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Sushil Sales Corporation v. Deputy Director Directorate Of Enforcement .
Structured Summary of Legal Opinion — FPA-FE-07/MUM/2015
Factual and Procedural Background
This appeal was filed against an adjudication order dated 29.03.2014 issued by the Deputy Director of Enforcement imposing a penalty of Rs. 15,00,000 on M/s Sushil Sales Corporation, Mumbai. The adjudicating authority found that despite issuance of a Show Cause Notice (No. T-4/869/B/DD(VS)/BE/2002 dated 22.05.2002) and several call notices (dated 14.02.2014, 25.03.2014 and 27.03.2014), the company failed to submit evidence establishing that foreign exchange remitted had been utilized for the purposes for which it was acquired. The authority concluded that the subject imports had not taken place and that this constituted a contravention of section 8(3) & 8(4) of FERA, 1973 read with section 49(3) & (4) of FEMA, 1999. The adjudication order required deposit of the penalty within 45 days.
When the appeal was listed before the Tribunal, no one appeared for the appellant. The Tribunal records that the appellant's principal contention was that the appeal before the Tribunal could not be entertained because it ought to have been filed before the Special Director (Appeals), who alone had jurisdiction to hear appeals from orders of Assistant Director/Deputy Director adjudicating authorities.
The Tribunal considered the statutory scheme under Sections 17 and 19 of FEMA and relevant judicial authorities before concluding that the appeal filed directly to the Appellate Tribunal for Foreign Exchange was not maintainable and therefore liable to be dismissed. The Tribunal directed that there would be no costs. The order is signed by Justice Manmohan Singh, Chairman, New Delhi, dated 20th March, 2018.
Legal Issues Presented
- Whether an appeal against an adjudication order passed by an Adjudicating Authority at the rank of Deputy Director of Enforcement is maintainable before the Appellate Tribunal for Foreign Exchange under section 19 of FEMA, or whether it must first be preferred to the Special Director (Appeals) under section 17 of FEMA.
- Whether, in the circumstances of this case (a FERA-related contravention adjudicated under FEMA provisions), the procedural forum prescribed by FEMA (i.e., the Special Director (Appeals)) applies to appeals arising out of such adjudication.
Arguments of the Parties
Appellant's Arguments
- The appellant submitted that the appeal filed before the Appellate Tribunal for Foreign Exchange could not be entertained because the appeal ought to have been filed before the Special Director (Appeals), who alone has jurisdiction and is the competent authority to hear such appeals.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Polestar Electronic (P) Ltd. Vs. Addl. Commissioner, Sales Tax (1978 SCR (3) 98) | Cited for the proposition that a strict interpretation of the statute must be adopted and that legislative intent derived from statutory recitals must be followed. | The Tribunal relied on this authority to support applying a strict interpretation to Sections 17 and 19 of FEMA in determining the proper forum for appeals. |
| Tirumalai Chemicals Ltd. Vs. Union of India (AIR 2011 SC 1725) | Explains application of Section 49 of FEMA and that procedure under FEMA applies even where cause of action arose under FERA; clarifies appellate procedure and Tribunal's power to condone delay. | The Tribunal used this judgment to establish that FEMA's procedural provisions govern appeals arising from FERA contraventions and that appeals against Deputy Director/Assistant Director adjudications must go to the Special Director (Appeals). |
| Maria Cristina De Souza v. Amria Zurana Pereira Pinto (AIR 1979 SC 1352) | Holds that the forum where an appeal must be lodged is a procedural matter; a vested right of appeal is substantive but the forum is governed by the repealing or subsequent statute. | The Tribunal invoked this authority to emphasise that even if a substantive right of appeal vests, the procedural forum (as provided by the repealing or subsequent enactment) governs where the appeal must be filed. |
| Colonial Sugar Refining Company Ltd. v. Irving (1905 AC 369) and Garikapatti Veeraya v. N. Subbiah Choudhury (1957 SCR 488) | Referenced in support of the principle that the forum of appeal is procedural and that procedural law (forum and limitation) may change under a repealing statute. | These older authorities were cited in the Maria Cristina De Souza passage relied on by the Tribunal to underpin the procedural-substantive distinction regarding appeals and forum. |
| Premier Limited & Ors. v. Union of India & Ors. (2006 (5) BOM CR 12) | Interprets FEMA provisions to hold that appeals in FERA contraventions lie before the Special Director (Appeals). | The Tribunal referred to this decision to support the proposition that, for FERA contraventions, the correct appellate forum is the Special Director (Appeals) rather than direct appeal to the Appellate Tribunal under Section 19. |
| Chitturi Subbanna vs. Kudapa Subbanna & Others (1965 AIR 1325, 1965 SCR (2) 661) | Holds that a pure question of law can be raised at any point of the proceedings. | The Tribunal relied on this authority to justify entertaining the jurisdictional point (the forum issue) at the stage before it and to conclude that the appeal filed before the Tribunal was not maintainable. |
Court's Reasoning and Analysis
The Tribunal's analysis proceeded in the following sequence, relying on the statutory text and the cited authorities:
- Statutory framework: The Tribunal examined Section 17 of FEMA, which authorizes the Central Government to appoint Special Directors (Appeals) to hear appeals from orders of Adjudicating Authorities where the adjudicator is an Assistant Director or Deputy Director of Enforcement. Section 19 sets out appeals to the Appellate Tribunal but contemplates exclusions for matters falling within Section 17.
- Interpretation of Sections 17 and 19: Applying a strict interpretation (with reliance on Polestar Electronic), the Tribunal concluded that appeals against Adjudicating Authorities of the rank of Deputy Director or Assistant Director must mandatorily lie first to the Special Director (Appeals) under Section 17, and only thereafter (as applicable) to the Appellate Tribunal under Section 19.
- Application to FERA/FEMA transition: Citing Tirumalai Chemicals, the Tribunal observed that procedural provisions of FEMA govern appellate procedure even where the cause of action arose under FERA; therefore, FEMA's forum prescription (i.e., the Special Director for Deputy Director adjudications) applies to the present case.
- Procedural vs. substantive distinction: Relying on Maria Cristina De Souza and the supporting authorities cited therein, the Tribunal reiterated that while the right of appeal is substantive and vests at the initiation of proceedings, the forum for pursuing that appeal is a procedural matter determined by the repealing or successor statute (here FEMA).
- Support from jurisprudence: The Tribunal noted that the Bombay High Court decision in Premier Limited similarly holds that appeals against adjudication orders in FERA contraventions lie before the Special Director (Appeals), reinforcing the statutory reading adopted.
- Jurisdictional point may be raised at any stage: The Tribunal relied on Chitturi Subbanna to hold that a pure question of law — here, the jurisdiction/maintainability issue — can be raised at any point in the proceedings, and therefore the Tribunal could entertain the jurisdictional objection notwithstanding the filing before the Tribunal.
- Conclusion of applicability: Applying these legal principles and authorities to the facts (an adjudication order by a Deputy Director of Enforcement against M/s Sushil Sales Corporation), the Tribunal concluded that the appeal was misplaced before the Appellate Tribunal and should have been preferred to the Special Director (Appeals) under Section 17 of FEMA.
Holding and Implications
Holding: The Tribunal held that the appeal filed before the Appellate Tribunal for Foreign Exchange was not maintainable because the adjudicating authority was of the rank of Deputy Director of Enforcement and, therefore, the appeal should have been preferred to the Special Director (Appeals) under Section 17 of FEMA. The Tribunal concluded that the appeal was liable to be dismissed and ordered dismissal. The Tribunal also directed that there be no costs.
Implications:
- Direct effect on the parties: The appeal is dismissed as not maintainable, leaving the adjudication order dated 29.03.2014 (imposing a penalty of Rs. 15,00,000 on M/s Sushil Sales Corporation) intact subject to any proper proceedings before the Special Director (Appeals) as prescribed by FEMA.
- Procedural consequence emphasized: The decision reinforces the procedural requirement that appeals from adjudicating authorities at the Assistant Director/Deputy Director level proceed to the Special Director (Appeals) under Section 17 before any further recourse as provided under Section 19.
- Precedential note: The opinion does not purport to lay down a novel rule of law beyond applying existing statutory language and settled authorities; it applies earlier precedents to conclude the appeal's lack of maintainability.
Judge and date as recorded in the opinion: (Justice Manmohan Singh) Chairman, New Delhi, 20th March, 2018.
FPA-FE-07/MUM/2015
1. The present appeal has been filed against the order dated 29.03.2014 passed by the Deputy Director of Enforcement.
2. The operative part of the order reads as under: Ample opportunities in the form of Show Cause Notice No. T-4/869/B/DD(VS)/BE/2002 dated 22.05.2002 and Call Notices dtd. 14.2.14, 25.03.14 & 27.03.2014 were given to M/s Sushil Sales Corporation, Mumbai and Mangalore, Karnataka to submit the required evidence regarding utilization of the foreign exchange remitted for the purposes it was acquired but they have failed to submit any such evidence either in response to the SCN or at the FPA-FE-07/MUM/2015 Page 2 of 6 time of personal hearing given to them. This leads to the conclusion that the subject imports have not taken place and thereby not utilizing the said foreign exchange acquired by M/s Sushil Sales Corporation, Mumbai for the imports of goods for which it was acquired which is a contravention of the provisions of section 8(3) & 8(4) of fera, 1973 read with section 49(3) & (4) of fema, 1999. I am therefore, satisfied that the charges against M/s Sushil Sales Corporation, Mumbai are established and proved beyond reasonable doubt. I, therefore, impose a penalty of Rs. 15,00,000/- (Rupees Fifteen Lakhs Only) on M/s Sushil Sales Corporation, Mumbai, in terms of the powers conferred upon me under section 50 of fera, 1973 read with section 49(3) & (4) of fema, 1999. The penalty of Rs. 15,00,000/- (Rupees Fifteen Lakhs Only) on M/s Sushil Sales Corporation, Mumbai should be deposited in the office of the Joint Director, Directorate of Enforcement, 2nd Floor, Mittal Chambers, Nariman Point, Mumbai-400 021 by means of Demand Draft/Pay Orders drawn in favour of the DDO A/c, Directorate of Enforcement, Mumbai, payable at Mumbai, within 45 days from the date of receipt of this Adjudication Order. While depositing the penalty, this Adjudication Order No. and date should be quoted clearly.
3. No one appears on behalf of appellant when the matter was listed for hearing.
4. The main submission is that the appellant has filed the appeal before this tribunal cannot be entertained as it ought to have filed before Special Director who alone has jurisdiction and Competent Authority to hear the appeal. Even on merit the appellant has no case.
5. Admittedly the appeal arising out of Adjudication Orders passed by the Adjudicating Authority being an Assistant Director of Enforcement or Deputy Director of Enforcement have been detailed under section 17 of the Foreign Exchange Management Act. FPA-FE-07/MUM/2015 Page 3 of 6
6. The relevant portion Section 17 FEMA is reproduced hereafter:-
17. Appeal to Special Director (Appeals):- (1) The Central Government shall, by notification, appoint one or more Special Directors (Appeals) to hear appeals against the orders of the Adjudicating Authorities under this section and shall also specify in the said notification the matter and places in relation to which the Special Director (Appeals) may exercise jurisdiction. (2) Any person aggrieved by an order made by the Adjudicating Authority, being an Assistant Director or Enforcement or a Deputy Director of Enforcement, may prefer an appeal to the Special Director (Appeals).
7. Section 19(1) itself mandates that appeals other than those referred to in Section 17(1) or Special Director (Appeals) may be preferred before the Appellate Tribunal for Foreign Exchange, meaning thereby that appeals against Adjudication Orders passed by the Adjudicating Authority being the rank of Deputy Director of Enforcement or Assistant Director must mandatorily lie to the Special Director (Appeals) under section 17 and thereafter to Appellate Tribunal for Foreign Exchange.
8. Relevant portion of Section 19 is reproduced as under:
19. Appeal to Appellate Tribunal: (1) Save as provided in sub-section (2), the Central Government or any person aggrieved by an order made by an Adjudicating Authority, other than those referred to in sub-section (1) of Section 17, or the Special Director (Appeals), may prefer an appeal to the Appellate Tribunal: Provided that any person appealing against the order of the Adjudicating Authority or the Special Director (Appeals) levying any penalty, shall while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government : Provided further that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realization of penalty. FPA-FE-07/MUM/2015 Page 4 of 6
9. As per settled principle of law that a strict interpretation of the statute must be adopted and the legislative intent which is abundantly clear from the recitals of section 17 and section 19 of FEMA must be adopted. Reliance is placed in this respect on Polestar Electronic (P) Ltd. Vs. Addl. Commissioner, Sales Tax 1978 SCR (3) 98.
10. The position as regards the application of FEMA for a contravention in the FERA issue in hand has been settled in the case of Tirumalai Chemicals Ltd. Vs. Union of India (AIR 2011 SC 1725):-
28. Above discussion will clearly demonstrate that section 49 of fema does not seek to withdraw or take away the vested right of appeal in cases where proceedings were initiated prior to repeal of FERA on 01.06.2000 or after. On a combined reading of Section 49 of FEMA and Section 6 of General Clauses Act, it is clear that the procedure prescribed by FEMA only would be applicable in respect of an appeal filed under FEMA though cause of action arose under FERA. In fact, the time limit prescribed under FERA was taken away under the proviso to sub-section (2) of Section 19 and the Tribunal has been conferred with wide powers to condone delay if the appeal is not filed within forty-five days prescribed, provided sufficient cause is shown. Therefore, the finding rendered by the Tribunal as well as the High Court that the Tribunal does not have jurisdiction to condone the delay beyond the date prescribed under FERA is not a corrected understanding of the law on the subject
11. The question in relation to the forum where an appeal is to lie is a procedural matter and this has been dealt by the Honble Supreme Court in the case of Maria Cristina De Souza v. Amria Zurana Pereira Pinto AIR 1979 SC 1352, wherein it was held that: It is no doubt well-settled that the right of appeal is a substantive right and it gets vested in a litigant no sooner the lie is commenced in the Court of the first instance, and such right or any remedy in respect thereof will not be affected by any repeal of the enactment conferring such right unless the repealing enactment either expressly or by necessary implication takes away such right or remedy in respect thereof. This position has been made clear by Clauses (b) and (c ) of the proviso to Section 4 of the Central Act XXX of FPA-FE-07/MUM/2015 Page 5 of 6 1965 which substantially correspond to Clauses (c ) and (e ) of Section 6 of the General Clauses Act, 1867. This position has also been settled by the decisions of the Privy Council and this Court (vide the Colonial Sugar Refining Company Ltd. v. Irving 1905 AC 369 and Garikapatti Veeraya v. N. Subbiah Choudhury) 1957 SCR 488 but the forum where such appeal can be lodged is indubitably a procedural matter and, therefore, the appeal, to right to which has arisen under a repealed the Act, will have to be lodged in a forum provided for by the repealing Act. That the forum of appeal, and also the limitation for it, are matters pertaining to procedural law will be clear from the following passage appearing at page 462 of Samonds Jurisprudence (12th Edn.): Whether I have a right to recover certain property is a question of substantive law, for the determination and the protection of such rights are among the ends of the administration of justice; but in what courts and within what time I must institute proceedings are questions of procedural law, for they relate merely to the modes in which the courts fulfil their functions.
12. It is true that under Clause (e ) of the proviso to Section 4 of Central Act XXX of 1965 (which corresponds to Section 6 (e ) of the General Clauses Act, 1897) it is provided that a remedy or legal proceeding in respect of a vested right like a right to an appeal may be instituted, continued or enforced as if this Act (meaning the repealing Act) had not been passed. But this provision merely saves the remedy or legal proceeding in respect of such vested right which it is open to the litigant to adopt notwithstanding the repeal but this provision has nothing to do with the forum where the remedy or legal proceeding has to be pursued. If the repealing Act provides new forum where the remedy or the legal proceeding in respect of such vested right can be pursued after the repeal, the forum must be as provided in the repealing Act.
13. Even in the light of the Judgement rendered in Premier Limited & Ors.… v. Union Of India & Ors.…. 2006 (5) BOM CR 12, the appeal shall lie before the Special Director (Appeals) in case of a FERA contravention. The relevant paragraph is reproduced below:- FPA-FE-07/MUM/2015 Page 6 of 6 From the aforesaid analysis of the provision contained in FEMA, we have no hesitation in holding that the appeals against the adjudication orders passed by the Assistant Director/Deputy Director (Appeals) and appeals against the orders of all other Adjudicating Authorities are maintainable before the Appellate Tribunal constituted under FEMA.
14. It is evident from the Judgement Chitturi Subbanna vs. Kudapa Subbanna & Others 1965 AIR 1325, 1965 SCR (2) 661, that a pure question of law can be raised at any point of the proceedings. Thus the appeal filed by the appellant before this tribunal is not maintainable. The ignorance of law has no excuse once there are statutory provisions of the Act.
15. The present appeal in view finding arrived in the case of Tirumalai Chemicals case (supra) should have been initiated before the Special Director (Appeals) instead of the Appellate Tribunal for Foreign Exchange. The appellant could not have approached this Appellate Tribunal for Foreign Exchange directly under Section 19 FEMA.
16. The present appeal instead of being preferred before the Special Director (Appeals) under section 17 of fema has being filed this Tribunal for Foreign Exchange under section 19 FEMA is not maintainable and thus the same is liable to be dismissed.
17. No costs. (Justice Manmohan Singh) Chairman New Delhi, 20th March, 2018
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