Om Prakash Mittal And Ors. vs Union Of India (Uoi) And Ors.
2006 Latest Caselaw 1468 Del

JUDGMENT

Mukul Mudgal, J.

1. This writ petition challenges the constitutional validity of Section 19(1) & (2) of the Foreign Exchange Management Act, 1999 (FEMA) and Rule 10 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000 ('Rules'). Said Sections and Rule 10 read as follows:

Section 19(1) Save as provided in Sub-section (2), the Central Government or any person aggrieved by an order made by an Adjudication Authority, other than those referred to in Sub-section (1) of Section 17, or the Special Director (Appeals), may prefer all appears 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 realisation of penalty.

(2) Every appeal under Sub-section (1) shall be filed within a period of forty five days from the date on which a copy of the order made by the Adjudicating Authority or the Special director (appeal) is received by the aggrieved person or by the Central Government and it shall be in such form, verified in such manner and be accompanied by such fee as may be prescribed.

Rule 10: (1) Every Appeal presented to the Appellate Tribunal under Section 19 of the Act shall be in the Form II signed by the applicant. The appeal shall be sent in triplicate and accompanied by three copies of the order appealed against. Every appeal shall be accompanied by a fee of rupees ten thousand in the form of cash or demand draft payable in favor of the Registrar, Appellate Tribunal for Foreign Exchange, New Delhi.

Provided that the applicant shall deposit the amount of penalty imposed by the Adjudicating Authority or the Special Director (Appeals) as the case may be, to such authority as may be notified under the first proviso to Section 19 of the Act.

Provided further that where in a particular case, the appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such 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 realisation of penalty.

2. The principal plea advanced by the learned Counsel for the petitioner is that the said provisions are arbitrary, irrational and violative of Article 14 of the Constitution. The brief background in which this plea is raised is that each of the four petitioners as well the firm of which they are partners was issued notices on 4.7.2000 in respect of certain violations of the Act. After receiving their replies, the Assistant Director, Directorate of Enforcement, by an order dated 30.10.2000 found them guilty of the violations and imposed a penalty of Rs. 30,000/- on the firm and Rs. 5,000/- on each of the four petitioners. He directed that the total penalty of Rs. 50,000/- be paid within 45 days of the order. The firm and the four petitioners filed a joint appeal on 11.1.2001 before the Appellate Tribunal for Foreign Exchange, New Delhi. By a communication dated 4.4.2001 addressed to the firm, the Registry of the Appellate Tribunal informed that the appeal was defective for non-payment of the appropriate court fee and further that "since separate penalties have been imposed on the appellant, separate appeals are required to be filed along with the prescribed fee.

3. Under Rule 10 of the prescribed court fee for every appeal is Rs. 10,000/- and since the petitioners were required to file five separate appeals, the total court fee payable worked out to Rs. 50,000/-. The learned Counsel for the petitioners submitted that the above facts go to show that in respect of a total penalty of Rs. 50,000/-, they were required to pay a court fee of Rs. 50,000/- which itself makes the provisions arbitrary, unreasonable and ultra vires Article 14 of the Constitution.

4. The learned Counsel for the respondent relied upon the judgment of the Hon'ble Supreme Court in Secretary to Government of Madras v. P.R. Sriramulu , and particularly on para 14 which reads as follows:

Having regard to the decisions and various pronouncements cited above it is difficult to accept the reasoning and the view taken by the High court in the impugned judgment. As discussed above if the essential to the class of citizens which is intended to be benefited by the service and the broad and general correlation between the amount so collected and the expenses incurred in providing the service is found to exist, then such levy would partake the character of a 'fee', irrespective of the fact that such special services for which the amount by levy of fee is collected incidentally and indirectly benefit the general public also. In order to establish the correlation between the amount recovered by way of 'fee' and the expenses incurred in providing the service they should not be examined so minutely or be weighed in golden scale to discern any difference between the two. It is not necessary to ascertain the same with any mathematical exactitude for finding the correlation but the test would be satisfied if a broad and general correlation is found to exist and once such a broad correlation between the totality of the expenses on the services rendered as a whole on the one hand and the totality of the amount so raised by way of the fee, on the other is established, it would be no part of the legitimate exercise in the examination of the constitutionality of the concept of the impost to embark upon its effect in the individual cases. If the aforesaid relation is found to exist in the levy of the fee, the levy cannot be said to be wanting in its essential character of a incidence is disproportionate to the actual services made available to them. In view of this position of law the view expressed by the High Court that ad valorem levy of court fee in an individual case far exceeds the maximum value, in terms of money, qua that contributor and hence the concept of correlation fails and renders the levy invalid and illegal cannot be accepted for the simple reason that the correlation is not in the context of individual contributors, the test being its ascertainment on a comprehensive basis keeping in view the value of the totality of the service, qua the totality of receipts. According to DD Marco, the author of the First Principles of Public Finance, page 33, the fee must be equal in the aggregate to the cost of production of the services. That is the aggregate amount of the fees which the State collects from individual customers must equal the aggregate expenses of production.

Thus the test of the correlation is to be reckoned at the aggregate level and not at the individual level as is also the view taken in Ashwathanarayana Setty case.

4. In our view, the above position of law squarely applies to the facts of the present case. Merely because the amount of court fee required to be paid might work harshly in certain individual cases, that cannot be the reason for holding it to be arbitrary or unconstitutional. We see no ground to hold Section 19 of the Act or Rule 10 unconstitutional.

6. The learned Counsel then submits that the levy of penalty was unjustified since the payments for the exports made by them have since been received. We express no opinion on this submission since it is always open to the petitioner to point this out to the Appellate Tribunal after complying with the requirements of Rule 10. Accordingly, this writ petition is dismissed.