Delhi High Court
Shri V.K. Modi vs The Director, Enforcement ... on 9 February, 2009
Author: Kailash Gambhir
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Crl.Appeal No. 1060/2008
Judgment reserved on: 17.12.2008
% Judgment delivered on: 09.02.2009.
Shri V.K. Modi ....Petitioner
Through: Mr.L.P.Dhir, Advocate
versus
The Director, Enforcement Directorate & Anr...... Respondent
Through: Mr. Vineet Malhotra, Adv.
CORAM:
HON'BLE MR. JUSTICE KAILASH GAMBHIR
1. Whether the Reporters of local papers may Yes
be allowed to see the judgment?
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
KAILASH GAMBHIR, J.
*
1. This order shall dispose of three appeals filed by
the appellant under Section 54 of the FERA 1973 r/w Section
35 of FEMA 1999, assailing the order passed by the
Appellate Tribunal Foreign Exchange, New Delhi under
Section 19 (1) of FEMA. Crl. Appeal No. 1059/2008 has
been preferred by the company M/s. Modi Rubbers Ltd.
while Crl. Appeal No. 1060/2008 and Crl. Appeal No.
1061/2008 have been preferred by the Directors of the said
company.
2. All these appellants had filed appeals before the
Appellate Tribunal under Section 19(1) of the Foreign
Exchange Management Act challenging the order dated
9.11.2004 passed by the adjudicatory authority whereby the
penalty of Rs.1 crore was imposed on the company M/s. Modi
Rubbers Ltd. for violating the provisions of Section 8(3) r/w
Section 8(4) of FERA, 1973 r/w para 7A, 20(i) of the ECM
1995 r/w Section 68(1) of the FERA and Section 49(3) and
(4) of the Foreign Exchange Management Act, and penalty of
Rs.5 lacs each on the individual was imposed on the directors
under Section 50 of the said Act.
3. Brief facts as set out by the appellants in the
present appeals are as under:
That M/s Modi Rubber Ltd. (MRL for short) was established
in the year 1971. It acquired the latest technology and
despite recession in tyre industry, made exports of its well
known products to USA, Australia, Italy and Germany etc. It
won "CAPEXIL" Award for a record 11 times and also won
"National Productivity Award". In 1995-96 its turnover was
Rs. 1020 Crores of which FOB value of exports was Rs.
105.89 Crores, in 1996-97 it was Rs. 128.99 crores, whereas
in 1997-98 it was Rs. 101.39 crores. It imported goods and
raw material in 1992-93 and 1996-97 etc. and duly submitted
each one of the requisite documents for the actual imports in
all cases, including the abovementioned items. As a law
abiding corporate citizen, it met with all its legal obligations
as per the procedure laid down, to the authorixed
dealers/banks in good time as required by Para 7A.20 of RBI
Exchange Control Manual, 1993. However, it seems
somehow that the authorized dealers (Amercian Express and
Citibank, in these cases) were inadvertently not able to
handle the import documents as required by Para 7A.21 and
failed to pass on the documents to RBI which resulted in RBI
reporting the 18 so-called items of defaults to the
Enforcement Directorate as per the Annexure to Show Cause
Notice. The learned Adjudication Officer issued
Memorandum dated 29.5.2002 to the appellant and inter alia
to its two Directors Shri V.K. Modi and Dr. B.K. Modi
charging them all with failure to furnish Exchange Control
Copy of the Bills of Entries including items No. 3,4,5,6 & 7 of
the Annexure, as proof of confirmation of having imported
the goods for which the said amounts were released to the
company and held that the company and its aforesaid two
directors appear to have contravened the provisions of
Section 8(3) and 8(4) read with Section 68(1) of FERA read
with Para 7 A 20(i) of Exchange Control Manual and initiated
adjudication proceedings u/s 50 of FERA in respect of 18
items. Unfortunately, MRL fell on bad days and simmering
labour problem and financial crunch resulted in volcanic
labour strike on 7.8.2001 whereby its Plant, Accounts
Department and Offices came to be closed. Since then it does
not have access to its old records, and the new skeleton staff
knows nothing of old records. Its net worth got eroded and it
was registered as sick industrial company u/s 3 (1)(o) of Sick
Industrial Companies (Special Provisions) Act (SICA for
short) with Board for Industrial & Financial Reconstruction
(BIFR for short).
4. The impugned adjudication proceedings have
taken place under the shadow of these adverse constraints.
5. In response to Show Cause Notice issued by
Special Director of Enforcement, the MRL submitted
requisite documents including Bills of Entry for 16 months, 1
more Bill of Entry was also acceptable to the Special
Director. By letter dated 30.06.1993 the MRL proved
before the incumbent Special Director that the item Nos.
3,4,5 and 6 (American Express) were duly explained to the
Bank and Original Bills of Entry were submitted to the Bank.
MRL had filed the quadruplicate Bills of Entry in original in
respect of all these 4 items vide letter dated 30.06.1993 and
also clarified once again by letter dated 30.07.1998.
Reference to letter dated 28.10.2003 from American Express
to Modi Rubber Ltd. confirms this position. All these
documents were placed before the Ld. Special Director but in
spite of this conclusive evidence, he was still not satisfied.
MRL had been pursuing with the two Banks. Ultimately,
American Express Bank sent in letter dated 9.12.2004 to
Reserve Bank of India (RBI : for short) enclosing all the
requisite documentary evidence, requesting the RBI to
regularize the outstanding bills of Entries (for items No.3,4,5
& 6) and delete them from BEF Part-II. In other words, all
the four entries No. 3,4,5 & 6 listed for default are now
deleted with the Bank or would be deleted with the RBI from
BEF Part-II. Similarly in the case of item No.7 ( Citibank),
the details were submitted through two Bills of Entry for Ex-
Bond Clearance for Home Consumption - one for US $15,000
and other for US$ 10,000. MRL had placed on record copies
of the 2 bills of Entry for Ex-Bond Clearance for Home
Consumption, first for US$15,000 and the other for
US$10,000 evidencing that goods were imported in
December, 1996 and Customs duty were paid. Incidentally,
the MRL has been able to persuade Citibank to send the
requisite documents to RBI which they have done by letter
dated 9.12.2004 enclosing copies of the Debit Advice, Bills of
Lading. Certificate of Origin, C.A.‟s Certificate and Bill of
Entry and Certificate of Origin with Sworn Affidavit etc. etc.
for the approval of the RBI, to regularize this particular entry
No. 7 for US$25,000.
6. The learned Special Director, Respondent No.2
levied penalties of Rs.1 Crore on the Company and Rs.5 Lacs
each on its two directors. Aggrieved with the order of
Special Director, the appellant company and its Directors
preferred appeal to the Appellate Tribual. Appellate Tribunal
vide impugned order dated 15.9.2008 remanded back the
matter to the Special Director. Aggrieved with the said
order, the appellants preferred the present appeals.
7. As would be seen from the above facts, the
learned Appellate Tribunal has given the directions to the
learned adjudicatory officer to examine the matter afresh to
ascertain the veracity of the claims of the appellants. The
learned Appellate Tribunal also gave directions for setting
aside of the order of the adjudicatory authority with liberty
to the appellant to file further proofs/evidence in support of
their case. Directions were also given by the Tribunal to the
learned adjudicatory authority to give fresh hearing and to
decide the matter within a period of six months. This order
of remand is under challenge in these appeals.
8. Mr. Vineet Malhotra, counsel for the respondent
took preliminary objection to the maintainability of these
appeals on the ground that the Appellate Tribunal has yet
not passed any order on merits and has merely remanded
the appeals filed by the appellants for fresh consideration by
the adjudicatory authority, therefore, such order of remand
being totally inconsequential does not merit any interference
by this court. Mr. L.P. Dhir, counsel for the appellants
refuting such submissions of the counsel for the respondent
submitted that no such power of remand vests with the
Appellate Tribunal exercising powers under Section 52(3) of
the FERA, and therefore, the order of remand being per se
illegal merited rejection from this court. In support of his
arguments counsel for the appellant contended that plain,
simple and literal interpretation of Section 52(3) of FERA
would show that no such power of remand has been
conferred on the Appellate Board and the only power given to
the Appellate Board is either to confirm the order of the
adjudicatory authority, modify such an order or set aside the
order appealed against. The contention of the counsel for the
appellant is that when the legislature never intended to
give such power to the Appellate Board, then the power of
remand cannot be read into the said statutory provision
which is plain and unambiguous. In support of his
arguments counsel for the appellant placed reliance on the
judgment of Apex Court reported in 2003(6) SCC 659,
Shiv Shakti Cooperative Housing Society, Nagpur Vs.
Swaraj Developers & Ors., especially paras 17 and 29 of
the said judgment. Both the paras are reproduced as under:-
17. Right of appeal is statutory. Right of appeal
inhered in no one. When conferred by statute it
becomes a vested right. In this regard there is
essential distinction between right of appeal and
right of suit. Where there is inherent right in every
person to file a suit and for its maintainability it
requires no authority of law, appeal requires so. As
was observed in State of Kerala v. K.M. Charia
Abdulla and Co.6 the distinction between right of
appeal and revision is based on differences implicit in
the two expressions. An appeal is continuation of the
proceedings; in effect the entire proceedings are
before the Appellate Authority and it has the power
to review the evidence subject to statutory
limitations prescribed. But in the case of revision,
whatever powers the revisional authority may or may
not have, it has no power to review the evidence,
unless the statute expressly confers on it that power.
It was noted by the four Judge Bench in Hari Shankar
v. Rao Girdhari Lal Chowdhury7 that the distinction
between an appeal and a revision is a real one. A
right of appeal carries with it a right of rehearing on
law as well as fact, unless the statute conferring the
right of appeal limits the rehearing in some way, as
has been done in second appeals arising under the
Code. The power of hearing revision is generally
given to a superior court so that it may satisfy itself
that a particular case has been decided according to
law. Reference was made to Section 115 of the Code
to hold that the High Court‟s powers under the said
provision are limited to certain particular categories
of cases. The right there is confined to jurisdiction
and jurisdiction alone.
29. "Appeal", is defined in the Oxford Dictionary,
Vol. 1, p. 398, as the transference of a case from an
inferior to a higher court or tribunal in the hope of
reversing or modifying the decision of the former. In
the Law Dictionary by Sweet, the term "appeal" is
defined as a proceeding taken to rectify an erroneous
decision of a court by submitting the question to a
higher court or Court of Appeal, and it is added that
the term, therefore, includes, in addition to the
proceedings specifically so called, the cases stated
for the opinion of the Queen‟s Bench Division and the
Court of Crown Cases reserved, and proceedings in
error. In the Law Dictionary by Bouvier an appeal is
defined as the removal of a case from a court of
inferior to one of superior jurisdiction for the
purpose of obtaining a review and retrial, and it is
explained that in its technical sense it differs from a
writ of error in this, that it subjects both the law and
the facts to a review and retrial, while the latter is a
common law process which involves matter of law
only for re-examination; it is added, however, that
the term "appeal" is used in a comprehensive sense
so as to include both what is described technically as
an appeal and also the common law writ of error. As
Mr Justice Subramania Ayyar observes in Chappan v.
Moidin Kutti25, ILR at p. 80, the two things which
are required to constitute appellate jurisdiction are
the existence of the relation of superior and inferior
court and the power, on the part of the former, to
review decisions of the latter.
9. Counsel for the appellant also relied upon the
decision of the Constitutional Bench reported as 1997 (3)
SCC 261 L. Chandra Kumar Vs. Union of India., to
buttress his argument that such power of remand has
consciously not been conferred by the legislators on these
tribunals as these tribunals have failed to inspire confidence
of the public. Special attention of this court was drawn to
following paras of the said judgment.
89. In the years that have passed since
the Report of the Malimath Committee was delivered,
the pendency in the High Courts has substantially
increased and we are of the view that its
recommendation is not suited to our present context.
That the various Tribunals have not performed up to
the expectations is a self-evident and widely
acknowledged truth. However, to draw an inference
that their unsatisfactory performance points to their
being founded on a fundamentally unsound principle
would not be correct. The reasons for which the
Tribunals were constituted still persist; indeed, those
reasons have become even more pronounced in our
times. We have already indicated that our
constitutional scheme permits the setting up of such
Tribunals. However, drastic measures may have to be
resorted to in order to elevate their standards to
ensure that they stand up to constitutional scrutiny in
the discharge of the power of judicial review
conferred upon them.
90. We may first address the issue of exclusion of
the power of judicial review of the High Courts. We
have already held that in respect of the power of
judicial review, the jurisdiction of the High Courts
under Articles 226/227 cannot wholly be excluded. It
has been contended before us that the Tribunals
should not be allowed to adjudicate upon matters
where the vires of legislations is questioned, and that
they should restrict themselves to handling matters
where constitutional issues are not raised. We cannot
bring ourselves to agree to this proposition as that
may result in splitting up proceedings and may cause
avoidable delay. If such a view were to be adopted, it
would be open for litigants to raise constitutional
issues, many of which may be quite frivolous, to
directly approach the High Courts and thus subvert
the jurisdiction of the Tribunals. Moreover, even in
these special branches of law, some areas do involve
the consideration of constitutional questions on a
regular basis; for instance, in service law matters, a
large majority of cases involve an interpretation of
Articles 14, 15 and 16 of the Constitution. To hold
that the Tribunals have no power to handle matters
involving constitutional issues would not serve the
purpose for which they were constituted. On the other
hand, to hold that all such decisions will be subject to
the jurisdiction of the High Courts under Articles
226/227 of the Constitution before a Division Bench of
the High Court within whose territorial jurisdiction
the Tribunal concerned falls will serve two purposes.
While saving the power of judicial review of
legislative action vested in the High Courts under
Articles 226/227 of the Constitution, it will ensure
that frivolous claims are filtered out through the
process of adjudication in the Tribunal. The High
Court will also have the benefit of a reasoned decision
on merits which will be of use to it in finally deciding
the matter.
91. It has also been contended before us that even in
dealing with cases which are properly before the
Tribunals, the manner in which justice is dispensed by
them leaves much to be desired. Moreover, the
remedy provided in the parent statutes, by way of an
appeal by special leave under Article 136 of the
Constitution, is too costly and inaccessible for it to be
real and effective. Furthermore, the result of
providing such a remedy is that the docket of the
Supreme Court is crowded with decisions of Tribunals
that are challenged on relatively trivial grounds and it
is forced to perform the role of a first appellate court.
We have already emphasised the necessity for
ensuring that the High Courts are able to exercise
judicial superintendence over the decisions of the
Tribunals under Article 227 of the Constitution. In
R.K. Jain case6, after taking note of these facts, it was
suggested that the possibility of an appeal from the
Tribunal on questions of law to a Division Bench of a
High Court within whose territorial jurisdiction the
Tribunal falls, be pursued. It appears that no follow-
up action has been taken pursuant to the suggestion.
Such a measure would have improved matters
considerably. Having regard to both the aforestated
contentions, we hold that all decisions of Tribunals,
whether created pursuant to Article 323-A or Article
323-B of the Constitution, will be subject to the High
Court‟s writ jurisdiction under Articles 226/227 of the
Constitution, before a Division Bench of the High
Court within whose territorial jurisdiction the
particular Tribunal falls.
92. We may add here that under the existing
system, direct appeals have been provided from the
decisions of all Tribunals to the Supreme Court under
Article 136 of the Constitution. In view of our above-
mentioned observations, this situation will also stand
modified. In the view that we have taken, no appeal
from the decision of a Tribunal will directly lie before
the Supreme Court under Article 136 of the
Constitution; but instead, the aggrieved party will be
entitled to move the High Court under Articles
226/227 of the Constitution and from the decision of
the Division Bench of the High Court the aggrieved
party could move this Court under Article 136 of the
Constitution.
93. Before moving on to other aspects, we may
summarise our conclusions on the jurisdictional
powers of these Tribunals. The Tribunals are
competent to hear matters where the vires of
statutory provisions are questioned. However, in
discharging this duty, they cannot act as substitutes
for the High Courts and the Supreme Court which
have, under our constitutional set-up, been
specifically entrusted with such an obligation. Their
function in this respect is only supplementary and all
such decisions of the Tribunals will be subject to
scrutiny before a Division Bench of the respective
High Courts. The Tribunals will consequently also
have the power to test the vires of subordinate
legislations and rules. However, this power of the
Tribunals will be subject to one important exception.
The Tribunals shall not entertain any question
regarding the vires of their parent statutes following
the settled principle that a Tribunal which is a
creature of an Act cannot declare that very Act to be
unconstitutional. In such cases alone, the High Court
concerned may be approached directly. All other
decisions of these Tribunals, rendered in cases that
they are specifically empowered to adjudicate upon by
virtue of their parent statutes, will also be subject to
scrutiny before a Division Bench of their respective
High Courts. We may add that the Tribunals will,
however, continue to act as the only courts of first
instance in respect of the areas of law for which they
have been constituted. By this, we mean that it will
not be open for litigants to directly approach the High
Courts even in cases where they question the vires of
statutory legislations (except, as mentioned, where
the legislation which creates the particular Tribunal is
challenged) by overlooking the jurisdiction of the
Tribunal concerned.
94. The directions issued by us in respect of making
the decisions of Tribunals amenable to scrutiny before
a Division Bench of the respective High Courts will,
however, come into effect prospectively i.e. will apply
to decisions rendered hereafter. To maintain the
sanctity of judicial proceedings, we have invoked the
doctrine of prospective overruling so as not to disturb
the procedure in relation to decisions already
rendered.
95. We are also required to address the issue of
the competence of those who man the Tribunals and
the question of who is to exercise administrative
supervision over them. It has been urged that only
those who have had judicial experience should be
appointed to such Tribunals. In the case of
Administrative Tribunals, it has been pointed out that
the Administrative Members who have been
appointed have little or no experience in adjudicating
such disputes; the Malimath Committee has noted
that at times IPS Officers have been appointed to
these Tribunals. It is stated that in the short tenures
that these Administrative Members are on the
Tribunal, they are unable to attain enough experience
in adjudication and in cases where they do acquire
the ability, it is invariably on the eve of the expiry of
their tenures. For these reasons, it has been urged
that the appointment of Administrative Members to
Administrative Tribunals be stopped. We find it
difficult to accept such a contention. It must be
remembered that the setting up of these Tribunals is
founded on the premise that specialist bodies
comprising both trained administrators and those
with judicial experience would, by virtue of their
specialised knowledge, be better equipped to
dispense speedy and efficient justice. It was expected
that a judicious mix of Judicial Members and those
with grassroot experience would best serve this
purpose. To hold that the Tribunal should consist only
of Judicial Members would attack the primary basis of
the theory pursuant to which they have been
constituted. Since the Selection Committee is now
headed by a Judge of the Supreme Court, nominated
by the Chief Justice of India, we have reason to
believe that the Committee would take care to ensure
that Administrative Members are chosen from
amongst those who have some background to deal
with such cases.
96. It has been brought to our notice that one
reason why these Tribunals have been functioning
inefficiently is because there is no authority
charged with supervising and fulfilling their
administrative requirements. To this end, it is
suggested that the Tribunals be made subject to the
supervisory jurisdiction of the High Courts within
whose territorial jurisdiction they fall. We are,
however, of the view that this may not be the best
way of solving the problem. We do not think that
our constitutional scheme requires that all
adjudicatory bodies which fall within the territorial
jurisdiction of the High Courts should be subject to
their supervisory jurisdiction. If the idea is to divest
the High Courts of their onerous burdens, then
adding to their supervisory functions cannot, in any
manner, be of assistance to them. The situation at
present is that different Tribunals constituted under
different enactments are administered by different
administrative departments of the Central and the
State Governments. The problem is compounded by
the fact that some Tribunals have been created
pursuant to Central Legislations and some others
have been created by State Legislations. However,
even in the case of Tribunals created by
parliamentary legislations, there is no uniformity in
administration. We are of the view that, until a
wholly independent agency for the administration
of all such Tribunals can be set up, it is desirable
that all such Tribunals should be, as far as possible,
under a single nodal ministry which will be in a
position to oversee the working of these Tribunals.
For a number of reasons that Ministry should
appropriately be the Ministry of Law. It would be
open for the Ministry, in its turn, to appoint an
independent supervisory body to oversee the
working of the Tribunals. This will ensure that if the
President or Chairperson of the Tribunal is for some
reason unable to take sufficient interest in the
working of the Tribunal, the entire system will not
languish and the ultimate consumer of justice will
not suffer. The creation of a single umbrella
organisation will, in our view, remove many of the
ills of the present system. If the need arises, there
can be separate umbrella organisations at the
Central and the State levels. Such a supervisory
authority must try to ensure that the independence
of the members of all such Tribunals is maintained.
To that extent, the procedure for the selection of
the members of the Tribunals, the manner in which
funds are allocated for the functioning of the
Tribunals and all other consequential details will
have to be clearly spelt out.
10 . Counsel for the petitioner further strengthened
his arguments by comparing similar provisions under the
Central Excise Act, Customs Act, 1962 and the Income Tax
Act, 1961. The contention of the counsel for the petitioner
is that under the Central Excise Act, the Appellate Tribunal
has been vested with the power to refer the case back to
the authority and same is the position under the Customs Act
1962 and while the Appellate Tribunal under the Income
Tax Act has been given powers to pass such orders as it
may think fit after opportunity of hearing is given to the
parties in appeal for benefit. The relevant provisions of these
statutes are referred as under:
CENTRAL EXCISE ACT
35C. ORDERS OF APPELLATE TRIBUNAL. -
(1) The Appellate Tribunal may, after giving the parties to the
appeal an opportunity of being heard, pass such orders thereon
as it thinks fit, confirming, modifying or annulling the
decision or order appealed against or may refer the case back
to the authority which passed such decision or order with such
directions as the Appellate Tribunal may think fit, for a fresh
adjudication or decision, as the case may be, after taking
additional evidence, if necessary.
(2) The Appellate Tribunal may, at any time within four years
from the date of the order, with a view to rectifying any
mistake apparent from the record, amend any order passed by
it under sub-section (1) and shall make such amendments if the
mistake is brought to its notice by the Commissioner of Central
Excise or the other party to the appeal :
Provided that an amendment which has the effect of enhancing
an assessment or reducing a refund or otherwise increasing
the liability of the other party, shall not be made under this
sub-section, unless the Appellate Tribunal has given notice to
him of its intention to do so and has allowed him a reasonable
opportunity of being heard.
(3) The Appellate Tribunal shall send a copy of every order
passed under this section to the Commissioner of Central
Excise and the other party to the appeal.
(4) Save as provided in section 35G or section 35L, orders
passed by the Appellate Tribunal on appeal shall be final.
Customs Act, 1962
SECTION 129B. Orders of Appellate Tribunal. -
(1) The Appellate Tribunal may, after giving the parties to the
appeal, an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or annulling
the decision or order appealed against or may refer the case
back to the authority which passed such decision or order with
such directions as the Appellate Tribunal may think fit, for a
fresh adjudication or decision, as the case may be, after taking
additional evidence, if necessary.
[(1A) The Appellate Tribunal may, if sufficient cause is shown,
at any stage of hearing of an appeal, grant time to the parties
or any of them and adjourn the hearing of the appeal for
reasons to be recorded in writing :
Provided that no such adjournment shall be granted more than
three times to a party during hearing of the appeal.]
(2) The Appellate Tribunal may, at any time within [six
months] from the date of the order, with a view to rectifying
any mistake apparent from the record, amend any order
passed by it under sub-section (1) and shall make such
amendments if the mistake is brought to its notice by the
[Commissioner of Customs] or the other party to the appeal :
Provided that an amendment which has the effect of enhancing
the assessment or reducing a refund or otherwise increasing
the liability of the other party shall not be made under this sub-
section, unless the Appellate Tribunal has given notice to him
of its intention to do so and has allowed him a reasonable
opportunity of being heard.
[(2A) The Appellate Tribunal shall, where it is possible to do
so, hear and decide every appeal within a period of three years
from the date on which such appeal is filed :
Provided that where an order of stay is made in any proceeding
relating to an appeal filed under sub-section (1) of section
129A, the Appellate Tribunal shall dispose of the appeal within
a period of one hundred and eighty days from the date of such
order :
Provided further that if such appeal is not disposed of within
the period specified in the first proviso, the stay order shall, on
the expiry of that period, stand vacated.]
(3) The Appellate Tribunal shall send a copy of every order
passed under this section to the [Commissioner of Customs]
and the other party to the appeal.
(4) Save as otherwise provided in section 130 or section
130E, orders passed by the Appellate Tribunal on appeal shall
be final.
Income Tax Act, 1961
Section 254
ORDERS OF APPELLATE TRIBUNAL.
(1) The Appellate Tribunal may, after giving both the parties to
the appeal an opportunity of being heard, pass such orders
thereon as it thinks fit.
(2) The Appellate Tribunal may, at any time within four years
from the date of the order, with a view to rectifying any
mistake apparent from the record, amend any order passed by
it under sub-section (1) and shall make such amendment if the
mistake is brought to its notice by the assessee or the
Assessing Officer :
Provided that an amendment which has the effect of enhancing
an assessment or reducing a refund or otherwise increasing
the liability of the assessee, shall not be made under this sub-
section unless the Appellate Tribunal has given notice to the
assessee of its intention to do so and has allowed the assessee
a reasonable opportunity of being heard :
Provided further that any application filed by the assessee in
this sub-section on or after the 1st day of October, 1998, shall
be accompanied by a fee of fifty rupees.
(2A) In every appeal, the Appellate Tribunal, where it is
possible, may hear and decide such appeal within a period of
four years from the end of the financial year in which such
appeal is filed under sub- section (1) of section 253.
(2B) The cost of any appeal to the Appellate Tribunal shall be
at the discretion of that Tribunal.
(3) The Appellate Tribunal shall send a copy of any orders
passed under this section to the assessee and to the
Commissioner.
(4) Save as provided in section 256 or section 260A, orders
passed by the Appellate Tribunal on appeal shall be final.
11 . The contention of the counsel for the petitioner is
that no such power has been conferred upon the Appellate
Tribunal under FOREIGN Exchange Regulation Act, by the
legislature and therefore, the order passed by the Appellate
Tribunal remanding the matter back to the adjudicatory
authority is ex-facie illegal and liable to be set aside.
12 . Refuting the said submissions made by the
counsel for the appellant, Mr. Vineet Malhotra, counsel for
the respondent submitted that all the three appeals were
filed by the appellant under Section 19 r/w Section 49 (5) of
Foreign Exchange Management Act, 1999 against the order
of the Special Director dated 9.11.2004 imposing a penalty of
Rs.1,00,00,000/- on M/sModi Rubber Ltd. and Rs.5,00,000/-
each on the two directors. The contention of the counsel for
the respondent is that after the repeal of Foreign Exchange
Regulation Act these appeals filed by the appellant are
governed by Section 49 (5) (a) and (b) of the Foreign
Exchange Management Act, 1999 and not under the
repealed Act of FERA. Elaborating his argument further, the
counsel contended that all these appeals were filed by the
appellants under Section 19 of the FEMA 1999 and sub
Section (3) of Section 19 gives ample powers to the
appellate tribunals to remand the matter in the given facts
of a particular case. Laying much emphasis on the words
"as it thinks fit" in sub-Section (3) of Section 19 of FEMA
1999 the counsel submited that same words have been used
even under Section 35 (c ) of the Central Excise Act, 1994,
under Section 254 of the Income Tax Act, 1961 as well as
under Section 129-B of the Customs Act, 1962 dealing with
the powers of the appellate tribunal. Counsel for the
respondent also placed reliance on the judgment of the Apex
Court reported in (1997) 10 SCC 223 UOI & Ors. Vs.
Umosh Dhaimode and VIII (1999) SLT 293 (SC)
Collector of Central Excise, Madaras Vs. NOVO Impox.
13 . I have heard learned counsel for the parties at
considerable length and gone through the record.
14 . Vide order dated 15.9.2008 the Ld. Appellate
Tribunal remanded back all these three appeals for fresh
consideration by the Adjudicating Officer with the liberty to
the appellants to file further proof/evidence. The operative
para of the said order of the Appellate Tribunal is reproduced
as under:-
"In the circumstances, it is felt that nothing
will amis if the matter is examined bythe Ld.
Adjudicating Officer afresh to ascertain the
veracity of the claim of the appellants.
Accordingly, the impugned order is set aside but
these appeals are remanded back for fresh
consideration by the adjudicating officer with
liberty to the appellants to file further
proof/evidence. We direct the appellants to be
present before the Ld. Adjudicating Officer on
3.12.2008. the Ld. Adjudicating Officer may hear
the parties on the same day or fix some other
convenient day. We hope that the Ld.
Adjudicating Officer will complete the examination
of the matters remanded back within six months
thereafter."
15 . The above said order was passed by the Appellate
Tribunal keeping in view the stand taken by the appellants
that the Ld. Special Director had passed the ex-parte order
dated 9.11.2004 leveling penalty of Rs.1 crore on M/s Modi
Rubber ltd. and Rs.5 lakhs each on the two Directors of the
said company. The main contention raised by the appellants
before the Appellate Tribunal was that the appellant had
actually imported goods and materials in respect of the 18
items mentioned by the Department in the Annexure to the
show cause notice complaining violation on the part of the
appellants to submit necessary documentary evidence
regarding the import of goods into India for which necessary
remittances were sent abroad through the authorized
dealers. The contention raised by the appellants before the
appellate tribunal was that conclusive evidence with regards
to import of goods and material in respect of item Nos.
3,4,5,6 & 7 of the Annexure to the show cause notice dated
29.5.2008 were sufficiently placed on record but the same
was ignored by the Special Director while passing the ex-
parte order. Paras 4 and 8 of the impugned order of the
Appellate Tribunal wherein such a contention was raised by
the counsel for the appellant is reproduced as under:-
"Shri L.P. Dhr, Ld. Advocate filed the written
submission which is taken on record. It is argued
that out of the 18 remittances mentioned in the
Memo. Dated 29.5.2002, the appellants have been
wrongly held guilty in respect of 5 remittances.
According to Shri L.P. Dhir, Ld. Advocate out of the
5 remittances, 4 remittances mentioned at
S.No.3,4,5 & 6 relate to American Express Bank,
New Delhi. The appellant submitted quadruplicate
along with bills of entry relating to other 13
imports its authorized dealer on 30.06.1993. The
authorized dealer by accepting the said bills of
entry acknowledged the said letter placed at page-
28 of the appeal papers. As regards the remaining
remittance mentioned at S. No.7 of the said Memo
dated 29.05.2005, Shri L.P. Dhir, Ld. Advocate
argued that the appellant company submitted the
original exchange control copy of bill of entry to
Citi Bank N.A. New Delhi. The said authorized
dealer, however, failed to cooperate by furnishing
acknowledgement of receiving the exchange
control copy in respect of said S. No.7.
In the instant case, Shri L.P. Dhir, Ld.
Advocate for the appellants firstly led us to copies
of bills of entry at pages-35 & 36 of the appeal
papers showing imports of certain goods worth US
$ 25,000 i.e. the amount mentioned at S. No. 7 of
Annexure to the Memo. He then led us to copies of
Bills of Entry in respect of S. No. 3,4,5 & 6 of
Annexure to the Memo placed at pages 31 to 34
of the appeal papers. "
The said submissions of the Appellants weighed with
the appellate tribunal and considering the fact that since the
appellants could not bring all these facts on record to the
knowledge of the Special Director on account of their being
ex-parte, therefore, to give a fresh opportunity to the
appellants to first bring to the knowledge of the adjudicating
officer necessary proofs with regard to the import of the
goods of all the items in respect of which the violation was
held to have been committed by the appellants, the appellate
tribunal in its judicial wisdom thought fit to set aside the
order passed by the Adjudicating Authority and remanded
the matter for fresh consideration with further liberty given
to the appellants to file further proof/evidence. The appellate
tribunal felt that after remand the adjudicating officer
would be able ascertain the veracity of the claim of the
appellants afresh to reach at a conclusive finding with regard
to the import of the goods in respect of the items for which
the violation of the relevant provisions was found on the part
of the appellants.
16 . This order of remand is now under challenge by
the appellants and the grievance raised by the appellants in
all the present appeals is that the appellate authority was not
legally competent to remand the matters back to the
adjudicating authority for fresh adjudication but should have
decided the appeals after taking into consideration the
entire material which was placed on record by the
appellants. This plea has been raised by the appellants
on the ground that the appellate authority is not
empowered to remand the matter under the Statute,
particularly, the relevant provision i.e. Section 52 (3) of
FERA does not vest the appellate authority with any such
powers to remand the matter back to the Adjudicating
Authority. As per counsel for the appellant, the appeals filed
by the appellants would be governed by Section 52 of the
Foreign Exchange Regulation Act and not by Section 19 of
the FEMA on account of the fact that the alleged violations
pertain to the period when FERA was in force. The main
thrust of the counsel for the appellant was that as per
sub-Section (3) of Section 52 of the FERA the Appellate
Authority has been given the powers either to confirm,
modify or set aside the order in appeal against the order of
Adjudicating Authority and the language used in the Section
clearly does not vest any such power on the Appellate
Tribunal to remand the matter back to an Adjudicating
Authority while, on the other hand, the contention raised by
the counsel for the respondent is that the appeals filed by the
appellants would only be governed under Section 19 of the
FEMA after repeal of FERA and not under Sub-Section (3) of
Section-52 and the Appellate Authority is fully empowered to
remand the matter back as would be clearly borne out by the
language used in S. 19 (3) of the FEMA which empowers the
Appellate Tribunal to pass such orders as it thinks fit.
17 . To examine the existing legal position, it would be
appropriate to reproduce Section 52 of the Foreign
Exchange Regulations Act and Sections 19 & 49 of the
Foreign Exchange Management Act, 1999 as under:-
Section 52. Appeal to Appellate Board
52. 1. The Central Government may, by notification in the
Official Gazette, constitute an Appellate Board to be called the
Foreign Exchange Regulation Appellate Board consisting of a
Chairman [being a person who has for at least ten years held a
civil judicial post or who has been a member of the Central Legal
Service (not below Grade I) for at least three years or who has
been in practice as an advocate for at least ten years] and such
number of other members, not exceeding four, to be appointed
by the Central Government for hearing appeals against the
orders of the adjudicating officer made under section 51.
2. Any person aggrieved by such order may, on payment of such
fee as may be prescribed and after depositing the sum imposed
by way of penalty under section 50 and within forty-five days
from the date on which the order is served on the person
committing the contravention, prefer an appeal to the Appellate
Board:
Provided that the Appellate Board may entertain any appeal
after the expiry of the said period of forty-five days, but not
after ninety days, from the date aforesaid if it is satisfied that
the appellant was prevented by sufficient cause from filing the
appeal in time
Provided further that where the Appellate Board is of opinion
that the deposit to be made will cause undue hardship to the
appellant, it may, in its own discretion, dispense with such a
deposit either unconditionally or subject to such conditions as it
may deem fit.
3. On receipt of an appeal under sub-section (2), the Appellate
Board may, after making such further inquiry as it deems fit,
confirm, modify or set aside the order appealed against and the
decision of the Appellate Board shall, subject to the provisions of
section 54, be final and if the sum deposited by way of penalty
under sub-section (2) exceeds the amount directed to be paid
by the Appellate Board, the excess amount shall be refunded.
4. The Appellate Board may, for the purpose of examining the
legality, propriety or correctness of any order made by the
adjudicating officer under section 50 read with section 51 in
relation to any proceeding, on its own motion or otherwise, call
for the records of such proceeding and make such order in the
case as it thinks fit.
5. No order of the adjudicating officer made under section 50
read with section 51 shall be varied by the Appellate Board so as
to prejudicially affect any person without giving such person a
reasonable opportunity for making a representation in the
matter; and subject thereto, the Appellate Board shall follow
such procedure, in respect of the proceedings before it, as may
be prescribed.
6. The powers and functions of the Appellate Board may be
exercised and discharged by Benches consisting of two members
and constituted by the Chairman of the Appellate Board:
Provided that if the members of the Bench differ on any point or
points, they shall state the point or points on which they differ
and refer the same to a third member (to be specified by the
Chairman) for hearing on such point or points and such point or
points shall be decided according to the opinion of that member:
Provided further that it shall be competent for the Chairman or
any other member of the Appellate Board authorised by the
Chairman in this behalf to exercise the powers and discharge the
functions of the Appellate Board in respect of any appeal against
an order imposing a penalty of an amount not exceeding Rupees
two lakhs and fifty thousand.
THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999
19. (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 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
(Appeals) 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 :
Provided that the Appellate Tribunal may entertain an appeal
after the expiry of the said period of forty-five days if it is
satisfied that there was sufficient cause for not filing it within
that period.
(3) On receipt of an appeal under sub-section (1), the Appellate
Tribunal may, after giving the parties to the appeal an
opportunity of being heard, pass such orders thereon as it thinks
fit, confirming, modifying or setting aside the order appealed
against.
(4) The Appellate Tribunal shall send a copy of every order
made by it to the parties to the appeal and to the concerned
Adjudicating Authority or the Special Director (Appeals), as the
case may be.
(5) The appeal filed before the Appellate Tribunal under sub-
section (1) shall be dealt with by it as expeditiously as possible
and endeavour shall be made by it to dispose of the appeal
finally within one hundred and eighty days from the date of
receipt of the appeal:
(6) Provided that where any appeal could not be disposed of
within the said period of one hundred and eighty days, the
Appellate Tribunal shall record its reasons in writing for not
disposing off the appeal within the said period.
The Appellate Tribunal may, for the purpose of examining the
legality, propriety or correctness of any order made by the
Adjudicating Authority under section 16 in relation to any
proceeding, on its own motion or otherwise, call for the records
of such proceedings and make such order in the case as it thinks
fit.
Repeal and saving
49. (1) The Foreign Exchange Regulation Act, 1973 is hereby
repealed and the Appellate Board constituted under sub-section
(1) of section 52 of the said Act (hereinafter referred to as the
repealed Act) shall stand dissolved.
(2) On the dissolution of the said Appellate Board, the person
appointed as Chairman of the Appellate Board and every other
person appointed as Member and holding office as such
immediately before such date shall vacate their respective
offices and no such Chairman or other person shall be entitled to
claim any compensation for the premature termination of the
term of his office or of any contract of service.
(3) Notwithstanding anything contained in any other law for the
time being in force, nor court shall take cognizance of an offence
under the repealed Act and no adjudicating officer shall take
notice of any contravention under section 51 of the repealed Act
after the expiry of a period of two years from the date of the
commencement of this Act.
(4) Subject to the provisions of sub-section (3) all offences
committed under the repealed Act shall continue to be governed
by the provisions of the repealed Act as if that Act had not been
repealed.
(5) Notwithstanding such repeal,-
(a )anything done or any action taken or purported to have been
done or taken including any rule, notification, inspection, order
or notice made or issued or any appointment, confirmation or
declaration made or any license, permission, authorization or
exemption granted or any document or instrument executed or
any direction given under the Act hereby repealed shall, in so far
as it is not inconsistent with the provisions of this Act, be
deemed to have been done or taken under the corresponding
provisions of this Act;
(b) any appeal preferred to the Appellate Board under sub-
section (2) of section52 of the repealed Act but not disposed off
before the commencement of this Act shall stand transferred to
and shall disposed of by the Appellate Tribunal constituted under
this Act;
(c) very appeal from any decision or order of the appellate
Board under sub-section (3) or sub-section (4) of section 52 of
the repealed Act shall, it not filed before the commencement of
this Act, be filled before the High Court within a period of sixty
days of such commencement:
Provided that the High Court may entertain such appeal after
the expiry of the said period of sixty days if it is satisfied that
the appellant was prevented by sufficient cause from filing the
appeal with the said period.
(6) Save as otherwise provided in sub-section (3), the mention
of particular matters in sub-section (2), (4) and (5) shall not be
held to prejudice or affect the general application of section 6 of
the General Clauses Act, 1897 with regard to the effect of
repeal.
18 . Under the Foreign Exchange Regulations Act the
appeal against the order of the Adjudicating Authority could
be preferred before the Appellate Board under Section 52 (3).
On receipt of such an appeal the Appellate Board after
holding a proper enquiry as it deems fit, either can confirm
the order of the adjudicating authority or to modify or set
aside the same subject to the provisions of Section 54 of the
FERA which deals with the right of an aggrieved party to file
appeal before the High Court. The order so passed by the
Appellate Board was to become final between the parties.
Under the Foreign Exchange and Management Act, 1999 the
analogous provision dealing with such exercise of powers of
appeal finds place in Section 19 (3) and perusal of both these
provisions i.e. 52 (3) FERA and 19 (3) FEMA would clearly
show that there is a drastic change in the use of some
expressions. Besides the fact that in place of „Appellate
Board‟ the „Appellate Tribunal‟ so established by the Central
Government finds place, where the appeal could be
maintained against the order of the Adjudicating Authority
other than those orders where the remedy to file an appeal
is available to the Special Director (Appeals) under Section
17 of FEMA Act. The power of the Appellate Tribunal has
clearly been widened with the use of the words „pass such
orders as it thinks fit‟ in Section 19 (3) of the FEMA, 1999.
The contention of the counsel for the appellants is that under
Section 52 (3) of the FERA one does not find mention of the
said expressions and therefore, the Appellate Board after
holding any such enquiry as it deems fit was legally bound to
decide the appeal one way or the other in the modes
prescribed under the Section i.e. either by confirming the
order of the Adjudicating Authority or modifying such an
order or by setting aside the order but the power to remand
the matter did not vest with the Appellate Board. As a
corollary to the said argument the counsel for the appellants
also submitted that no tribunal can exercise such power of
remand unless specifically vested in such an authority under
the Statute. The counsel for the appellants has also drawn a
distinction between the powers of the judicial review
exercised by the High Court under article 226 of the
Constitution of India which are wide enough to include the
power to remand the matter unlike the powers of the
Tribunal to be strictly exercised under the relevant provisions
of the particular statute or enactment.
19 . In my considered view every Appellate Authority
exercising judicial or quasi-judicial powers vests with the
inherent powers to remand a matter. The rule of inherent
powers has its source in the maxim "Quadolex aliquid alicui
concedit, concedere videtur id sine quo ipsa, ess uon potest"
which means that when the law gives anything to anyone, it
gives also all those things without which the thing itself could
not exist. At the same time the inherent powers do not
confer an arbitrary jurisdiction upon the appellate authority
to act according to whim or caprice. The said powers have to
be exercised sparingly, with circumspection & in the rarest of
rare cases. Such powers should be exercised to pass orders
to prevent abuse of process of Court or to secure the ends of
justice. The power to remand back the matter can be read
into S. 52(3) of FERA. The word „remand‟ means to remit
back a matter. It is only when any Appellate Authority finds
that due to any reasons the full facts could not be gone into
by the Adjudicating Authority due to one or the other reasons
which could be, either one of the parties was ex-parte or
because the department did not place the entire material on
record and such material being of vital importance to
ultimately influence the decision one way or the other, in
given facts of the case is fully competent to remand the
matter back to the Adjudicating Authority. It is, however,
made clear that incidental power to remand, is only an
exception and should be sparingly used when it is not
possible to dispose of the appeal for want of relevant
evidence, lack of finding or investigation warranted by the
circumstances of the case. In any event of the matter, that is
not a question here as admittedly the appellants had filed an
appeal under Section 19 of the FEMA 1999 and Section 19
(3) of the said Act clearly vests the power to Appellate
Tribunal to pass such orders on the order of the Adjudicating
Authority as it thinks fit and there cannot be an iota of doubt
that power to pass such order includes the incidental power
to remand the matter to the Adjudicating Authority. In the
case of Union of India and Others Vs. Umosh Dhaimode
(1997) 10 SCC 223 while dealing with such similar
provision of the Customs Act the Apex Court clearly held that
the Appellate Authority under the Customs Act under Section
128 (2) of the Customs Act (as it then stood) was fully vested
with the power to pass such order which includes the power
to remand the matter. The relevant para of the said decision
is referred as under:-
"The then Judicial Commissioner, Goa, Daman and Diu,
took the view that Section 128 (2) of the Customs Act, 1962, as
it then read, did not vest the appellate authority with the power
to remand. Accordingly, he set aside such order and the
Revenue is in appeal.
As the order under appeal itself notes, the
aforesaid provision vested the appellate authority with powers
to pass such order as it deemed fit confirming, modifying or
annulling the decision appealed against. An order of remand
necessarily annuls the decision which is under appeal before the
appellate authority. The appellate authority is also invested with
the power to pass such order as it deems fit. Both these
portions of the aforesaid provision, read together, necessarily
imply that the appellate authority has the power to set aside the
decision which is under appeal before it and to remand the
matter to the authority below for fresh decision."
20 . Similarly in another matter reported in 1993
Supp (4) SCC 206 entitled CIT Vs. Assam Travels
Shipping Service the Apex Court upheld the power of the
Tribunal to make an order of remand in certain situations
being well settled. Para 6 of the said decision is reproduced
as under:-
6. The expression „„as it thinks fit‟‟ is wide enough
to include the power of remand to the authority
competent to make the requisite order in accordance
with law in such a case even though the Tribunal itself
could not have made the order enhancing the amount
of penalty. The power of the Appellate Assistant
Commissioner under Section 251(1)(b) includes the
power even to enhance the penalty subject to the
requirement of sub-section (2) of Section 251 of
reasonable opportunity of showing cause against such
enhancement being given to the appellant assessee.
This could have been done in the assessee‟s appeal
itself filed in the present case. The power of the
Tribunal to make an order of remand in such a situation
is well settled.1
7. This being the position in law the Tribunal was
not justified in taking the view that it had no other
alternative except to affirm the order of the Appellate
Assistant Commissioner cancelling even the lesser
penalty imposed by the Income Tax Officer. In view of
Section 251(1)(b) of the Act it is also clear that the
Appellate Assistant Commissioner was wrong in taking
the view that he had no power to enhance the penalty
in accordance with law on reaching the conclusion that
the computation of penalty made by the Income Tax
Officer was illegal, and that he could only cancel even
the lesser penalty which had been imposed by the
Income Tax Officer. It has now to be seen whether the
question of law referred to the High Court under
Section 256(1) of the Act covered this aspect.
21 . In my view, therefore, the power to remand is an
important postulate of any authority exercising appellate
jurisdiction and such a power is a necessary concomitant of
the powers of the Appellate Authority to do complete justice
between the parties in the absence of which the power to be
exercised by the Appellate Authority would become illusory
and ineffective. The very existence of the Appellate
Jurisdiction obliges the Authority exercising the Appellate
Board‟s powers to discharge its jurisdiction fully and
effectively and in the given set of facts the appellate
authority can always remand the matter back for proper and
effective decision by the Authority of the first instance who
for some reasons or in the absence of complete material
before it failed to return a proper finding.
22. The judgments relied upon by the counsel for the
appellants are not applicable in the facts of the present case
and therefore are of no assistance to the appellants.
23 . The other argument of the counsel for the
appellants that appeal of the appellants would be governed
by the old Act is equally misplaced as Section 49 (1) of the
FEMA clearly states that Appellate Board constituted under
the FERA Sub Section (1) of Section 52 of FERA shall stand
dissolved and Sub Section 49 (5) (b) of the FEMA further
states that all the appeals preferred to the Appellate Court
under Sub Section (2) of the repealed Act shall stand
transferred to the Appellate Tribunal constituted under
FEMA if the same were not disposed of before the
commencement of FEMA and in the facts of the present case
admittedly, all the three appeals were preferred by the
appellants under Section 19 of Foreign Exchange
Management Act, 1999. The Appeals filed by the appellant
are thus governed by Section 19 of the FEMA and not by
Section 52 (3) of the FERA. As far as Sub-Section (4) of
Section 49 of the FEMA is concerned, there cannot be any
doubt that Sub-Section (3) of Section 49 of FEMA as far as
commission of offence is concerned the same shall continue
to be governed by the provisions of the repealed Act and this
position is not in dispute as the alleged offences in the
present case were committed by the appellants when the
FERA was in force.
24 . In view of the above decision, I do not find that
there is any merit in the present appeals.
25. Dismissed.
February 09, 2009 KAILASH GAMBHIR
JUDGE
