2011 (12) TMI 260 - HC - FEMA

Import of Toyota Lexus Car - Department Illegal purchase - Appellant gifted by father-in-law, no reasonable opportunity provided, not asked for documents, notice barred by limitation - Notice issued under FERA - Held That - Section 49(3) of FEMA has replaced FERA,the two years period was to expire on 31.5.2000, notice not effected by period of limitation. The act do not contemplate any time however period of 5 days can be considered as reasonable specially when appellant replied during such period. On ground of documents when the appellant was required to show whether he got any permission for such transaction, there would not have been any hesitation for the appellant to submit the same and it cannot be said. Decided against assessee.

Summary

Issues Involved:
1. Alleged contravention of FERA provisions by the appellant.
2. Legitimacy of the opportunity notice issued under Section 61(2)(ii) of FERA.
3. Repeal of FERA and applicability of FEMA.
4. Adequacy of the opportunity given to the appellant to respond.
5. Non-provision of essential documents to the appellant by the Department.

Issue-wise Detailed Analysis:

1. Alleged Contravention of FERA Provisions by the Appellant:
The appellant was accused of contravening FERA provisions by purchasing a Toyota Lexus car from London through a fictitious transaction using the name of Dr. S. Balakrishnan. The Department alleged that the vehicle was illegally imported to India under an undervalued declaration for import duty purposes. The appellant contended that the car was a gift from Dr. S. Balakrishnan, a friend of his father-in-law. The Department's investigation, including statements from Dr. Balakrishnan's associates, suggested that Dr. Balakrishnan could not afford such a car, thus implying the transaction was fictitious.

2. Legitimacy of the Opportunity Notice Issued Under Section 61(2)(ii) of FERA:
The appellant received an opportunity notice on 21.5.2002, requiring a reply within five days. The appellant argued that the notice was issued hastily to save the limitation period under Section 49(3) of FEMA, thus violating principles of natural justice. The Department maintained that the notice was issued following a thorough investigation, and the appellant had indeed responded within the given timeframe.

3. Repeal of FERA and Applicability of FEMA:
FERA was repealed on 31.5.2000 and replaced by FEMA, which came into effect on 1.6.2000. Section 49 of FEMA allowed for the continuation of actions initiated under FERA within two years of its repeal. The opportunity notice issued on 21.5.2002 was within this period, thus not barred by limitation. The court reiterated that actions initiated within the two-year period were valid under FEMA.

4. Adequacy of the Opportunity Given to the Appellant to Respond:
Section 51 of FERA requires a 'reasonable opportunity' for the delinquent before adjudication. The appellant argued that five days was insufficient. However, the court noted that the appellant did submit his reply within the given period, indicating that the opportunity provided was adequate. The court referenced the Supreme Court's judgment in Standard Chartered Bank v. Directorate of Enforcement, which clarified that notices under Section 61 of FERA are preliminary and do not decide anything against the appellant but merely provide an opportunity to show necessary permissions.

5. Non-provision of Essential Documents to the Appellant by the Department:
The appellant claimed that the Department did not provide necessary documents for an effective representation. The court found this argument unconvincing, noting that the appellant did not demonstrate any permission for the transaction. The court highlighted that the opportunity notice did not conclude any guilt but was a procedural step to allow the appellant to present any permissions.

Conclusion:
The court found that the Department acted within the legal framework, providing the appellant with an adequate opportunity to respond. The appellant's arguments regarding the hurried issuance of the notice and non-provision of documents were rejected. The learned single Judge's dismissal of the writ petition was upheld, and the appeal was dismissed with no costs. The connected Miscellaneous Petition was also dismissed.