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2022 (9) TMI 856 - HC - FEMAInterpretation of statute - Compounding of offence for non-filing of the annual return by payment of penalty - delay in filing of the annual return - Validity of Notification bearing No.S.O. 1070(E) dated 26.04.2013 issued by the respondent u/s 41 of the Foreign Contribution (Regulation) Act, 2010 - whether impugned notification is ultra vires of the provisions of the FCR Act? - Whether the delay in filing of the returns is an offence punishable under the FCR Act? - HELD THAT - Petitioner was required to furnish the annual returns in Form FC-6 along with its final accounts (income and expenditure statement, receipt and payment account and balance sheet) within nine months of the end of the relevant financial year. Therefore, the petitioner was required to file the annual return for the financial year ending on 31st March of any year on or before 31st December of that year. There is no ambiguity that the petitioner was required to file the annual returns within the prescribed period in compliance with the provisions of the FCR Act. It is not necessary that all offences be separately listed out in Chapter-VIII of the FCR Act. The plain language of Section 37 of the FCR Act clarifies that the punishment, as specified, would be applicable in case of noncompliance of any provision of the FCR Act for which no specific punishment is prescribed. Thus, violation of any provision of the FCR Act would attract punition, as specified. The heading of a section of an enactment may be used as an aid for interpretation of that section but does not control the meaning or import of the section where the language of the section is free from ambiguity. The contention that delay in filing of the annual return under the FCR Act is not an offence, is rejected. The question as noted in paragraph 2(b) is answered in the affirmative. Composition of certain offences - challenge to the validity of the impugned notification - Section 41 of the FCR Act expressly provides that any offence, other than an offence, which is punishable by imprisonment only, made prior to institution of any prosecution be compounded for such sums as the Central Government may specify. The impugned notification has been issued by the Central Government in exercise of powers under Section 41 of the FCR Act. It does not fall foul of any provision of the FCR Act. We are unable to accept that the impugned notification is ultra vires to the Constitution of India. It merely stipulates the terms on which given offences can be compounded.Question as noted in paragraph 2(a) is answered in the negative. Whether the impugned order is sustainable? - Admittedly, the petitioner had failed to file the annual return within the time prescribed and thus, had failed to comply with the provisions of Section 18 of the FCR Act read with Rule 17 of the FCR Rules. In terms of the impugned notification, the delay in filing of the annual return would be compounded by payment of penalty as stipulated therein. The tabular statement specifying the offences, the amount of penalty and the officer competent to compound the same, as set out in the impugned notification. The obligation to file the annual return for the financial year 2010-11 had arisen on 01.05.2011 and the same was required to be filed before 31.12.2011. Failure to do so is failure to comply with the provisions of the FCR Act. This does not amount to imputing any act committed prior to the FCR Act coming into force as an offence under the said Act. The impugned order to the extent it stipulates payment of penalty for the delay in filing the annual return for the financial year 2009-10, is set aside.The questions, as noted in paragraph 2(c) and 2(d), are answered accordingly. Considering the mitigating circumstances, this Court also considers it apposite to grant the petitioner further four weeks time from today to deposit the penalty, as stipulated, for the financial years 2010-11 and 2011-12 along with the requisite application for compounding the offence.
Issues Involved:
1. Whether the impugned notification is violative of the provisions of the FCR Act. 2. Whether the delay in filing of the returns is an offence punishable under the FCR Act. 3. Whether the impugned order advising the petitioner to pay the penalty for the financial years 2009-10, 2010-11, and 2011-12 is beyond the scope of the FCR Act. 4. Whether the impugned order calling upon the petitioner to pay the penalty for a period prior to 01.05.2011 is sustainable. Detailed Analysis: Issue 1: Whether the impugned notification is violative of the provisions of the FCR Act. The court examined whether the impugned notification violates the provisions of the FCR Act or is ultra vires the Constitution of India. The petitioner argued that the delay in filing the return is not an offence under the FCR Act, and the notification creates an offence with retrospective effect. The court found that Section 18 of the FCR Act mandates filing returns and Section 37 provides penalties for non-compliance. The impugned notification, issued under Section 41, specifies the terms for compounding offences and does not violate the FCR Act or the Constitution. Therefore, the court concluded that the notification is not violative of the FCR Act. Issue 2: Whether the delay in filing of the returns is an offence punishable under the FCR Act. The court clarified that non-filing of an annual return within the prescribed time is indeed an offence under the FCR Act. Section 18 mandates the filing of returns, and Rule 17 of the FCR Rules prescribes the manner and timeline for filing. Section 37, a residuary clause, imposes penalties for non-compliance with any provision of the FCR Act. Thus, the court rejected the petitioner's contention and affirmed that delay in filing returns is an offence under the FCR Act. Issue 3: Whether the impugned order advising the petitioner to pay the penalty for the financial years 2009-10, 2010-11, and 2011-12 is beyond the scope of the FCR Act. The court found that the petitioner failed to file the annual returns within the prescribed period, violating Section 18 of the FCR Act and Rule 17 of the FCR Rules. The impugned order, applying the notification, computed penalties for the delays. The court upheld the penalties for the financial years 2010-11 and 2011-12, as the FCR Act and Rules were in force by then. However, it found that the penalty for 2009-10 was unsustainable since the FCR Act and Rules came into force on 01.05.2011, and the petitioner could not be penalized for non-compliance before that date. Issue 4: Whether the impugned order calling upon the petitioner to pay the penalty for a period prior to 01.05.2011 is sustainable. The court clarified that the petitioner could not be held guilty of an offence for not filing returns before the FCR Act came into force on 01.05.2011. The obligation to file returns for the financial year 2010-11 arose after the FCR Act came into force, and failure to file by 31.12.2011 constituted non-compliance under the FCR Act. Thus, the court set aside the penalty for the financial year 2009-10 but upheld the penalties for 2010-11 and 2011-12. Conclusion: The court concluded that the impugned notification is not violative of the FCR Act or the Constitution. Delay in filing returns is an offence under the FCR Act. The penalty for the financial year 2009-10 was unsustainable, but penalties for 2010-11 and 2011-12 were upheld. The petitioner was granted four weeks to deposit the penalties for 2010-11 and 2011-12 and apply for compounding the offence. The petition was disposed of accordingly, with no costs awarded.
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