2009 (5) TMI 472 - HC - Customs

Foreign Exchange violation- By an order the Adjudicating Authority held the appellant guilty for violation of the provisions of the aforesaid Sections of the FERA in all the five Show Cause Notices and imposed a total penalty of Rs. 20,75,000/- In this manner, a total of Rs. 14,51,360/- was appropriated as penalty amount against the total penalty of Rs. 20,75,000/- , leaving a balance of Rs. 6,23,240/-. Failure on part of person concerned to pay the penalty imposed is sine qua non for conviction under section 57. Held that- No failure on part of petitioner to pay the penalty imposed, when Appellate Tribunal itself had waived the deposit of balance penalty amount. The petitioner cannot be said to be either deliberate or willful when Appellate Tribunal itself had waived penalty amount and appeal pending before Tribunal. Complaint filed u/s 57 ibid quashed.

Issues Involved:

1. Quashing of the complaint under Section 57 of the Foreign Exchange Regulation Act, 1973 (FERA).
2. Legality of the penalty imposed by the Adjudicating Authority under FERA.
3. Validity of the complaint filed by the Enforcement Directorate despite the stay order by the Appellate Tribunal.

Detailed Analysis:

1. Quashing of the Complaint under Section 57 of FERA:

The petitioner sought to quash the complaint pending before the trial court for alleged violations of Section 57 of FERA. The complaint was filed due to the non-deposit of a penalty amount imposed by the Adjudicating Authority. The petitioner argued that there was no willful default in complying with the orders, as the Appellate Tribunal had waived the deposit of the balance penalty amount. The court observed that the failure to pay the penalty is a sine qua non for conviction under Section 57, and such failure must exist on the date of the complaint filing. Since the Appellate Tribunal had waived the deposit of the balance penalty amount, there was no failure on the part of the petitioner to pay the penalty, and thus, no offence under Section 57 was committed.

2. Legality of the Penalty Imposed by the Adjudicating Authority:

The Adjudicating Authority found the petitioner guilty of violating various provisions of FERA and imposed a total penalty of Rs. 20,75,000 and ordered the confiscation of Rs. 1,15,90,000. The petitioner appealed against this order, and the Appellate Tribunal waived the pre-deposit of the remaining penalty amount, acknowledging that the deposit would cause undue hardship. Despite this, the Enforcement Directorate filed a complaint for non-deposit of the penalty amount, which the petitioner argued was not justified, given the Tribunal's waiver.

3. Validity of the Complaint Filed by the Enforcement Directorate:

The Enforcement Directorate filed the complaint under Section 57 of FERA on 31-5-2002, despite the Tribunal's order dated 27-5-2002 waiving the deposit of the penalty amount. The court noted that the complaint was filed with full knowledge of the Tribunal's order, indicating a lack of willful default by the petitioner. The court highlighted that the haste in filing the complaint suggested mala fides on the part of the Department, especially since the sunset clause was approaching. The court held that the petitioner could not be held liable under Section 57 of FERA as the basic ingredients of the offence were missing, and the complaint was quashed with the clarification that the respondents could take action if the appeal was decided in their favor or if the stay was vacated.

Conclusion:

The court quashed the complaint filed under Section 57 of FERA, holding that the petitioner had not committed the offence as there was no willful default in paying the penalty amount. The court emphasized that the Enforcement Directorate's actions were not justified given the Tribunal's waiver and the pending appeal, and the complaint was filed with mala fides. The court disposed of the case with the provision that the respondents could take action if the appeal was decided against the petitioner or if the stay was vacated.

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