2015 (2) TMI 174 - HC - FEMA

Violations of Sections 9 (1) (a), 19 (1) (d) as well as 29 (1) (b) read with Section 68 FERA - Held that - although the AO was passed on 15th October 1990, the order passed by the AT staying recovery of the penalty amount was not passed till 26th May 1995. Then again admittedly the stay order was not formally communicated to the parties. Although the ED appears to have not taken steps to recover the penalties during this entire period, it woke up on 27th December 1999 i.e. more than 9 years after the AO sanctioned the recovery of the penalty amount. At this time, the Petitioners were under a bona fide belief that the recovery of penalties had been stayed by the AT on 26th May 1995. This was also conveyed to the ED. If despite adjudication order attaining finality no payment is made of the penalty amount then certainly it could be said that Section 57 FERA is attracted. Here, however, with there being definitely a clear stay order passed on 8th July 2002, there was no justification for the learned ACMM to have proceeded to frame notice on 17th May 2003 against the Petitioners for the offence under Section 57 FERA. It is possible that on the date of taking cognizance of the offence on 23rd April 2002, the ACMM may have been justified in proceeding with the order since the formal order of stay was not yet passed but certainly once that order was passed further proceedings ought not to have been continued. In any event, with the subsequent developments there appears to be no purpose served in keeping the proceedings under Section 57 FERA alive. It is urged by learned counsel for the Respondents that the matters could be sent back to the learned ACMM for appropriate orders to be passed in light of the subsequent developments. The Court sees no purpose being served in doing that except that it would delay the proceedings even further. - there is no ground made out for continuing the proceedings under Section 57 FERA qua the Petitioners. - Decided in favour of assessee.

Summary

Issues:
Challenge to summoning order under FERA for failure to pay penalty amount, validity of stay order, interpretation of Section 57 FERA, relevance of stay order communication, impact of subsequent developments on proceedings.

Analysis:
The judgment concerns petitions challenging orders summoning the Petitioners under Section 57 of FERA for non-payment of penalty. The background involves a show cause notice issued in 1989, leading to penalties imposed in 1990. The Petitioners appealed to the AT, claiming stay of penalty enforcement. Despite a stay being granted in 1995 but not communicated, ED demanded payment in 1999, leading to complaints in 2002. The AT granted a formal stay in 2002, but ACMM proceedings continued. The AT later dispensed with pre-deposit in 2003, and a Sessions Judge stayed proceedings in 2008 pending AT appeals. The AT dismissed appeals in 2008, leading to High Court appeals. The High Court restrained coercive steps in 2008, and petitions were filed in 2009. The High Court ultimately allowed the appeals in 2014, setting aside the adjudication and AT orders.

The main legal issue revolved around the interpretation of Section 57 FERA in light of the stay order situation. The Petitioners argued that the offence under Section 57 FERA was not attracted due to the stay order, citing a previous case. The Respondents contended that the cognizance taken by the ACMM prior to the formal stay order should be upheld. The Court analyzed the facts, noting the delay in ED action and Petitioners' belief in the stay. Comparisons were drawn to a previous case where the Court ruled on failure to pay penalties until the adjudication order attains finality. The Court found similarities with the present cases, emphasizing the importance of a formal stay order. It concluded that with a clear stay order in place, there was no justification for the ACMM to proceed with the case.

The judgment highlighted the significance of the stay order communication and the impact of subsequent developments on the proceedings. The Court found no grounds to continue the Section 57 FERA proceedings against the Petitioners. It set aside the summoning and notice orders, concluding that there was no purpose in prolonging the proceedings given the circumstances. The judgment ultimately allowed the petitions, with no order as to costs, bringing an end to the legal battle over the penalty payment issue under FERA.