Madras High Court
Deputy Director, Enforcement ... vs Naina Maricair on 9 March, 1989
Equivalent citations: AIR1990MAD22, 1990(26)ECC299, 1990(46)ELT16(MAD), AIR 1990 MADRAS 22
ORDER
Paomini Jesuduhai,
1. The short point involved in this writ appeal is whether, the show cause notice issued under R. 3(1) of the Adjudication Proceedings and Appeal Rules 1974, framed under the foreign Exchange Regulation Act, 1973, is or is not a notice of the commencement of adjudication proceedings under S. 51 of that Act.
2. The respondent filed W.P. 7523 of 1987 on the averment that on 21-5-19, the Enforcement Officials seized from his residential premises a sum of Rs. 1,60,000, Indian Currency he longing to him, for alleged viola-lion of Foreign Exchange Regulation Act, "1973 (hereinafter referred to as the Act), and that S. 41 of the Act permits retention of the amount beyond a period of one year if proceedings cither under S. 51 of the Act or prosecution under S. 56 of the Act had been commenced and in (case he) received any (no) show cause notice about any adjudication proceedings, that the appellants department could no longer retain the currency and that, therefore, a writ of mandamus ought to be issued to them, directing them to return the currency to him.
3. The appellants resisted the action, admitting that the seizure was made on the day alleged, but contended that the seizure was for contravention, of the provisions of S. 9(1)(h) of the Act, that adjudication proceedings under S. 51 of the Act had really been commenced, since even on 8-5-1987 i.e. within a period of one year a show cause notice, as contemplated under R3(1) of the adjudication Proceedings and Appeal Rules 1974 (hereinafter referred to as the Rules) had been issued and since the respondent evaded service, the notice was served in the manner provided for in law and that in view of the fact, that even on 8-5-1987 a show cause notice was issued, the enabling provision of S. 41 of the Act justifies their retention of the property beyond the period of one year.
4. Learned single Judge, relied on the judgment of V. Ramaswami, 1. (as he then was) in Sivarajan v. Dy. Collector, Madras, (1987) 12 ECC 256, wherein the learned Judge had held that proceedings under S. 51 of the Act commence, only when a notice of hearing under K. 1(1) is issued and not when a show cause notice under R. 3(1) is issued. Learned single Judge, therefore, held that since no notice under R.3(3) of the Rules had been issued within the period of one year from the date of seizure by the appellants, the appellants could not in law retain the currency and allowing the writ petition issued a Mandamus directing the appellants to return the currency to the respondent. Aggrieved with the order, this writ appeal is filed by the Enforcement.
5. The only point canvassed before us is whether adjudication proceedings under S. 51 of the Act commence on the issuance of a show cause notice under R. 3(1) or whether it commences only when a notice of hearing is issued under R. 3(3).
6. Thiru S. Veeraraghava, Additional Central Government Standing Counsel, for appellants, placed reliance upon an earlier decision of V. Ramaswami, J. (as he then was) in Abdul Khader v. Dy. Director, Enforcement Information Directorate, Madras, AIR 1976 Mad 233, as also the decision of the Division Bench of this Court in the appeal filed against the above decision viz. the Dy. Director of Enforcement Directorate, Madras v. Abdul Khadar, judgment dt. 16-9-1976 in W.A. No. 65 of 1976. Reliance was also placed upon a decision of the KeraIa High Court in Rhaskaran Pillai v. Enforce-
rnent Directorate 1978 Ker I/I 436(437): (1978 Tax LR 2251), to contend that proceedings under S. 51 of the Act commence, when a show cause notice under R. 3( I) is issued.
7. Per contra, Thini Krishnamaraju, learned counsel for the respondent, placing reliance upon the later judgment of V. Kamaswami. J. (as he then was) in Sivrajan v. Dy. Director, Madras, (1987) 12 .ECC 256 contended that the learned Judge therein had gone in depth into the aspect and had given proper reasons for construing the' relevant rules, that adjudication proceedings commence only when notice under R.3(3) is issued and not until then.
8. Before referring to the various decisions that were placed before us, it would he appropriate to analyse the related provisions of the Act. S. 41 of the Act is as follows-
"Where in pursuance of an order made under sub-see. (2) of S. 33 or of the provisions of S. 34 or S. 36 or S. 37 of a requisition of summons under S. 39 or S. 40, any document is furnished or seized and any officer of Enforcement has reason to believe that the said document would be evidence of the contravention of any of the provisions of this Act or of any rule, direction or order made thereunder and that it would he necessary to ret am the document in his custody, he may so retain the document for a period of not exceeding one year or if, before the expiry of the said period of one year, any proceedings
(i) under S. 51 have been commenced, until the disposal of those proceedings, including the proceedings, it any, before the Appellate Board and the High Court, or
(ii) under S. 56 have been commenced before a Court, until the document has been tiled in the Court."
A reacting of the above provision clearly indicates that it is concerned primarily with documents that have come into (he possession of the Enforcement Officers under Ss. 33, 34, 36, 37, 39 and 40. S. 33 enables the Enforcement Officer to require any person who has to submit returns of foreign exchange, foreign security or immovable property held outside India, to produce any document which they consider expedient to obtain and examine for the purpose of the Act, S. 34 enables them to search and seize from persons the documents which would he useful for or relevant to any investigation of proceedings under the Act. S. 36 gives similar power to stop and search conveyance. S. 37 enables the Enforcement to seatch and seize from the premises. Ss. 39 and 40 enable them during the course of any investigation or proceeding under the Act, to require any person to produce or deliver any document, which they consider would be relevant to the investigation or proceeding. It is, therefore, clear that for the purpose of effectively enforcing the Act, the officers of the Enforcement are given the power to seize documents, which they consider would be relevant and useful for any proceeding that could be taken under the Act. While the provisions are primarily intended for documents, by virtue of an explanation appended to S. 33, currency is also included in the term 'document'. Explanation to S. 33 is as follows "(or the purposes of this section, S. 34 and Ss. 36 to 41 (both inclusive) 'document' includes Indian currency, foreign exchange and books of account."
9. For violations of the provisions of the Act, two proceedings are contemplated. The first one is an adjudication proceeding under S. 51 of the Act, which could be followed up by imposition of penalty under S. 50 and confiscation under S. 63. The second proceeding contemplated is a criminal prosecution under S. 56 which would include, besides the penal consequences mentioned in that section, confiscation of the properly under S. 63. The documents, therefore, have to be retained, if they are considered useful or relevant for any one of these proceedings. This is the object of permitting the officers of the Enforcement to retain the documents that have come into their possession under the various provisions referred to above. Being a power given to the Enforcement officers to enable them to effectively enforce the Act, whose primary object is to stop drawings of foreign capital too strict any interpretation cannot be put. At the same time, the Statute has taken care to see that this power of retention should not be abused by the officers by refraining from taking action within a reasonable lime and putting the matter into cold storage, thereby causing considerable hardship to the individuals affected. S. 41, therefore, imposes a time limit, as a safeguard against any such possible abuse. It is, therefore, provided that within the period of one year from, cither commencement of the addiration u/s. 51 or commencement of a prosecution u/s.56, the documents ought to be returnned to the party. One cannot also miss the I act that I be Enforcement Officers, even in proceedings conducted under the Act have a right to summon documents from any person.
10. Keeping this in the background, we shall now deal with the procedure contemplated for adjudication proceedings u/s. 51 of the Act, which is as follows "For the purpose of adjudging u/s. 50 whether any person has committed a contravention of any of the provisions of this Act (other than those referred to in that section) or of any rule, direction or order made thereunder, the adjudicating officer shall bold an enquiry in the prescribed manner after giving that person a reasonable opportunity for making a representation in the matter and if, on such enquiry, he is satisfied that the person has committed the contravention, he may impose such penalty as he thinks fit, in accordance with the provisions of that section."
11. The procedure indicated in R. 3 is as follows--
"3. Adjudication proceedings: - (I) In holding an inquiry under S. 51 for the purpose of adjudging under S. 50 whether any person has committed contra vent ion as specified in S. 50, the adjudicating Officer shall, in the first instance, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereto) why adjudication proceedings should not be held against him;
(2) Every notice under sub-rule (1) to any such person shall indicate the nature of offence alleged to have been committed by him;
(3) If after considering the cause, if any, shown by such person, the adjudication proceedings should be held, he shall issue a notice fixinga date for the appearance of that person either personally or through his lawyer or other authorised representative, (4) On the date fixed, the Adjudicating Officer shall explain to the person proceeded against or his lawyer or authorised representative the offence alleged to have been committed by such person indicating the provisions of the Act or of the Rules, directions or orders made thereunder in respect of which contravention is alleged to have taken place.
(5) The adjudicating officer shall then give an opportunity to such person to produce such documents as he may consider relevant to the inquiry and if necessary, the hearing may he adjourned to a future date; and in taking such evidence the adjudicating officer shall not he bound to observe the provisions of the Evidence Act, 1872(1 of 1872).
(d) If any person fails, neglects or refuses to appear as required by sub-r. (3) before the adjudicating officer, the adjudicating officer may proceed with the enquiry in the absence of such person after recording the reasons for doing so.
(7) If, upon consideration of the evidence produced before the adjudicating officer, the adjudicating officer is satisfied that the person has committed the contravention he may, by order in writing, impose such penalty as he thinks fit, in accordance with the provisions of S. 50;
Provided that the notice referred to in sub-rule (I) and the personal hearing referred to in sub-rules (3), (4) and (5) may at the request of the person concerned be waived."
A reading of the rule would show that the rule contemplates that the Enforcement Officer shall initially place before the adjudicating officers materials which would make out contravention of any of the provisions of the Act. On that, the adjudicating officer issues a show cause notice to the person wherein the nature of the offence alleged to have been committed by him is to he stated. The person its called upon to show cause, if any, as to why adjudication proceedings ought not to be held. In the event of a person showing suffi-cient cause, which the adjudicating Officer accepts, the proceedings u/s. 51 of the Act come to an end. If, however, no cause is shown or the cause shown is unacceptable, the proceedings continue and the person is required to appear before the adjudicating officer, cither in person or through his lawyer. The oral enquiry then commences. Under K. 3(4) the adjudicating officer is to explain to the person or his counsel, as the rase may he, the offence that is alleged to have been committed by such person, indicating the provisions of the Act. Then the person is given an opportunity to produce oral or documentary evidence and on the consideration of the evidence placed before the adjudicating officer suitable orders arc placed. The only document that is supplied to the person which contains the materials placed against him as also the contravention, is the show cause notice issued u/r. 3(1). The second notice u/r. 3(3) is a mere intimation of the date of hearing for the further proceedings.
12. A comparative study of adjudication proceedings in an analogous Act, viz, the Customs Act of 1962, would help us in deciding this legal issue. Under S. 110 of the Custom*, Act, the Customs Offices arc empowered to seize goods liable for confiscation umlcr the Act. Under Ss 11 (. 113. 118. 119. 120 and 121 certain types of goods seized are liable for confiscation. S. 122 requires that where any goods is liable for confiscation or penalty there should be an adjudication proceeding to be conducted by the Officers mentioned in S. 122 and in the manner provided for in S. 124. The definition of 'goods' in S. 2(22) of the Customs Act, includes currency also. Section 124 is as follows "Issue of show cause not ice before confiscation of goods, etc: No order confiscating any goods or imposing any penalty on any person shall he made under this chapter unless the owner of the goods or such person
(a) is given a notice in writing informing him of the grounds in which it is proposed to confiscate the goods or to impose a penalty;
(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and
(c) is given a reasonable opportunity of being heard in the matter;
Provided, that the notice referred to in cl. (a) and the representation referred to in cl.(b) may, at the request of the person concerned be oral."
Similar to S. 41 of the Act, we find S. 110(2) of the Customs Act, which is as follows "Where any goods are seized under sub-s. (I) and no notice in respect thereof is given under cl. (a) of S. 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized."
Adjudication proceeding under the Customs Act, therefore, contemplates first show cause notice informing the person about the grounds on which it is proposed to confiscate the goods or impose a penalty, an opportunity for making a representation in writing and an opportunity of being heard in the matter. Section 110(2) of the Customs Act makes it explicit that the goods cannot be retained beyond the period of six months unless meantime, a show cause notice is issued u/s. 124(a) of the Customs Act.
13. The contents of the show cause notice contemplated in the two provisions are more or less similar. While u/r. 3(1) of the Rules a show cause notice has to indicate the nature of the offence alleged to have been committed by him. Section 124(a) of the Customs Act requires the show cause notice to inform the person of the grounds on which it is proposed to confiscate the goods or impose a penalty. A show cause notice, therefore, in either of these dings would contain the factual averments and the other details, which would make out the contravention committed by the person which he has to meet. Under the Customs Act, final orders are passed alter giving an opportunity for representation and hearing. The Act, however, provides for a stage, when the adjudicating officer could consider the cause shown by the person and if satisfied, could decide to conclude the proceedings and pass linal orders u/s, 51 of the Act. Such an order passed, even before the stage contemplated u/r. 3(3) is still a final order of adjudication u/s. 51 of the Act, deciding not to impose a penalty. In the Customs Act, however, the enquiry is a continuous one which docs not contemplate a stage when the adjudicating officer could accept the explanation and conclude the enquiry even before proceeding for a personal hearing. All that happens under the Act, after the notice u/r. 3(3) is issued fixing a date for the appearance of the person is that the adjudicating officer orally explains to the person about the contravention and the person is called upon to produce evidence, either oral or documentary. If the notice u/r. 3(3) is to be construed only as an office memo, as the learned Judge V. Ramaswami .l. (as he then was) held in Sivarajan v. Dy. Director, (1987) 12 FCC 256, and the enquiry commences only on notice of hearing u/r. 3(3) then the whole enquiry would only proceed on a mere oral explanation of the offence alleged to have have been committed by him.
14. Section 51 calls upon the adjudicating officer to bold an enquiry in the prescribed manner. Rule 3 prescribes the manner. If the enquiry is to commence only from R. 3(3) stage, I here could be no statutory basis for the adjudicating officer to issue notice under R. 3(1) or decide whether or not to accept the cause shown by the person and pass consequential orders, cither dropping the proceedings or continuing the proceedings.
15. We shall now refer to some of the decisions placed before us. As rightly contended by the learned counsel for the respondent, in K. A. Abdul Khader v. Dy.
Director of Enforcement Information Directorate, Madras, AIR 1976 Mad 233, rendered by V. Ramaswami .1. (as he then was) this question whether adjudication proceed- '' ings commence on the notice being issued u/r.3(1) or whether they commance on a notice u/r. 3(3) had neither been raised nor decided. Learned Judge, while generally analysing the provisions of the Act, has made a passing observation that proceedings commence when a show cause not ice is issued. The learned Judge, later in Sivarajan v. Dy. Director, (1987) 12 ECC 2^6 has gone elaborately into this aspect and has equated the notice under R.3(1) to an office memo, issued before disciplinary proceedings are initialed in ordinary civil cases in regard to Government servants. With due respect to the learned Judge, we are not inclined to agree with the view of the learned Judge for the reasons already enumerated above. The decision of the learned Judge in Abdul Khader v. Dy. Director of Kniorcemcnt Information Directorate, Madras, AIR 1976 Mad 233 was the subject matter of W.A. 65 of 1976, wherein even though the question that directly came up for decision was, whether the date to be reckoned with, was the d ate of issuance of the notice or the dale of service of the notice, the Bench also discussed the issue as to when adjudication proceedings under S. 51 of the Act commence, when a show cause notice is issued u/r. 3(1) and the requirements of S. 19(g) present S. 41) are satisfied. Ramaswami J. (as he then was) in his later decision in Sivarajan v. Dy. Director, (1987) 12 FCC 256 did not choose to place reliance on the view expressed by the Division Bench on the ground that the point, as raised in the case before him, was not raised before the Division Bench and decided. We, however, agree with the view expressed by the Division Bench in W. A. 65 of 1976. The High Court of Kerala in Bhaskaran Pillai v. Enforcement Directorate, 1978 Ker LT436: (1978 Tax LR 225) has also taken a view that proceedings u/s. 51 of the Act commences as soon as a show cause notice is issued u/r. 3(1) and not when a notice of hearing is issued u/r, 3(3). We, therefore, hold that adjudication proceedings u/s. 51 of the Act commence, when a show cause notice is issued by the adjudicating officer u/r.3(1) and not when a notice of hearing is issued u/r. 3(3).
16. Coming to the admitted facts of the case, the seizure was made on 21-5-1986. Though the learned Counsel for the respondent, in the end of his submissions, faintly contended that the show cause notice under R.3(1) dl. 1-5-1987 could not have been issued that day and could have been antedated and the later affixture of the above notice on 11-9-1987 was a farce, since the respondent was very much available for direct service, we cannot go into-these factual allegations. It has, therefore, to be taken that the notice under R.3(1) had been issued on 11 -5-1987, that is, within a period of one year from the date of seizure. '1 lie appellants, therefore, by virtue of the enabling provisions in S. 41 of the Act are entitled to retain the currency, until the disposal of the adjudication proceedings; including the proceedings, if any, before the Appellate Board and the High Court.
17. In the result, the writ appeal is allowed. 'I here will be no order as to costs.
18. Appeal allowed.