Appellant Penalised for FDI Reporting Failure Under Repealed Norms as New Amendment Maintained Reporting Obligation

Case Details: M/s Shell India Markets Pvt. Ltd v. The Special Director, ED - 162 taxmann.com 167 (SAFEMA-New Delhi)

Judiciary and Counsel Details

• • Munishwar Nath Bhandari, Chairman & Rajesh Malhotra, Member
  • Jai Savla, Prabhat Kumar Chaurasia, Jasdeep Singh Dhillon, Yugantar Chauhan & Anirudh Jamwal, Advs. for the Appellant.
  • Varun Mishra, Adv. for the Respondent.

Facts of the Case

In the instant case, the appellant company (Non-resident investor) received an FDI for 204 crores on 21-4-2016. The RBI issued a Circular dated 12-2-2015 to initiate online filing of an Advance Remittance Form (ARF) to report FDI inflows within 30 days of receipt in addition to the manual reporting system.

The appellant reported FDI through its bank on 13-6-2016. Later, the Assistant Director of ED filed a complaint against appellant before Adjudicating Authority, alleging violation of section 6(3)(b) read with Para 9(1)(A) of Schedule I to Regulation 5(1) of FEM (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 as appellant delayed reporting its FDI by 24 days.

The Adjudicating Authority imposed a penalty of Rs. 20 crores on the appellant company and Rs.5 crores on its director for causing the said delay. On appeal, appellant submitted that imposition of penalty was made in reference to provision of section 6(3)(b) and Regulation 5 which were omitted / repealed w.e.f. 15-10-2019 while proceedings were initiated against it in year 2022. Further, appellant submitted that penalty could be maximum of Rs.2 lakhs on company and its director.

SAFEMA Held

The Appellate Tribunal SAFEMA observed that the provision of section 6(3)(b) was repealed and section 47(3) was inserted however the requirement of reporting of FDI was maintained. Further, in case of Fibre Boards Private Limited, Bangalore Vs. CIT Bangalore (2015)10 SCC 333, Supreme Court held that repeal/omission shall not affect continuance of any enactment which was repealed and was in operation at time of such repeal.

Since regulations framed by RBI remain in operation pursuant to section 47(3) as amended, the Appellate Tribunal SAFEMA held that appellant could not take excuse regarding repeal/omission of provision and, thus, penalty imposed was to be substituted with amount of 2 crores on company and 5 lakhs on its directors and instant appeal was to be disposed of.