NON-REALISATION OF EXPORT PROCEEDS – PENALTY IS CONFIRMED WHERE RESPONSIBILITY WAS PROVED

In M/s. Bhansali Stainless Wire Pvt. Ltd., Shri Ashok Kasliwal, Shri Mukesh Bhansali, Shri Girish Agrawal and Shri Shailesh Jain Versus The Joint Director, Directorate of Enforcement, Ahmedabad - 2026 (5) TMI 16 - APPELLATE TRIBUNAL UNDER SAFEMA, NEW DELHI, Bhansali Stainless Wire Private Limited, earlier known as ‘Triveni Shinton International Limited’ was in the process of exporting consignments between 2000 – 2001. It was found by the Enforcement Directorate that the appellant company has not realised the export proceeds to the tune of Rs.2.34 crores. Investigations were conducted.

A show cause notice was issued to the company and four other persons who were looking after the company affairs on 17.03.2014. The appellants contended that the show cause notice could not be issued after a lapse of 13 years. They further contended that they were not in a position to provide all documents as they did not maintain the same for 13 years.  The Bhansali was on the process of declaring it as a sick company. The new management took over the company and the new management is not responsible for the contravention of provisions of FEMA. The Adjudicating Authority, after considering the reply of the appellants, held that they have failed to realise the export proceeds.

The Adjudicating Authority held that the appellants contravened Section 8 of the Foreign Exchange Management Act, 1999 read with Regulation 3 of Foreign Exchange Management (Realisation, Repatriation and surrender of Foreign Exchange) Regulation, 2000. The Adjudicating Authority, vide their impugned order dated 26.03.2015 imposed Rs.50 lakhs as penalty to the company and also imposed penalty of Rs. 5,00,000/- each on Shri Ashok Kasliwal, Shri Girish Agrawal and Shri Shailesh Jain and penalty of Rs. 3,00,000/- on Shri Hiralal Bhansali. Since, Shri Hiralal Bhansali expired on 26.04.2013 the Appeal was filed by his legal heir and son Shri Mukesh Bhansali. The Tribunal vide Order dated 18.03.2025 directed the Appellant Company to make pre-deposit of Rs. 5,00,000/-, the three aforementioned individual Appellants to make pre-deposit of Rs. 1,00,000/- each and had directed completely waiver of the pre-deposit for the Appellant Shri Mukesh Bhansali. The said Order was complied with.

The appellants submitted the following before the Tribunal-

• The Show Cause Notice was issued on 17.03.2014 after a delay of almost 13 years from the date of the last relevant export transactions and hence suffers from delay and laches.
•  The Appellant Company did not maintain record for 13 years since no law required it to maintain records regarding realization and repatriation of outstanding foreign export proceeds for so long.
• The Impugned Order has made wrong finding as its outstanding export proceeds were Rs. 2.34 Crores in spite of having submitted that the outstanding export proceeds were Rs. 1.8 Crores only.
•  The erstwhile Company Triveni was under BIFR in 2001 and was declared a sick unit on 17.10.2001.
• Triveni could only make efforts to recover the outstanding export proceeds by means of faxes, letters, telephone calls and personal visits.
• During the year 2000 the authorities in Europe imposed anti-dumping duties on Stainless Steel Wire imported from India. Triveni was adversely impacted as they were in the business of manufacturing and exporting Stainless Steel Wire. 
• The importers in Europe released the goods after paying the anti-dumping duty, but did not make payments to the intermediaries Nippon and Asean located in UAE through which the Triveni had exported the goods to Europe.
• One Shri Vinay Vijaywargiya, who represented Triveni pursued with the entities in UAE to realise the payments for the exports they made. He made numerous visits to UAE to realise the pending payments.
•  The Appellant Company made an application on 05.09.2005 with the Reserve Bank of India for permission to write off outstanding export proceeds amounting to Rs. 1.8 Crores.
• Dena Bank vide certificate dated 27.07.2006 certified that Rs. 2.34 Crores, alleged outstanding export proceeds was included in one time settlement with Triveni. 
• In the year 2006 that the Appellant Company was taken over by the new management. Under such circumstances Late Sh. Hiralal Bhansali and his legal heir cannot be held liable for penalty. 
• Girish Agrawal and Shailesh Jain were not involved in the day-to-day affairs of Triveni. They were inactive Directors of the Company. They were in no way responsible for export transactions. Moreover, no specific averment has been made against them.

In view of the settlement made by Dena Bank with the Appellant Company and the efforts made to realise the outstanding export proceeds, they prayed the Tribunal to allow their Appeals.

The respondent department submitted the following before the Tribunal-

• The Appellant Company failed to realise the export bills during the period from 01.11.2000 to 03.07.2001 amounting to US $ 2,67,042.14 and Euro € 252623.45 equivalent to Rs. 2,34,64,828/-. 
• Dena Bank, Indore vide its letter dated 12.02.2009 confirmed the aforementioned outstanding export proceeds.
• RBI vide letter dated 31.08.2010 also confirmed the said amount for outstanding export proceeds.
• RBI further informed on 27.06.2012 that the write off proposal for the said outstanding export proceeds was under consideration for approval.
•  The Respondent Directorate vide letters dated 20.09.2013 and 22.12.2013 sought from RBI the details of the decision taken on the issue of the write off for which there was no reply from RBI.
• The Appellants failed to produce any evidence for the write off of the outstanding amount.

The Department, therefore, prayed the Tribunal to dismiss the present appeal.

The Tribunal heard the submissions of the parties. The Tribunal observed that the Appellant Company was exporting the Stainless-Steel Wire through two intermediaries in Dubai. the Appellant Company on 05.09.2005 had prayed to RBI for write off of total amount US $ 109228.43 on the basis of the aforementioned documents. Therefore, the Tribunal accepted the pleading of the Appellant that total amount of Rs. 1.8 Crore was pending as outstanding export proceeds. However, there is nothing to show that the RBI had written off the outstanding export proceeds of Rs. 1.8 Crore.

The Appellate Tribunal, then considered the next question as to whether the Appellant took all reasonable steps to realise and repatriate to India foreign exchange equivalent to Rs. 1.8 Crores, which was due on account of the exports made. The Tribunal found that it was unable to hold that the outstanding export proceeds of Rs. 1.8 Crore had either been settled by Dena Bank or written off by the RBI. The appellants had made numerous repeated attempts vide telephone calls and faxes to recover the outstanding export proceeds. they had deputed their representative Shri Vinay Vijaywargiya to make personal visits to UAE to follow up with Nippon and Asean for recovery of the outstanding amounts. The Tribunal found that such efforts were not sufficient. The Tribunal found nothing on record on record to show their approaching the Indian Mission/Consulate for realization of the export proceeds through Chambers of Commerce or other Trade Bodies.

The Tribunal rejected the plea raised by the appellants that the show cause notice in this matter suffers from delay and laches. The show cause notice could have only been issued after necessary enquiry had been made by the Respondent Directorate with the Authorised Dealer Dena Bank and with the RBI. The Appellant Company itself had been making efforts to realise the export proceeds, to settle the account with the Dena Bank and to obtain the write off from the RBI of the outstanding export proceeds. The Tribunal held that it is incorrect to count the period from the date of the last export consignment. The Tribunal found that Late Shri Hiralal Bhansali took over the running of the erstwhile Company Triveni Shinton International Ltd. as Bhansali Stainless Wire Private Limited in 2006. The Tribunal found that Hiralal Bhansali and his legal heirs are not liable to penalty since they have taken steps to recover the amount and set aside the penalty imposed on them.

The Tribunal found that Girish Agrawal and Shailesh Jain have pleaded that they were not involved in the day-to-day affairs of the Company and also, they were in no manner responsible for the export transactions. There was no evidence as to hold them liable for penalty for the contravention of Section 8 read with the Regulations thereunder in terms of Section 42 of FEMA. Therefore, the Tribunal set aside the penalty imposed on them. The individual Appellant Ashok Kasliwal has admitted being the promoter and the Managing Director of Triveni from its inception till around 2006. He was regularly concerned the running of the Company and conducted its business. He was also in full knowledge of the efforts which were made to realise the outstanding export proceeds. The Tribunal held that the Appellant Company is in contravention of Section 8 of FEMA read with Regulation 3 of Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulation 2000 and individual Appellant Shri Ashok Kasliwal to be liable for penalty.

The Tribunal reduced the penalty from Rs.50 lakhs to Rs.5 lakhs on the company and Rs. 1 lakh on the individual appellant.