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2007 (1) TMI 653 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Misdescription of party name and admissibility of ED statements were found insufficient to upset the penalty order.
A mere misdescription of a party's name, limited to the addition or omission of "Trading" while the address and identity remained consistent, was treated as a non-substantive error causing no prejudice to the defence. The commentary also states that statements recorded before Enforcement Directorate officers were admissible because such officers are not police officers for sections 25 and 26 of the Indian Evidence Act, and that an unparticularised plea of duress was insufficient. On that basis, the record was said to sustain the finding of contravention and the penalty order.

Misdescription of party - identification of defendant - admissibility of confessional statements recorded by Enforcement Directorate - onus on appellant at appellate stage - reconstruction of record - non-application of mindMisdescription of party - identification of defendant - Whether the variation in the appellant's name in parts of the adjudication order vitiates the proceedings or amounts to wrong identification. - HELD THAT: - The Tribunal found that the appellant, a partnership firm described primarily as M/s. Arenja & Co., was correctly identified overall despite occasional insertion of the word 'Trading' in parts of the adjudication order. The addition of the word in limited paragraphs was held to be a mistake in description and not one of substance. Reliance was placed on authorities establishing that minor errors in Christian name, surname or description do not cause failure of prosecution where the person is otherwise correctly identified and not prejudiced. The consistent use of the same address in the impugned order and the memo of appeal further supported that there was no ambiguity or misidentification that impeded the appellant's defence. [Paras 6]The variation in the name is a descriptive error and does not vitiate the adjudication; the plea of misidentification is rejected.Admissibility of confessional statements recorded by Enforcement Directorate - Whether statements/confessions recorded by officers of the Enforcement Directorate are admissible against the appellant and whether the appellant's allegation of duress renders them inadmissible. - HELD THAT: - The Tribunal applied the scheme of the Indian Evidence Act to conclude that confessions recorded before Enforcement Directorate officers are not caught by the bar applicable to confessions before police officers and are admissible unless it is shown that they were procured by promise, threat or coercion. The appellant alleged duress but did not particularise or furnish evidence to demonstrate promise, threat, coercion or duress as required under section 24 of the Evidence Act. The Tribunal also relied on precedent holding statements recorded by statutory officers (e.g., Customs) to be admissible material against co-noticees where admissions are made. Accordingly the recorded statements were held admissible and the duress plea was rejected for want of particulars and proof. [Paras 7, 8, 9]Statements recorded by Enforcement Directorate officers are admissible in evidence; the unexplained allegation of duress is insufficient to exclude them.Onus on appellant at appellate stage - reconstruction of record - non-application of mind - Whether the partial production of documents, reconstruction of the record by the Enforcement Directorate, or the allegation of non-application of mind in issuing a consolidated adjudication against many persons vitiates the adjudication order. - HELD THAT: - The Tribunal observed that the appellant, as the appellant before it, bore the onus of demonstrating error or illegality in the adjudication order on appeal and could not shift the burden to the Enforcement Directorate to re-prove the case. The Enforcement Directorate explained that the original Tribunal record had been lost and assisted in reconstructing the file; portions of the statements in Urdu/Devanagari and other available papers were placed before the Tribunal. The Tribunal found no merit in the contention that issuance of a common adjudication against multiple persons or minor serial-numbering inconsistencies demonstrated 'non-application of mind'. The reproduced statements and recovered documents identified the appellant in the account of hawala transactions, and ample opportunity of hearing had been afforded. In these circumstances, absence of complete documentary annexures before the Tribunal did not entitle the appellant to set aside the order. [Paras 5, 10, 11]The onus to demonstrate error on appeal rests with the appellant; reconstruction and partial production of record by the Enforcement Directorate do not invalidate the adjudication and the plea of non-application of mind is rejected.Final Conclusion: The adjudication order is sustained; the appeal is dismissed. The appellant is directed to deposit the penalty within the time allowed, failing which the Enforcement Directorate may proceed to recover it in accordance with law.

2006 (11) TMI 726 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues: (i) Whether the revision petition was liable to be rejected as delayed in the absence of a prescribed limitation period. (ii) Whether the respondent had committed contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 on the basis of the confession and surrounding evidence.

Issue (i): Whether the revision petition was liable to be rejected as delayed in the absence of a prescribed limitation period.

Analysis: Section 52(4) of the Foreign Exchange Regulation Act, 1973 did not prescribe a period of limitation for filing the revision. A rigid limitation period for appeal could not be imported into revision proceedings. The petition had been filed within 100 days, which was held not to be unreasonable in the circumstances, particularly as the matter involved a Government department acting through internal hierarchy.

Conclusion: The objection as to delay was rejected and the revision was held to be maintainable.

Issue (ii): Whether the respondent had committed contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 on the basis of the confession and surrounding evidence.

Analysis: The confession recorded before officers of the Enforcement Directorate was treated as admissible because such officers are not police officers for the purpose of sections 25 and 26 of the Indian Evidence Act, 1872. A bare retraction, unsupported by particulars or proof of coercion, threat, or duress, was held insufficient to displace the evidentiary value of the original statement. The surrounding circumstances, including the receipt of the cheque from the non-resident account and the payment made in lieu of it, were held sufficient to prove contravention, and remand was considered unnecessary.

Conclusion: The respondent was held guilty of contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 and the adjudication order of acquittal was set aside.

Final Conclusion: The revision succeeded, the respondent's exoneration was reversed, and a penalty was imposed for the established foreign exchange contravention.

Ratio Decidendi: A retracted confession remains legally usable when it is not shown to have been obtained by threat, coercion, or duress, and a revision under section 52(4) of the Foreign Exchange Regulation Act, 1973 is not defeated merely because it is filed after a period that is not shown to be unreasonable.

Retracted confession and no fixed limitation period under FERA supported maintainability, contravention, and penalty.
A revision under FERA was held maintainable because section 52(4) prescribed no limitation period, and a filing within 100 days was not treated as unreasonable in the circumstances. On merits, a confession before Enforcement Directorate officers was treated as admissible, since such officers are not police officers for sections 25 and 26 of the Evidence Act, and a bare retraction without particulars of coercion or duress did not displace its evidentiary value. The surrounding circumstances, including the cheque transaction involving a non-resident account and the corresponding payment, were sufficient to establish contravention of section 9(1)(a), and the exoneration was reversed with penalty.

Retracted confession - admissibility of confession before Enforcement Directorate - duress, threat and coercion under section 24 of the Indian Evidence Act, 1872 - contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 - standard of proof for payment to or for the credit of a non-resident - reasonableness of delay for filing revision under section 52(4) - penalty for contraventionReasonableness of delay for filing revision under section 52(4) - Whether the revision petition filed within 100 days was barred by delay or maintainable. - HELD THAT: - The Tribunal held that no specific period of limitation is prescribed under section 52(4) and the 45-day limitation for appeals cannot be imported as an exact standard for revision. While a revision must be filed within a reasonable time, the 100-day period in the present case did not demonstrate acquiescence or waiver by the Enforcement Directorate, especially having regard to practical governmental decision-making channels and the seriousness of the alleged violation. Accordingly, the objection based on delay and absence of a condonation application was rejected. [Paras 4]Revision petition is maintainable and the delay of about 100 days is not unreasonable in the circumstances.Retracted confession - admissibility of confession before Enforcement Directorate - duress, threat and coercion under section 24 of the Indian Evidence Act, 1872 - Whether the respondent's confessional statement recorded by the Enforcement Directorate, and subsequently retracted, could be accepted as evidence. - HELD THAT: - The Tribunal applied the scheme of the Indian Evidence Act to conclude that confessions made before officers of the Enforcement Directorate are admissible unless it is shown that they were induced by promise, threat, coercion or duress contrary to section 24. The respondent's retraction neither narrated nor explained the alleged duress with particulars; a bald allegation of duress without corroboration or particulars was held insufficient to exclude the confession. The Tribunal observed that the retraction letter failed to disclose the nature or circumstances of the alleged coercion and that there was some corroboration of particulars supporting the original confessional statement. Consequently, the confessional statement was not wholly effaced by the retraction and could be acted upon. [Paras 5, 6, 7, 8]The voluntary confessional statement, though retracted, was admissible and capable of being relied upon in absence of credible evidence of duress.Contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 - standard of proof for payment to or for the credit of a non-resident - penalty for contravention - Whether the respondent committed contravention of section 9(1)(a) by making payment in lieu of a cheque received from a non-resident, and what penalty should follow. - HELD THAT: - On evaluation of the available evidence - receipt of a cheque from the NRE account of the named non-resident and the admitted payment in lieu thereof - the Tribunal held that the adjudicating authority erred in acquitting the respondent. The Tribunal reasoned that, given the source of the cheque and the payment made in lieu, the payment could only have been to or for the credit of the non-resident; further inquiry, though possible, was not a justification for disregarding the existing evidence. Concluding that contravention of section 9(1)(a) was established, the Tribunal exercised its appellate power to impose a proportionate penalty; while noting the amount involved, it found the respondent not to be a hawala racketeer and fixed a moderate penalty to serve justice. [Paras 8, 9, 10, 11]Respondent guilty of contravention of section 9(1)(a) FER Act; adjudication order quashed and penalty of Rs. 3 lakhs imposed, recoverable as provided by law.Final Conclusion: The Tribunal set aside the adjudication order, held the respondent guilty of contravening section 9(1)(a) of the FER Act, upheld the admissibility of the retracted confession in absence of credible evidence of duress, found the revision timely, and imposed a penalty of Rs. 3 lakhs to be deposited or recovered in accordance with law.

2006 (10) TMI 525 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retracted confession in foreign exchange contravention upheld where admission was corroborated by recovery and supporting statements.
A penalty for contravention of section 8(1) and section 8(2) of the Foreign Exchange Regulation Act, 1973 was upheld where the appellant admitted unauthorized purchase and sale of foreign exchange at rates other than those prescribed by the RBI. The later retraction was delayed and unsupported by material showing coercion or inducement. The confession was corroborated by recovery of foreign currency and documents from a person found in the appellant's premises, together with that person's statement. A retracted confession may be relied on when it appears true and receives assurance from other evidence, and no satisfactory basis was shown to discard the adjudication findings.

Penalty under Foreign Exchange Regulation Act for unauthorized purchase and sale of foreign exchange - retracted confession - corroboration by recovery of currency and incriminating documents - voluntariness of statement and burden on maker to prove inducement, threat or coercionRetracted confession - voluntariness of statement and burden on maker to prove inducement, threat or coercion - corroboration by recovery of currency and incriminating documents - The retracted confessional statement of the appellant was admissible and could be relied upon when sufficiently corroborated and when retraction was delayed without adequate explanation. - HELD THAT: - The Tribunal found that the appellant had made a confessional statement admitting unauthorized sale and purchase of specified foreign currencies and later retracted that confession after an unexplained delay. The law requires the maker of a statement who alleges inducement, threat or coercion to establish such improper means; mere allegation is insufficient. A retracted confession may be relied upon if, on examination of the evidence, the confessional material is found to be true. Here the confessional statement contained minute details and was fully corroborated by independent evidence - specifically, recovery of foreign currency and incriminating documents from the co-accused and the statement of that co-accused who was found in possession of the recovered currency. In view of the delay in retraction, absence of proof of coercion, and the corroborative material, the Tribunal held that the confession could be relied upon. [Paras 5, 6, 7]Confessional statement, though retracted, was reliable and admissible in light of corroboration and absence of satisfactory proof of coercion.Penalty under Foreign Exchange Regulation Act for unauthorized purchase and sale of foreign exchange - corroboration by recovery of currency and incriminating documents - The adjudication imposing penalty under the FER Act for contravention of provisions relating to unauthorized exchange transactions was legally sustainable and was not interfered with. - HELD THAT: - The Tribunal examined the material relied upon by the Adjudicating Officer: the appellant's confessional statement (corroborated as above), the seizure of substantial foreign currency and documents from the co-accused, and the appellant's admitted dealings in travel tours that involved purchase and sale of foreign exchange at rates other than those prescribed. Finding that the confessional admission was corroborated by independent recovery and documentary evidence and that the appellant did not satisfactorily explain the retraction, the Tribunal concluded there was no reason to disturb the adjudicating authority's finding of contravention of section 8(1) and 8(2) of the FER Act and the imposition of the penalty. [Paras 5, 7, 8]The penalty imposed by the Adjudicating Officer is affirmed and the appeal dismissed.Final Conclusion: The appeal is dismissed; the adjudicating authority's order imposing the penalty is upheld and the appellant is directed to deposit the penalty within the time specified, failing which recovery may follow in accordance with law.

2006 (10) TMI 524 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retracted confession in foreign exchange proceedings can sustain penalty when corroborated by documents and witness statements.
A retracted confession in foreign exchange contravention proceedings may still support penalty where it is shown to be voluntary and is corroborated by independent evidence. The appellant's statement admitting receipt and payment of Indian currency was not substantiated by any material showing coercion or threat, while seized documents and the statements of recipients supported the disclosure. The objection that denial of cross-examination vitiated the adjudication was rejected because the record already contained proved material sufficient to sustain the findings. The impugned adjudication was confirmed and the monetary penalty maintained.

Retracted confession as evidence - corroboration of confessional statement - burden of proof for duress allegations - penalty under Foreign Exchange Regulation Act for receipt and payment of Indian currency on behalf of a person resident outside India - right to cross-examinationRetracted confession as evidence - burden of proof for duress allegations - Validity and evidentiary value of the appellant's retracted confessional statement - HELD THAT: - The Tribunal held that a retracted confessional statement is not ipso facto inadmissible and may be relied upon if found true on scrutiny. The appellant had retracted his statement alleging duress, but produced no evidence to discharge the burden of proving that the statement was recorded under duress or threat. In the absence of any material to substantiate the allegation of coercion, no favourable inference could be drawn for the appellant, and the retraction alone did not vitiate the statement's evidentiary value. The Tribunal relied on the principle that a retracted confession can constitute substantial evidence if corroborated by other material. [Paras 2]The retracted confessional statement was held to retain evidentiary value because the appellant failed to prove duress.Corroboration of confessional statement - right to cross-examination - Whether the confessional statement was corroborated and whether denial of opportunity to cross-examine witnesses vitiated the findings - HELD THAT: - The Tribunal found that the confessional statement was corroborated by documents recovered from the appellant's custody and by the statements of the recipients who identified and admitted receipt of funds as described by the appellant. The appellant's contention that he was denied the right to cross-examine witnesses was rejected because the appellant did not provide any explanation justifying entitlement to such cross-examination, and the charges stood proved on the basis of the corroborative evidence. Consequently, there was no reason to interfere with the adjudicating officer's findings. [Paras 3]The confessional statement was upheld as corroborated by documentary and testimonial evidence; the complaint about denial of cross-examination did not vitiate the findings.Penalty under Foreign Exchange Regulation Act for receipt and payment of Indian currency on behalf of a person resident outside India - Confirmation of the penalty imposed under the Foreign Exchange Regulation Act for receiving and making payments totalling Rs. 4.5 lakhs on instruction of a person resident outside India - HELD THAT: - Having upheld the evidentiary basis - including the appellant's statement and its corroboration - the Tribunal found no infirmity in the adjudication order imposing penalties under the FER Act for receipt and onward payment of Indian currency as alleged. The appeal, taken up ex parte after service by affixation and the appellant's non-participation, was considered on merits and the Tribunal confirmed the adjudicating officer's order. [Paras 1, 3, 4]The adjudicating officer's order imposing the penalties is affirmed; the appeal is dismissed and the appellant directed to deposit the penalty.Final Conclusion: The appeal was dismissed on merits; the Tribunal affirmed the adjudicating officer's order imposing penalties under the FER Act, finding the retracted confession to be corroborated and the appellant's allegation of duress and complaint about cross-examination unsupported, and directed deposit of the penalty within 15 days.

2006 (10) TMI 523 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Reasonable steps to realise export proceeds were not proved, so the statutory contravention and penalty were sustained.
Failure to take reasonable steps to realise export proceeds within the prescribed period constituted contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973. The appellants relied on an alleged auction by foreign customs and other circumstances beyond their control, but produced no documentary proof from the foreign authorities and no reliable evidence of effective follow-up, waiver requests, or other steps to secure payment. The statutory presumption under section 18(3) was not rebutted by credible material, so the contravention was established and the penalty was sustained.

2006 (10) TMI 522 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retracted confession may support foreign exchange liability when voluntary admission is independently corroborated by documentary and circumstantial evidence.
A retracted confession can sustain liability where it is voluntary, found to be true, and materially corroborated by independent evidence. The tribunal found the appellant's admission of receiving foreign-sourced funds locally to be voluntary and supported by a letter recovered from her husband in Muscat and by surrounding circumstances. It rejected the later retraction as an afterthought and held that corroborative documentary and circumstantial material was sufficient to support the contravention under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973. The penalty was upheld and the challenge to the adjudication order failed.

Retracted confession and corroboration - Voluntariness of statement - Admissibility of retracted confession - Burden of proof for duress - Contravention of Section 9(1)(b) of FER Act, 1973 - Confirmation of penalty and dismissal of appealRetracted confession and corroboration - Voluntariness of statement - Admissibility of retracted confession - Burden of proof for duress - The evidentiary value and voluntariness of the appellant's retracted confessional statement and whether it could be relied upon to sustain the charge. - HELD THAT: - The tribunal found that the appellant's initial statement admitting receipt of Rs. 70,000 on instructions from her husband resident abroad was voluntary and not proved to have been extracted by force or duress. The burden of proving coercion lay on the appellant and was not discharged. The tribunal applied the established principle that a retracted confession may constitute substantial evidence if corroborated in material particulars, citing the authority reproduced in the judgment. In this case the confessional statement was materially corroborated by the letter recovered from the husband's residence in Muscat and by attendant circumstantial evidence, and the tribunal concluded that the retracted denial was an afterthought. On these grounds the statement was held admissible and reliable to sustain the charge under the impugned decision. [Paras 5, 6, 7]The confessional statement was voluntary, properly corroborated, admissible as substantial evidence, and supports the finding of contravention.Contravention of Section 9(1)(b) of FER Act, 1973 - Confirmation of penalty and dismissal of appeal - Whether the adjudication order imposing penalty should be confirmed and the appeal dismissed. - HELD THAT: - Having upheld the evidentiary basis for the charge-particularly the corroborated confessional statement and the documentary/circumstantial evidence linking the appellant to receipt of funds-the tribunal concluded that the impugned adjudication order was sustainable. The tribunal rejected the appellant's contentions regarding absence of proof as to the channel of payment and non-reliance on recovered documents, finding the record collectively sufficient. In view of these findings the adjudication order imposing penalty was confirmed and the appeal was dismissed. The appellant was directed to deposit the penalty within the time specified, failing which recovery may follow in accordance with law. [Paras 1, 8]The adjudication order is confirmed, the appeal is dismissed, and the penalty is to be deposited as directed.Final Conclusion: The tribunal held the retracted confession to be voluntary and materially corroborated, affirmed the finding of contravention of Section 9(1)(b) of the FER Act, 1973, confirmed the penalty imposed and dismissed the appeal, directing deposit of the penalty within the time specified.

2006 (10) TMI 521 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retacted confession and corroboration supported foreign exchange penalty despite an unproven coercion claim.
A retracted confession may sustain liability where it is corroborated by independent documentary and circumstantial evidence, and a bare allegation of coercion does not discharge the burden of proving duress. The tribunal found admissions that the appellant had made payments to persons outside India and borrowed foreign currency abroad, and it accepted corroboration from documents and the appellant's own agents. On that basis, the contraventions of the foreign exchange law were established and the penalty was upheld.

Penalty under Foreign Exchange Regulation Act for unauthorized payments and borrowings - retracted confession corroboration - admissibility of confession alleged to be under coercion - evidentiary burden to prove duress - confirmation of adjudication order on merits - ex parte proceeding for non-appearancePenalty under Foreign Exchange Regulation Act for unauthorized payments and borrowings - confirmation of adjudication order on merits - Whether the adjudicating officer proved contraventions of the FER Act by the appellant and whether the penalty imposed was liable to be upheld. - HELD THAT: - The Tribunal examined documentary evidence and witness statements to conclude that the appellant, as sole proprietor of Maqsood Associates, entered into a recruitment contract with Mohd. Idris for 233 workers and recruited them through named agents. The agents' admissions (including payment of specified sums to Idris) and the seized recruitment files corroborated the adjudicating officer's findings that payments were made in contravention of the FER Act and that the appellant acquired foreign currency from abroad. The Tribunal rejected the appellant's assertion that payments were made solely by agents on their own and found that material evidence on record supported the charge. On this basis the impugned order imposing penalty was held to withstand judicial scrutiny and was confirmed. [Paras 5, 6, 7, 8, 9]Charges proved on the basis of documentary and corroborative evidence; the penalty imposed by the adjudicating officer is confirmed.Retracted confession corroboration - admissibility of confession alleged to be under coercion - evidentiary burden to prove duress - Whether the appellant's retracted confessional statement, alleged to have been made under duress, could be relied upon to sustain the adjudication. - HELD THAT: - The Tribunal applied the settled principle that a retracted confession may be used if corroborated in material particulars and noted the Supreme Court authority K.I. Pavunny to that effect. The burden to prove that the confession was obtained under coercion lay on the appellant, which he failed to discharge as he produced no documentary support for the allegation of duress. The Tribunal found that the inculpatory parts of the retracted statement were corroborated by independent documentary evidence and attendant circumstantial material (including the seized letter and confirmations by the agent), and therefore the retracted confession could be relied upon in part to uphold the adjudication. [Paras 6, 7, 8, 9]Retracted confession admitted in evidence to the extent corroborated; allegation of coercion not proved and confession-based findings sustained.Ex parte proceeding for non-appearance - Whether the appeal could be proceeded with ex parte for the appellant's non-appearance and what consequential directions should follow. - HELD THAT: - The Tribunal recorded that despite service (including by affixation) the appellant did not appear or prosecute the appeal and had not pressed earlier applications as directed by the High Court. Having found the appellant not interested in contesting the appeal, the Tribunal permitted the matter to proceed ex parte and took up the appeal for final disposal on merits. Accordingly, after dismissing the appeal on merits, the Tribunal directed deposit of the penalty within a specified time and permitted recovery in accordance with law if deposit was not made. [Paras 2, 10]Proceeding permitted ex parte for non-appearance; appeal dismissed on merits and appellant directed to deposit the penalty within the time fixed.Final Conclusion: The Tribunal dismissed the appeal on merits, confirmed the adjudicating officer's penalty on the basis of documentary and corroborative evidence (including parts of a retracted confession that were corroborated), allowed the appeal to proceed ex parte for the appellant's non-appearance, and directed deposit of the penalty within the time stipulated with liberty to recover in accordance with law if not deposited.

2006 (9) TMI 628 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Charges Upheld for Unauthorized Forex Transactions; Partial Penalty Refund Granted as Evidence Lacking for Overseas Activities.
The Tribunal upheld charges against the appellant for unauthorized foreign exchange transactions, failure to realize foreign exchange, and purchasing gold with foreign exchange proceeds, confirming violations of the FEM Act, 1999. However, charges concerning alleged activities in Bangladesh and China lacked evidence and were dismissed. The appeal was partly allowed, granting a partial penalty refund.

Retracted confession and corroboration - presumption as to truth of seized documents under section 39 of FEM Act - recovery and panchnama as evidentiary foundation - proof beyond reasonable doubt by documentary and circumstantial corroboration - failure to prove foreign transactions for want of dates and specific evidence - penalty and confiscation for contravention of FEMA provisionsRetracted confession and corroboration - proof beyond reasonable doubt by documentary and circumstantial corroboration - Reliance on the appellant's retracted confessional statement and whether it could be acted upon. - HELD THAT: - The appellant's initial confessional statement dated 9-12-2002 was retracted by a letter dated 23-12-2002 after a delay of about 13 days without any evidence to substantiate coercion or duress. Subsequent statements on 7-3-2003 and 12-3-2003 did not dispute the earlier confessional account. The Tribunal applied established principles that a retracted confession may be relied upon if materially corroborated. In the present case the confession was corroborated by large recoveries of foreign currency, Indian currency, gold biscuits and incriminating documents recovered from the appellant's custody, and the attendant circumstances; thus the respondent proved the charges under the relevant SCNs I to IV and VII beyond reasonable doubt. [Paras 6, 9, 10, 12, 13]The retraction was rejected as an afterthought and the retracted confessional statement was held admissible and sufficiently corroborated; charges in SCNs I-IV and VII are proved.Presumption as to truth of seized documents under section 39 of FEM Act - recovery and panchnama as evidentiary foundation - Whether the seized documents required handwriting expert verification or could be presumed truthful and attributed to the appellant. - HELD THAT: - The appellant challenged authorship of seized documents, but panchnama recorded recovery from his custody and was witnessed. The Tribunal noted the statutory presumption in respect of the truth of seized documents under the FEM Act (section 39) unless rebutted by the appellant. The appellant made only bald assertions and did not produce evidence to displace the presumption. Given the panchnama and corroborative material, there was no necessity for handwriting expert verification. [Paras 7]No handwriting expert examination was required; contents of seized documents stood presumed and supported the respondent's case.Failure to prove foreign transactions for want of dates and specific evidence - Validity of SCN V and SCN VI alleging sale/purchase in Bangladesh and expenditure/payments in China and related failure to repatriate specified foreign exchange. - HELD THAT: - The respondent failed to produce specific incriminating statements or independent evidence establishing dates of the appellant's alleged foreign visits or concrete transactional proof for the amounts claimed under SCN V and SCN VI. The Tribunal found these charges to be uncorroborated and not sustaining judicial scrutiny, distinguishing them from the SCNs which were supported by recovery and documentary evidence. [Paras 14, 15]SCN V and SCN VI are not proved and are ordered to be dropped; the impugned order is accordingly modified insofar as these SCNs are concerned.Penalty and confiscation for contravention of FEMA provisions - Disposition of penalty already deposited and final monetary directions. - HELD THAT: - The appeal record states the appellant had deposited the penalty amount of Rs. 4,42,000. The Tribunal modified the adjudication by dropping SCNs V and VI while confirming the remainder; it directed partial release of deposited funds and appropriation of the balance towards the confirmed penalty.Rs. 30,000 to be released to the appellant after the appeal period expires; the remaining deposit to be appropriated towards the penalty confirmed by the Tribunal.Final Conclusion: The second appeal is partly allowed: the Tribunal confirmed findings (including reliance on the retracted confession as duly corroborated) and sustained charges under SCNs I-IV and VII, but set aside SCNs V and VI for lack of proof; consequential modification of the adjudication was ordered and partial release of the deposited penalty directed.

2006 (9) TMI 627 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Foreign exchange residential status depends on intention and surrounding circumstances, sustaining contraventions while reducing an excessive penalty.
Residential status under the Foreign Exchange Regulation Act, 1973 depends on the person's intention and surrounding circumstances, including whether the person stays outside India for an uncertain period. Long-term residence and business activities in Malaysia, admissions of mostly staying abroad, and the bank's enquiry findings supported treatment of the borrower as resident outside India. Income-tax assessments were not determinative because income-tax residence applies a different test. Loans advanced and payments made on behalf of that borrower contravened the Act's foreign exchange restrictions, although the penalty was reduced as excessive.

Residential status under the Foreign Exchange Regulation Act - intention to stay outside India as determinative test - distinction between residential tests under FERA and Income-tax law - contravention of section 9(1)(a) and section 9(1)(d) of FERA - bank's duty to exercise reasonable care in ascertaining customer's status - penalty: assessment and judicial moderationResidential status under the Foreign Exchange Regulation Act - intention to stay outside India as determinative test - distinction between residential tests under FERA and Income-tax law - bank's duty to exercise reasonable care in ascertaining customer's status - Whether K. Abdul Majeed was a person resident outside India for the purposes of the FER Act and whether the Bank of Madurai contravened sections 9(1)(a) and 9(1)(d) by making loans/payments to him or on his behalf without RBI permission. - HELD THAT: - The Tribunal accepted the Adjudicating Officer's finding that Abdul Majeed had, by his own admission and by documentary and testimonial evidence, been residing and conducting business in Malaysia for most of the relevant period (paras 7-8). It held that income tax assessment entries are irrelevant for determining residential status under the FER Act because FERA makes the person's intention to remain outside India the principal factor (paras 9-11). Applying the definitions in section 2(p) and 2(q) of FERA, and relying on precedent that a stay under FERA must indicate some permanence, the Tribunal found that the material established Majeed's non resident status and that the transactions required RBI permission (paras 10-11, 12-13). The Tribunal rejected the bank's reliance on income tax records and found the bank had not proved that it took the reasonable care required to ascertain the customer's status under FERA (para 13). [Paras 8, 9, 10, 11, 13]It was held that Abdul Majeed was a person resident outside India for the purposes of the FER Act, and the Bank of Madurai therefore contravened sections 9(1)(a) and 9(1)(d) by making the impugned payments without RBI permission.Penalty: assessment and judicial moderation - Whether the penalty imposed on the Bank of Madurai required modification in view of the facts and conduct of the parties. - HELD THAT: - While upholding liability, the Tribunal exercised its discretion to reduce the monetary penalty. Having regard to the absence of any allegation of default in repayment and the overall facts and circumstances, the Tribunal concluded that the original penalty was excessive and should be proportionately reduced to achieve ends of justice (para 13). The Tribunal ordered appropriation of the pre deposited amount and directed release of the balance after the appeal period (para 14). [Paras 13, 14]The penalty was reduced from Rs. 60,000 to Rs. 20,000, with directions for appropriation and release of the balance after the period of appeal.Final Conclusion: The appeal is partly allowed: the findings of contravention of sections 9(1)(a) and 9(1)(d) of the FER Act are upheld on the basis that K. Abdul Majeed was a non resident under FERA, but the total penalty is reduced from Rs. 60,000 to Rs. 20,000 with directions for appropriation of pre deposited sums and release of the balance after the appeal period.

2006 (8) TMI 700 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Proof of import through authorised banker defeats foreign exchange contravention where transaction is otherwise genuine.
Where an importer produced a banker's letter and forwarded bill of entry showing that goods were actually imported and that proof had been submitted through the authorised banker, the alleged contravention under foreign exchange provisions was not established. The tribunal treated the earlier omission to file the bill of entry as a procedural defect because the genuineness of the transaction was otherwise shown and no further rebuttal evidence was produced. On that basis, the statutory obligation to prove import was treated as satisfied, and the penalty order could not survive.

Obligation to import goods upon obtaining foreign exchange - proof of import by filing bill of entry with authorised banker - penalty under section 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973 - procedural irregularity versus substantive violation - standard of proof for contravention under the FER ActObligation to import goods upon obtaining foreign exchange - proof of import by filing bill of entry with authorised banker - penalty under section 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973 - procedural irregularity versus substantive violation - Whether the penalty imposed under section 8(3) read with section 8(4) of the FER Act, 1973 was justified where the appellant produced the banker's certificate showing filing of bill of entry as proof of import. - HELD THAT: - The Tribunal found that the statutory obligation created by section 8(3) read with section 8(4) is satisfied once imported goods are shown to have been brought in, leaving only the filing of proof of import to be established. The appellant produced a letter from its authorised banker forwarding the bill of entry to the bank's Foreign Department and documentary proof that the goods were imported. The respondent failed to rebut the genuineness of the transactions. The Tribunal accepted the principle, noted in Sunil Engg. Corpn. v. Union of India , that non-filing of a bill of entry may amount to a procedural irregularity and, if genuineness of the transaction is otherwise established, does not by itself constitute a substantive contravention. Applying that reasoning, the Tribunal held that the appellant fulfilled the statutory requirement by filing the bill of entry with the authorised banker and therefore the penalty could not be sustained. [Paras 4, 5]The penalty imposed under section 8(3) and 8(4) was set aside as the appellant proved import by filing the bill of entry with its authorised banker and the respondent did not establish a contravention.Final Conclusion: The appeal is allowed and the adjudication order imposing penalty under section 8(3) read with section 8(4) of the FER Act, 1973 is set aside.

2006 (8) TMI 701 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Statutory liability for export proceeds remains despite private partnership arrangements, though penalty may be reduced on mitigating facts.
A partner of an exporting firm remained liable for non-realisation of export proceeds where no material showed reasonable steps to recover the dues within the prescribed period or any request for extension or waiver to the RBI. A private arrangement between partners did not displace the statutory obligation under section 18(2) or the presumption under section 18(3) of the Foreign Exchange Regulation Act, 1973, so contravention was upheld. The penalty was nevertheless moderated because the exports were old, the appellant had retired long before, and the original quantum was considered excessive in the circumstances.

Obligation to realize export proceeds under section 18(2) and 18(3) of the FER Act, 1973 - rebuttable presumption under section 18(3) against exporters for non-realisation of export proceeds - partners are jointly and severally liable for acts of the firm - private agreement between partners cannot absolve statutory liability - judicial reduction of penalty in view of long delay and assessee's hardshipObligation to realize export proceeds under section 18(2) and 18(3) of the FER Act, 1973 - rebuttable presumption under section 18(3) against exporters for non-realisation of export proceeds - Liability of the appellant for contravention of section 18(2) and 18(3) of the FER Act for non-realisation of export proceeds in respect of exports made in 1980-81. - HELD THAT: - The appellant undisputedly was a partner in the exporter firm when the shipments in 1980-81 were effected and export proceeds remained outstanding. Section 18(2) imposes an obligation on exporters to realize export proceeds within the prescribed period and section 18(3) raises a rebuttable presumption against exporters who fail to do so. There is no evidence on record that the appellant took steps to realize the proceeds, applied for extension, sought RBI permission, or pursued diplomatic or other remedies while she remained a partner. The settled position that partners are jointly and severally liable for acts of the firm means the appellant cannot escape statutory liability merely because the firm was later dissolved or another partner took custody of documents. [Paras 7, 8]Appellant was rightly held to have contravened section 18(2) and 18(3) of the FER Act in respect of the 1980-81 exports.Private agreement between partners cannot absolve statutory liability - partners are jointly and severally liable for acts of the firm - Validity of the appellant's defence based on the dissolution deed and subsequent private arrangement transferring assets and liabilities to the co-partner. - HELD THAT: - The appellant relied on a dissolution deed and asserted that another partner assumed all assets and liabilities and took the records, and that she thereafter had no knowledge of the firm's affairs. The Tribunal held that a post-transaction private arrangement between partners does not negate the statutory duty to realize export proceeds arising at the time of export. In the absence of evidence showing any steps taken by the appellant to discharge the statutory obligation while she remained a partner, the private arrangement is not a defence to liability under the FER Act. [Paras 4, 7, 8]The plea based on the dissolution deed and private agreement is not a valid defence to statutory liability; appellant remains liable.Judicial reduction of penalty in view of long delay and assessee's hardship - Appropriateness of the penalty imposed and extent of reduction, if any. - HELD THAT: - While liability was established, the Tribunal considered mitigating factors: the long passage of time since the exports (over 25 years) and the appellant's financial hardship and status as a housewife. Exercising appellate discretion, the Tribunal found the original penalty excessive in the circumstances and concluded that reduction was warranted. The appellant had already deposited fifty per cent of the imposed penalty pursuant to an earlier direction. [Paras 8]Penalty reduced from the amount originally imposed to fifty per cent, which has been appropriated against the penalty.Final Conclusion: The appeal is partly allowed: the appellant's liability for contravention of section 18(2) and 18(3) of the FER Act in respect of the 1980-81 exports is affirmed, the defence based on the dissolution/private agreement is rejected, but the penalty is reduced to fifty per cent in view of long delay and appellant's hardship (the reduced amount having been pre-deposited and appropriated).

2006 (4) TMI 587 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Narrow revisional jurisdiction bars re-appreciation of evidence absent illegality or perversity in export proceeds cases.
Under section 52(4) of the Foreign Exchange Regulation Act, 1973, revisional power is narrow and is to be exercised sparingly only where grave injustice, illegality, or perversity is shown. Where the challenge concerns appreciation of evidence, including letters relied on to show the bankruptcy or untraceability of foreign buyers, that assessment remains within the adjudicating authority's domain. The Tribunal cannot substitute its own view of facts or re-appreciate the evidence merely because a different conclusion is possible. In the absence of demonstrated illegality or perversity, the finding that reasonable steps were taken for repatriation of export proceeds was left undisturbed and the revision petitions failed.

Revisional jurisdiction - appreciation of evidence - limited scope of revision - reasonable steps for repatriation of export proceeds - proof of bankruptcy and untraceability by private lettersRevisional jurisdiction - limited scope of revision - appreciation of evidence - Whether this Tribunal, in exercise of revisional jurisdiction, could re-appreciate evidence and substitute its own view for that of the adjudicating authority. - HELD THAT: - The Tribunal reiterated that its revisional powers are limited and must be sparingly exercised; they do not permit re-appreciation of evidence or substitution of the adjudicating authority's view merely because the Tribunal might on a second view have reached a different conclusion. Absent a showing that the adjudicating authority's conclusions are totally wrong, illegal, or beyond its jurisdiction, the Tribunal will not interfere. The petitioner did not demonstrate any grave illegality or such error of jurisdiction as would justify re-opening factual conclusions, and the matter raised related to evaluation and weight of evidence-a domain squarely within the adjudicating authority's competence. The Tribunal accordingly declined to re-evaluate the factual findings recorded below. [Paras 4, 6, 7]Revisional jurisdiction could not be invoked to re-appreciate evidence or substitute the Tribunal's view for that of the adjudicating authority; no interference was warranted.Reasonable steps for repatriation of export proceeds - proof of bankruptcy and untraceability by private letters - standard of proof in administrative adjudication - Whether letters from a private agency and a foreign solicitor could be accepted by the adjudicating authority as sufficient proof that reasonable steps had been taken (including proof of bankruptcy/untraceability) and thereby justify dropping proceedings or reducing liability. - HELD THAT: - The adjudicating authority accepted letters from a private agency regarding bankruptcy and from a foreign solicitor regarding non-traceability as evidence that reasonable steps had been taken for repatriation of export proceeds. The Tribunal observed that the question before the authority was not proof beyond reasonable doubt but whether reasonable steps had been taken; such letters constituted admissible evidence which the adjudicating authority could accept in the absence of contrary material. The Enforcement Directorate produced no contrary evidence to displace that conclusion. As the acceptance or rejection of such interim or private-source letters involves evaluation of evidence, the Tribunal would not substitute its own view. [Paras 3, 5]Letters from the private agency and the foreign solicitor were properly capable of being accepted as evidence of bankruptcy/untraceability and of having taken reasonable steps; the adjudicating authority's acceptance stood unimpeached.Final Conclusion: The revision petitions were dismissed for want of merit: the Tribunal declined to re-appreciate evidence or interfere with the adjudicating authority's acceptance of private-source letters as sufficient proof that reasonable steps were taken for repatriation of export proceeds.

2006 (1) TMI 675 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Reasonable steps for repatriation of export proceeds can rebut statutory presumption and defeat penalty under foreign exchange law.
An exporter can rebut the statutory presumption of default by showing reasonable steps to realise and repatriate export proceeds. Repeated follow-up with the foreign buyer, assistance sought from the Indian Consulate and the Ministry of External Affairs, reminders to the banker, and an RBI extension supported the finding that reasonable efforts were made. Since the proceeds were ultimately repatriated, the adverse presumption under section 18(3) stood displaced and penalty for contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973 could not be sustained. A merely imperfect presentation of those efforts was not enough to justify penalty where the substance of compliance was established.

Reasonable steps for repatriation of export proceeds - penalty for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act - legal presumption under section 18(3) of the Foreign Exchange Regulation Act - displacement of adverse presumption by leading sufficient evidence - presentation of evidence and its relevance to imposition of penalty - effect of amendment in section 50 on imposition of penaltyReasonable steps for repatriation of export proceeds - legal presumption under section 18(3) of the Foreign Exchange Regulation Act - displacement of adverse presumption by leading sufficient evidence - Whether the appellant took reasonable steps for repatriation of export proceeds and thereby displaced the adverse presumption under section 18(3) of the FER Act. - HELD THAT: - The Tribunal found that the appellant had taken multiple steps to secure repatriation: repeated contact with the foreign buyer, approaches to the Consulate General of India and Ministry of External Affairs, reminders to the recovery banker and initiation of court proceedings, all of which were recorded in the adjudication order. The authorized banker (State Bank of India) furnished a letter stating that the impugned amount was repatriated in September/November/December, 2003. Given these facts the adverse presumption under section 18(3) could be displaced by the evidence of efforts and eventual recovery. The adjudicating authority failed to address why the recorded efforts were not "reasonable" and relied instead on an absence of systematically presented proof; such omission made the penalty unsustainable. The Tribunal concluded that the statutory obligation is to take reasonable steps, not to achieve perfection, and on the material before it the appellant had discharged that obligation and rebutted the statutory presumption.Findings in the adjudication order set aside; appellant held to have taken reasonable steps and the adverse presumption under section 18(3) displaced.Presentation of evidence and its relevance to imposition of penalty - penalty for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act - Whether unsystematic or informal presentation of the efforts before the adjudicating authority is a valid ground to impose penalty for contravention of section 18(2). - HELD THAT: - The Tribunal observed that the adjudicating authority faulted the appellant on the ground that the efforts were not put up "in a systematic manner". The court held that variability in presentation does not equate to absence of reasonable efforts and is not a legitimate basis for penalizing an exporter. The adjudicator's failure to examine and explain why the documented efforts were insufficient rendered the penalty order flawed. The statutory test is the reasonableness of steps taken, not the formality of their presentation.Penalty set aside on the ground that unsystematic presentation of efforts cannot justify imposition of penalty where reasonable steps were, on the material, taken.Effect of amendment in section 50 on imposition of penalty - Whether the post-amendment position under section 50 of the Act affects the imposition of penalty in the facts of this case. - HELD THAT: - The Tribunal noted the appellant's submission regarding the Amending Act No. 29 of 1997 and the altered language of section 50, observing that, after the amendment, penalty could not be imposed for contravention of section 18(1). While the present adjudication related to section 18(2) read with section 18(3), the Tribunal treated the amendment as relevant background reinforcing the view that delayed repatriation which is ultimately effected and where reasonable steps were taken should not attract penalty. The combination of subsequent repatriation and the statutory amendment militated against sustaining the penalty in the circumstances.Reference to the amendment in section 50 supported the conclusion that penalty was not appropriate on the facts; the adjudication order was quashed.Final Conclusion: The appeal is allowed. The penalty imposed by the adjudicating authority is set aside on the grounds that the appellant had taken reasonable steps which displaced the adverse presumption under section 18(3), unsystematic presentation of those efforts was not a valid basis for penalty, and the circumstances (including subsequent repatriation and the statutory amendment) did not warrant sustaining the penalty.

2006 (1) TMI 674 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Reasonable steps for export proceeds repatriation can sustain contravention, but penalty may be reduced for partial default.
Section 18(2) of the Foreign Exchange Regulation Act, 1973 requires an exporter to take reasonable steps to secure repatriation of export proceeds. On the record, repatriation was proved for one consignment, but the evidence for the other two was found too weak or unrelated to displace the contravention finding. The finding of guilt was therefore deleted for one consignment and sustained for two. Because the established default covered only part of the alleged non-repatriation, the penalty was held excessive and was reduced on a proportional basis.

Obligation to make reasonable efforts for repatriation of export proceeds - penalty for contravention of the obligation to repatriate export proceeds under the Foreign Exchange Regulation Act, 1973 - burden on exporter to prove reasonable steps and repatriation - partial quashing of adjudication findings where repatriation is proved - judicial reduction of penalty in proportion to proved repatriationObligation to make reasonable efforts for repatriation of export proceeds - burden on exporter to prove reasonable steps and repatriation - partial quashing of adjudication findings where repatriation is proved - Whether the appellant had made reasonable efforts to repatriate the export proceeds of the three consignments and whether the adjudication finding of guilt should be sustained in respect of each consignment - HELD THAT: - The Tribunal examined documentary evidence produced by parties. A bank certificate from Centurion Bank matching the GRI number and showing receipt established repatriation in respect of the consignment recorded at serial No. 2 in the adjudication order; minor variance in amount was attributable to exchange-rate fluctuation and did not undermine the match. By contrast, the customs certificate produced in respect of the consignment described at serial No. 3 did not match the bill number and date given in the adjudication order, and the Centurion Bank letter dated 9-10-2003 could not be reliably related to the consignments described at serial Nos. 1 and 3. The Court reiterated that the onus was on the exporter to prove reasonable steps and actual repatriation; bald assertions without relatable documentary linkage were insufficient. Applying these findings, the Tribunal held that the adjudication finding of guilt could not be sustained for the consignment proven repatriated (serial No. 2), but the findings of contravention were maintainable in respect of the other two consignments where repatriation was not shown. [Paras 6, 7, 8, 9, 11]Guilt quashed and set aside in respect of the consignment recorded at serial No. 2; guilt sustained in respect of the consignments recorded at serial Nos. 1 and 3.Penalty for contravention of the obligation to repatriate export proceeds under the Foreign Exchange Regulation Act, 1973 - judicial reduction of penalty in proportion to proved repatriation - Whether the penalty imposed on the appellant-firm required modification in view of the Tribunal's findings on repatriation - HELD THAT: - The adjudicating authority had imposed a monetary penalty on the appellant-firm for contravention. Having found that one of the three consignments had been repatriated, the Tribunal applied a proportional approach to the penalty. Observing that the total value of the two consignments for which guilt was sustained was somewhat greater than the value of the repatriated consignment, the Tribunal, adopting a rough standard, reduced the penalty imposed on the appellant-firm by approximately one half as a judicial adjustment reflecting partial exculpation. [Paras 10, 11]Penalty against the appellant-firm reduced to Rs. 1,00,000; appeal partly allowed.Final Conclusion: The Tribunal upheld the adjudication finding of contravention in respect of two consignments, quashed the finding as to the one consignment proven repatriated, and reduced the penalty payable by the appellant-firm to Rs. 1,00,000; the appeal is partly allowed.

2005 (12) TMI 613 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues: (i) Whether RBI's grant of write-off in respect of a substantial part of the export proceeds negated contravention under section 18(2) of the Foreign Exchange Regulation Act, 1973 read with section 18(3); (ii) Whether the penalty required reduction where only a small balance amount remained in dispute.

Issue (i): Whether RBI's grant of write-off in respect of a substantial part of the export proceeds negated contravention under section 18(2) of the Foreign Exchange Regulation Act, 1973 read with section 18(3).

Analysis: The statutory scheme treats failure to realise export proceeds as a contravention only where the exporter, without RBI permission, omits to take the required action to secure realisation. Once RBI had granted write-off for the larger portion of the outstanding amount, that permission covered the relevant part of the default and displaced the basis for penal action to that extent. The adjudication order, insofar as it proceeded as if the write-off did not exist, was therefore unsustainable for the written-off amount.

Conclusion: In favour of the appellants; the finding of contravention could not be sustained for US Dollar 22047.70 and that part of the order was set aside.

Issue (ii): Whether the penalty required reduction where only a small balance amount remained in dispute.

Analysis: The remaining sum of US Dollar 1750 was not treated as negligible in the circumstances. No material was shown to displace the statutory presumption that reasonable steps had not been taken to recover the balance export proceeds. The finding of contravention for that amount was therefore upheld, but the overall penalty was scaled down on a rough proportional basis.

Conclusion: In favour of the appellants in part; the contravention finding for US Dollar 1750 was sustained, while the penalty was reduced to 10 per cent of the original amount.

Final Conclusion: The appeals succeeded only to the extent of excluding the written-off export proceeds from the adverse finding, and the remaining liability was confined to the balance amount with corresponding reduction in penalty.

Ratio Decidendi: Where RBI has granted write-off for the outstanding export proceeds, the statutory default cannot be sustained to that extent, but the exporter remains exposed to the presumption of contravention for any unrecovered balance unless reasonable steps to realise it are shown.

RBI write-off limits foreign exchange contravention, but unrecovered export proceeds can still attract liability and reduced penalty.
RBI write-off of a substantial part of unpaid export proceeds displaced penal contravention under the foreign exchange law to that extent, because failure to realise proceeds is actionable only where the exporter has not taken the required steps without RBI permission. The tribunal therefore set aside the finding of contravention for the written-off amount, while sustaining liability for the remaining unrecovered balance where no material rebutted the presumption that reasonable recovery steps had not been shown. It also reduced the penalty on a proportionate basis, confining the adverse finding and monetary consequence to the balance amount still in dispute.

Contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 - presumption under section 18(3) concerning failure to take reasonable steps to recover export proceeds - Reserve Bank of India write-off/permission as discharge of exporter's obligation under section 18(2) - de minimis (negligibility) contention in assessment of contravention - proportional reduction of penalty where part of liability is quashed - appropriation of pre-deposit towards penaltyReserve Bank of India write-off/permission as discharge of exporter's obligation under section 18(2) - contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 - Effect of RBI write-off on alleged contravention under section 18(2) read with section 18(3) in respect of US Dollar 22047.70. - HELD THAT: - The Tribunal held that the grant of write-off by the Reserve Bank of India constitutes the permission contemplated by section 18(2), and where such permission has been granted the exporter cannot be held to have contravened the obligations under section 18(2) in relation to the amount written off. The adjudicating authority's conclusion that write-off did not absolve the exporters was contrary to the statutory scheme: once RBI permission (write-off) is in place, refraining from further steps for repatriation in respect of that amount cannot form the basis of penal liability. The request for write-off was not pending but granted contemporaneously with the adjudication, hence the finding of contravention in respect of US Dollar 22047.70 was set aside and quashed. [Paras 8, 10]Guilt in respect of US Dollar 22047.70 quashed on account of RBI write-off/permission.Presumption under section 18(3) concerning failure to take reasonable steps to recover export proceeds - de minimis (negligibility) contention in assessment of contravention - proportional reduction of penalty where part of liability is quashed - appropriation of pre-deposit towards penalty - Liability for the remaining unpaid export proceeds of US Dollar 1750 and consequential adjustment of penalty. - HELD THAT: - The Tribunal found that for the consignment valued at US Dollar 1750 the appellants did not rebut the statutory presumption in section 18(3) that reasonable steps had not been taken to recover the payment. The appellants' sole contention that the amount was negligible was rejected as the term 'negligible' is relative and not established on the facts; the amount could not be treated as de minimis. Consequently the finding of contravention in respect of US Dollar 1750 was sustained. However, because the larger amount was quashed, the Tribunal reduced the penalty by applying a proportional standard-approximating that US Dollar 1750 represented 10 per cent of the total-and directed that the pre-deposit already made be appropriated towards the penalty. [Paras 9, 10]Contravention sustained in respect of US Dollar 1750; penalty reduced proportionately and pre-deposit appropriated.Final Conclusion: Appeals partly allowed: adjudication set aside insofar as it concerned the amount covered by RBI write-off (US Dollar 22047.70); contravention sustained for US Dollar 1750 with penalty reduced proportionately (approx. 10% of the original), and pre-deposits already made are appropriated towards the penalty.

2005 (12) TMI 617 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE OF NEW DELHI FEMA

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Issues: (i) Whether the appellants had taken all reasonable steps to realise and repatriate the export proceeds so as to rebut the statutory presumption of contravention under the foreign exchange law. (ii) Whether the penalty imposed for non-realisation of export proceeds was sustainable in full or required modification.

Issue (i): Whether the appellants had taken all reasonable steps to realise and repatriate the export proceeds so as to rebut the statutory presumption of contravention under the foreign exchange law.

Analysis: Non-realisation of export proceeds by itself was not treated as punishable; the material question was whether the exporter had taken all reasonable steps in the facts of the case. The Tribunal accepted the evidence of correspondence with foreign buyers, approaches to the Indian Embassy, efforts through bankers and authorised dealers, attempts to obtain RBI permission for write-off or price reduction, auction by US Customs in some cases, and difficulties arising from foreign bank fault and market recession. On those facts, the presumption of contravention was treated as rebutted.

Conclusion: The appellants were held to have taken reasonable steps, and the finding of contravention was not sustained for the covered GRIs.

Issue (ii): Whether the penalty imposed for non-realisation of export proceeds was sustainable in full or required modification.

Analysis: Since the evidence showed reasonable efforts in respect of the disputed export transactions, the original penalty based solely on non-realisation could not stand in full. The Tribunal considered the efforts made for obtaining RBI permission and other mitigating circumstances and found that a reduction in penalty was justified.

Conclusion: The penalty was reduced to the amount already recovered, namely Rs. 1,10,000.

Final Conclusion: The appeal succeeded in part, with the penalty substantially reduced on the basis that the appellants had shown reasonable efforts to realise the export proceeds and had rebutted the statutory presumption to that extent.

Reasonable steps to realise export proceeds rebut statutory presumption, leading to reduction of foreign exchange penalty.
Non-realisation of export proceeds was not treated as punishable where the exporter proved reasonable steps to realise and repatriate the funds. The Tribunal accepted correspondence with foreign buyers, approaches to the Indian Embassy, efforts through bankers and authorised dealers, attempts to secure RBI permission for write-off or price reduction, and other mitigating factors such as foreign bank fault, customs auction and market recession; on that basis, the statutory presumption of contravention was rebutted for the covered export transactions. Because the finding of contravention could not stand to that extent, the penalty based solely on non-realisation was reduced to the amount already recovered.

Failure to repatriate export proceeds - reasonable steps to realise export proceeds - rebuttable presumption under section 18(3) - onus on respondent to prove taking or refraining from action under section 18(2) - modification of penalty in the interest of justiceReasonable steps to realise export proceeds - rebuttable presumption under section 18(3) - onus on respondent to prove taking or refraining from action under section 18(2) - Whether the appellants had taken all reasonable steps to realise the export proceeds in respect of specified GRIs (Sl. Nos. 1, 2, 3, 4, 5 and 12) and whether the adjudicating authority erred in holding them liable. - HELD THAT: - The Tribunal held that non-realisation of export proceeds by itself is not punishable; the determinative question is whether the exporter took all reasonable steps in the facts and circumstances. Reasonableness must be assessed by commercial prudence and business considerations and does not require one specific action in every case. The onus to establish that an exporter took or refrained from action with the requisite effect under subsection (2) remains on the respondent. The material on record (authorised dealer certificates, communications with RBI, evidence of auction by US Customs, and steps taken to obtain price reduction or pursue matters with foreign banks and RBI) showed plausible and reasonably true efforts by the appellants in respect of GRIs at Sl. Nos. 1, 2, 3, 4, 5 and 12. Consequently the adjudicating authority's conclusion that no documents were produced evidencing sincere and reasonable efforts was erroneous, and the presumption under section 18(3) was rebutted for those GRIs. [Paras 7, 8]Impugned order set aside insofar as GRIs at Sl. Nos. 1, 2, 3, 4, 5 and 12; appellants not liable for those GRIs.Failure to repatriate export proceeds - modification of penalty in the interest of justice - Whether the penalty imposed for non-repatriation in respect of GRIs at Sl. Nos. 6 to 11 required modification and what should be the quantum of penalty. - HELD THAT: - The Tribunal found that the appellants had made attempts to obtain RBI's permission for extension and price reduction in respect of GRIs at Sl. Nos. 6 to 11 and that the explanations and evidence were plausible. While the adjudicating authority erred in not giving due weight to those steps, complete exoneration was not directed. Considering the efforts and the interests of justice, the Tribunal exercised its power to reduce and proportionately modify the penalty to the amount already recovered. [Paras 8]Penalty in respect of GRIs at Sl. Nos. 6 to 11 modified and reduced to the recovered amount of Rs. 1,10,000.Final Conclusion: Appeals partly allowed: impugned adjudication set aside in respect of GRIs at Sl. Nos. 1, 2, 3, 4, 5 and 12; penalty in respect of GRIs at Sl. Nos. 6-11 reduced so that the total penalty to be recovered equals the amount already recovered (Rs. 1,10,000).

2005 (12) TMI 612 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Repatriation of export proceeds upheld where exporter failed to rebut statutory presumption and justify non-realisation.
Export of goods outside India created an obligation to repatriate the sale proceeds, and liability did not depend on actual delivery to the foreign buyer. The failure to take delivery, or an asserted auction sale by Singapore Customs, did not relieve the exporter of the duty to account for and repatriate the value realised from the goods. The statutory presumption under section 18(3) of the Foreign Exchange Regulation Act operated against the exporter, and no satisfactory evidence was produced to rebut it. The penalty was considered proportionate because it was below the unrepatriated amount, so the contravention finding and penalty were upheld.

Repatriation of export proceeds - export of goods (as distinct from sale) - legal presumption under section 18(3) - contravention of section 18(2) - burden of proof to rebut statutory presumption - penalty proportionality and appropriatenessExport of goods (as distinct from sale) - repatriation of export proceeds - Non acceptance of delivery by the foreign buyer does not absolve the exporter from the obligation to repatriate export proceeds for goods sent outside India. - HELD THAT: - The language of section 18(2) refers to 'export of goods' and not to 'sale of goods'; accordingly, the fact that the foreign buyer did not take delivery is immaterial to the statutory duty to ensure repatriation of the price of goods that were sent out of the territory of India. The Tribunal therefore rejects the contention that non taking of delivery relieves the appellant from repatriation obligations. [Paras 4]Plea of non acceptance of delivery is of no avail and does not absolve the appellant of repatriation obligation.Repatriation of export proceeds - burden of proof to rebut statutory presumption - Alleged auction/sale of consignments by Singapore Customs does not discharge repatriation obligation in absence of evidence accounting for proceeds of such sale. - HELD THAT: - Where goods were sent outside India, any proceeds realized abroad (including by auction or sale by foreign authorities) must be shown and accounted for; the appellant failed to produce evidence of the price fetched at any such sale or of repatriation of those proceeds. The matter of what happened to proceeds is within the appellant's exclusive knowledge and therefore the contention based on Singapore Customs sale cannot absolve the appellant without supporting proof. [Paras 5]Claim that consignments were sold by Singapore Customs does not discharge repatriation obligation in absence of evidence of realization and repatriation.Legal presumption under section 18(3) - burden of proof to rebut statutory presumption - contravention of section 18(2) - The legal presumption under section 18(3) applies against the appellant and, having failed to produce sufficient evidence to rebut it, the appellant is liable for contravention of section 18(2). - HELD THAT: - Sub section (3) of section 18 raises a rebuttable legal presumption against the exporter regarding failure to take reasonable steps to repatriate export proceeds. The appellant did not place sufficient evidence to displace this presumption. Consequently, the Tribunal sustained the finding of contravention under section 18(2) based on the presumption and the absence of adequate rebuttal. [Paras 6]Legal presumption under section 18(3) applies; appellant failed to rebut it and is liable for contravention of section 18(2).Penalty proportionality and appropriateness - The penalty imposed on the appellant company was not excessive and is upheld. - HELD THAT: - The penalty of Rs. 2 lakhs upon the company was examined in relation to the repatriation shortfall; the Tribunal considered the penalty to be below the amount of the unrealized export proceeds and not harsh or excessive. No persuasive arguments were advanced to challenge the quantum of penalty, and the deposit made may be appropriated towards it with a direction to deposit the balance within the stipulated time. [Paras 6]Penalty is upheld as not harsh or excessive; half already deposited to be appropriated and balance to be deposited as directed.Final Conclusion: The appeal is dismissed; the adjudication finding of contravention of the obligation to repatriate export proceeds is sustained, the legal presumption under section 18(3) is applied, the penalty imposed on the appellant company is upheld, the amount already deposited may be appropriated towards the penalty and the balance is to be deposited within fifteen days or recovered in accordance with law.

2005 (12) TMI 616 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Foreign exchange import compliance: delayed proof of import did not justify penalty absent a statutory filing deadline.
Penalty for delayed filing of the bill of entry was unsustainable where the foreign exchange had in fact been used for the permitted import purpose. Section 8(3) of the Foreign Exchange Regulation Act, 1973 required utilisation for authorised import, but did not impose any time limit for filing proof of import. The Exchange Control Manual only provided for a banker's reminder after three months and did not create penal consequences for late submission. On these facts, belated proof of import did not amount to a punishable contravention, and the penalty order was set aside.

2005 (12) TMI 615 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues: (i) Whether the appellant's retracted confession could be relied upon in the foreign exchange adjudication proceedings. (ii) Whether the confession of a co-accused and other affidavits/statements were inadmissible or of no evidentiary value in proceedings under the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether the appellant's retracted confession could be relied upon in the foreign exchange adjudication proceedings.

Analysis: The statement was retracted on the plea of duress and threat, but no material was produced to substantiate coercion, torture, or involuntariness. There was no medical record or other supporting circumstance to displace the presumption of voluntariness. The statement was also supported by seized documents and surrounding circumstances, which furnished corroboration in material particulars. A retracted confession is not excluded as a matter of law and may be acted upon if found voluntary and truthful.

Conclusion: The retracted confession was validly relied upon and sustained the finding of contravention.

Issue (ii): Whether the confession of a co-accused and other affidavits/statements were inadmissible or of no evidentiary value in proceedings under the Foreign Exchange Regulation Act, 1973.

Analysis: The proceedings under the Foreign Exchange Regulation Act, 1973 are governed by the prescribed procedure and principles of natural justice, and not by the strict rules of the Indian Evidence Act, 1872. Accordingly, the bar under section 30 of the Indian Evidence Act, 1872 was held inapplicable. The affidavits relied upon by the appellant were treated as belated and self-serving materials lacking contemporaneous probative value, while the statements of other persons were treated as relevant supporting material in the adjudication context.

Conclusion: The challenge based on inadmissibility of co-accused material and affidavits failed.

Final Conclusion: The adjudication order imposing penalty and directing confiscation was affirmed, and the appeal failed in full.

Ratio Decidendi: In foreign exchange adjudication, a retracted confession may be relied upon if it is found voluntary and corroborated, and the strict evidentiary exclusion applicable to criminal trials does not control such proceedings.

Retracted confession in foreign exchange adjudication may be relied on when voluntary and corroborated by surrounding evidence.
A retracted confession in foreign exchange adjudication may be relied on when the retraction is unsupported by material showing coercion or involuntariness, and when the statement is corroborated by seized documents and surrounding circumstances. Proceedings under the Foreign Exchange Regulation Act, 1973 are governed by natural justice and the prescribed adjudicatory procedure, not the strict rules of the Indian Evidence Act, 1872, so the section 30 bar was treated as inapplicable. Co-accused statements and other supporting materials were therefore treated as relevant, while belated self-serving affidavits were given no weight. The penalty and confiscation order was affirmed.

Retracted confession - voluntariness of statement and proof of duress - corroboration of confession by recovered documents - admissibility of co-accused confession in proceedings under the Foreign Exchange Regulation Act - prescribed procedure for adjudication under the Foreign Exchange Regulation Act - probative value of non contemporary affidavits - confiscation of recovered currency under the Foreign Exchange Regulation ActRetracted confession - voluntariness of statement and proof of duress - corroboration of confession by recovered documents - Reliance on the appellant's retracted confessional statement - HELD THAT: - The Tribunal held that the appellant's retraction alleging duress, threat or torture was not supported by any material on record such as medical evidence or contemporaneous documentation and therefore could not be accepted as establishing involuntariness. The Tribunal applied the principle that the maker who alleges inducement, threat or coercion must establish it; absence of such proof requires the authority to subjectively apply its mind to the retraction before acting on the inculpatory statement. Further, the confessional statement was materially corroborated by documents recovered from the appellant, which fortified its truthfulness. In view of these factors the retracted confession could be acted upon and was acceptable for the purposes of the adjudication. [Paras 6, 7, 8]The retracted confession is to be treated as voluntary and admissible, having been corroborated by recovered documents.Admissibility of co accused confession in proceedings under the Foreign Exchange Regulation Act - prescribed procedure for adjudication under the Foreign Exchange Regulation Act - Applicability of section 30, Indian Evidence Act, to FER adjudication and reliance on statements of co accused - HELD THAT: - The Tribunal held that adjudication under the Foreign Exchange Regulation Act is governed by the 'prescribed procedure' and by principles of natural justice rather than by the Indian Evidence Act or the Civil Procedure Code. Consequently, the rule treating confession of a co accused as inadmissible substantive evidence under section 30 of the Evidence Act does not apply to FER adjudication proceedings. The Tribunal therefore rejected the submission that confessions or inculpatory statements of co accused could not be relied upon in the FER proceedings, noting there was no challenge that the prescribed procedure was violated. [Paras 5, 9]Section 30, Indian Evidence Act, is not applicable to FER adjudication; statements of co accused may be considered in accordance with the prescribed procedure and principles of natural justice.Probative value of non contemporary affidavits - Evidentiary weight of affidavits alleging advancement of recovered foreign currency to the appellant - HELD THAT: - The Tribunal observed that several persons filed sworn affidavits claiming they had advanced the recovered foreign currency to the appellant, but these affidavits were not contemporary and amounted to self created evidence with low probative value. The Tribunal concluded that the adjudicating authority was justified in overlooking such affidavits when reaching its decision. [Paras 10]The non contemporary affidavits have low probative value and their rejection does not vitiate the adjudication order.Final Conclusion: The appeal is dismissed; the adjudication order imposing penalty and confiscating the recovered amount is sustained, subject to the appellant being permitted to deposit the penalty within the time allowed.

2005 (12) TMI 614 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

AI TextQuick Glance (AI)Headnote

Issues: (i) Whether the appellants contravened section 18(2) of FERA, 1973 by reducing the export value and adjusting dues without Reserve Bank permission; (ii) Whether the appellants failed to take all reasonable steps to realise the export proceeds, attracting the presumption under section 18(3) of FERA, 1973; (iii) Whether the appellants were liable under section 68(1) of FERA, 1973 and whether the penalty required interference.

Issue (i): Whether the appellants contravened section 18(2) of FERA, 1973 by reducing the export value and adjusting dues without Reserve Bank permission.

Analysis: The adjustment of dues against the foreign buyers was made without permission of the Reserve Bank. The export invoices showed value below the floor price fixed by the Government, which amounted to an unauthorised reduction of the export value. The record also did not show receipt of the amounts claimed to have been realised through cheque payments or instalments.

Conclusion: The contravention under section 18(2) was established against the appellants.

Issue (ii): Whether the appellants failed to take all reasonable steps to realise the export proceeds, attracting the presumption under section 18(3) of FERA, 1973.

Analysis: Section 18(3) operates where export proceeds are not received within the prescribed time, unless the contrary is proved. On the facts, no material was produced to show what reasonable steps were taken to recover the amounts from the foreign buyers, who were closely connected with the appellant-firm. The explanation based on market recession and delayed delivery was not supported by evidence sufficient to displace the statutory presumption.

Conclusion: The appellants failed to rebut the presumption and were liable for contravention of section 18(2) read with section 18(3).

Issue (iii): Whether the appellants were liable under section 68(1) of FERA, 1973 and whether the penalty required interference.

Analysis: The connected partners and the power-of-attorney holder were shown to be aware of, and involved in, the affairs of the firm and the export transactions. The penalties were also found not to be disproportionate, and no ground for reduction was made out.

Conclusion: Liability under section 68(1) was affirmed and the penalty was not interfered with.

Final Conclusion: The appeals failed on merits and the adjudication order imposing penalties was sustained in full.

Ratio Decidendi: Non-realisation of export proceeds becomes punishable where the exporter fails to take all reasonable steps to recover payment, and unauthorised adjustment or reduction of export value without Reserve Bank permission constitutes contravention of the statutory export control provisions.

Export proceeds non-realisation and unauthorised value reduction trigger liability under FERA export control rules.
Unauthorised reduction of export value and adjustment of dues against foreign buyers without Reserve Bank permission constituted contravention of the export control requirements under FERA. Where export proceeds were not realised within the prescribed time, the exporter had to show all reasonable steps taken to recover the amounts; in the absence of such material, the statutory presumption of non-realisation was not displaced. Partners and a power-of-attorney holder who were aware of and involved in the export dealings could also be exposed to liability, and penalties may be sustained where no disproportionality is shown.

Obligation to repatriate export proceeds within prescribed period - failure to take all reasonable steps for realisation of export proceeds - unauthorised reduction of export value by invoicing below floor price - liability of partners and attorney under section 68(1) for acts of the firm - pre-deposit dispensation due to lapse of proceedings - penalty quantum not disproportionateObligation to repatriate export proceeds within prescribed period - failure to take all reasonable steps for realisation of export proceeds - unauthorised reduction of export value by invoicing below floor price - Adjudicating authority correctly held the appellant-firm guilty of contravening the obligation to repatriate export proceeds and of unauthorised reduction of export value, by adjusting invoices below floor price and failing to take all reasonable steps for realisation. - HELD THAT: - The Tribunal found that the appellant-firm adjusted invoice values without obtaining Reserve Bank permission and invoiced goods at values lower than the Government-fixed floor price, constituting an unauthorised reduction of export value. Section 18(2) penalises actions that secure delayed or otherwise improper payment or that the proceeds do not represent full export value; section 18(3) presumes lack of reasonable steps where payment is not received within the prescribed period unless contrary is proved. The appellants failed to produce evidence of receipt of amounts allegedly received or of successful realisation from post-dated cheques, and did not establish that they took all reasonable steps to recover dues-particularly when two foreign buyers were closely connected to non-resident partners-so the findings of contravention were upheld. [Paras 9, 10, 11, 12]Findings of contravention under section 18(2), read with section 18(3)'s presumption, are upheld and the adjudication on this ground is sustained.Liability of partners and attorney under section 68(1) for acts of the firm - Appellants (non-resident partners) and the Power of Attorney holder are properly held liable under section 68(1) for the contraventions. - HELD THAT: - The record showed that two appellants were husbands of proprietors of the foreign buyer concerns and thus aware of affairs of both the exporter and the buyers; the Power of Attorney holder signed GR Forms and controlled the firm's export affairs. On these facts the Tribunal held they could not be absolved of responsibility and were rightly made liable under section 68(1). [Paras 13]Liability of the named partners and the Power of Attorney holder under section 68(1) is affirmed.Pre-deposit dispensation due to lapse of proceedings - penalty quantum not disproportionate - Pre-deposit of penalty was dispensed with on account of prolonged delay in prosecution; the quantum of penalties imposed was not interfered with by the Tribunal. - HELD THAT: - The Tribunal noted the long lapse since the original adjudication (1986) and granted full dispensation of pre-deposit of penalty so the appeals could be heard on merits. Having considered submissions on proportionality, the appellants had not sought reduction of penalties and the Tribunal found the quantum not disproportionate to the contraventions, refraining from interference. [Paras 3, 9, 13]Dispensation of pre-deposit granted due to lapse; penalty amounts upheld and appellants directed to deposit them within the prescribed time or face recovery.Final Conclusion: Appeals dismissed. The Tribunal upheld findings of unauthorised invoice adjustments and failure to take reasonable steps to realise export proceeds, affirmed liability of partners and the Power of Attorney holder under section 68(1), granted dispensation of pre-deposit due to long delay, refused to interfere with penalty quantum, and directed deposit of the penalty in the manner prescribed within the time ordered.

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