Export realisation and foreign exchange control obligations upheld where altered payment terms and weak recovery efforts defeated the exporters' defence.

Changing export bills from D.P. to D.A. and failing to repatriate export proceeds was treated as a contravention of the export-realisation obligations under the Foreign Exchange Regulation Act, 1973 and the Rules, because the altered payment terms enabled delivery without receipt of foreign exchange. The exporters were also held not to have proved that all reasonable steps had been taken to recover the dues; prolonged inaction and belated explanations meant the statutory presumption operated against them. Statements recorded under section 40 were regarded as admissible and reliable evidence. A payment routed between non-residents on the instructions of resident exporters, without Reserve Bank permission, was treated as falling within the foreign-exchange prohibition.

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Issues: (i) Whether changing the tenor of export bills from D.P. to D.A. and the failure to repatriate export proceeds constituted a contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973 read with section 18(3) and Rule 9 of the Foreign Exchange Regulation Rules, 1974; (ii) whether the exporters had taken all reasonable steps to realise the export proceeds and whether the burden and statutory presumption under section 59 were correctly applied; (iii) whether statements recorded under section 40 of the Foreign Exchange Regulation Act, 1973 were admissible and could be relied upon; (iv) whether payment made by one non-resident to another on instructions of a resident attracted section 9(1)(a) of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether changing the tenor of export bills from D.P. to D.A. and the failure to repatriate export proceeds constituted a contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973 read with section 18(3) and Rule 9 of the Foreign Exchange Regulation Rules, 1974.

Analysis: The export declarations and undertakings required the full export value to be realised through the prescribed banking channel within the stipulated period. Altering the bills from D.P. to D.A. enabled release of goods without payment and directly caused non-realisation of proceeds. The asserted local-currency payments, pipeline system, and later explanations were found unsupported by the record and inconsistent with the correspondence and conduct of the exporters.

Conclusion: The change of tenor and failure to realise the export proceeds amounted to a contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973, in favour of Revenue.

Issue (ii): Whether the exporters had taken all reasonable steps to realise the export proceeds and whether the burden and statutory presumption under section 59 were correctly applied.

Analysis: The exporters were required to prove that all reasonable steps had been taken to receive or recover payment. The record showed prolonged inaction, no timely protest against adverse payment terms, no effective recovery action within time, and only belated attempts after notice. The Board's approach that a single step or alleged local-currency payment was sufficient was rejected, and the presumption under section 59 was held to operate against the exporters.

Conclusion: The exporters failed to establish that all reasonable steps had been taken, and the burden and presumption were wrongly applied by the Board, in favour of Revenue.

Issue (iii): Whether statements recorded under section 40 of the Foreign Exchange Regulation Act, 1973 were admissible and could be relied upon.

Analysis: The statement of the bank was treated as admissible evidence under the Act and was relevant to the question whether the goods had been cleared and whether the exporters had taken real steps for recovery. The Board erred in discarding that material.

Conclusion: The statements under section 40 were admissible and reliable, in favour of Revenue.

Issue (iv): Whether payment made by one non-resident to another on instructions of a resident attracted section 9(1)(a) of the Foreign Exchange Regulation Act, 1973.

Analysis: The payment arrangement was made at the instance of the resident exporters and without the permission of the Reserve Bank of India. On that footing, the transaction fell within the statutory prohibition governing dealings affecting foreign exchange control.

Conclusion: The arrangement constituted a contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973, in favour of Revenue.

Final Conclusion: The appellate order was set aside, the enforcement action was upheld, and the penalties were sustained with costs.

Ratio Decidendi: An exporter who alters the mode of payment so as to permit delivery without receipt of foreign exchange, and who fails to prove timely and effective recovery efforts, commits a contravention of the export-realisation provisions; statutory statements may be relied upon, and the burden of rebutting the presumption lies on the exporter.

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