Export proceeds non-repatriation attracts penalty without mens rea under foreign exchange law, despite alleged set-off defence.

Failure to repatriate export proceeds constituted a contravention under Section 18(2) of the Foreign Exchange Regulation Act, 1973 where part of the export value remained unrealised, the goods were delivered without a trust receipt, and the firm accepted the buyer's set-off claim without pursuing recovery. The Madras HC noted that the appellate Board had wrongly assumed the first authority had found the buyer's claim false; in fact, it had only treated it as possibly false. It also reiterated that, in Section 18(2) proceedings, proof of mens rea is unnecessary and liability arises from the proved contravention itself, so the penalty orders were sustainable.

---

---

Issues: Whether the respondent-firm's failure to repatriate the export proceeds was a contravention under Section 18(2) of the Foreign Exchange Regulation Act, 1973, warranting penalty, and whether the appellate Board was right in reversing the penalty on the basis that the release of documents and the alleged set-off indicated bona fides.

Analysis: The undisputed facts showed that part of the export proceeds remained unrealised, that the goods were delivered without a trust receipt, and that the firm had accepted the foreign buyer's claim of set-off without taking legal action for recovery of the outstanding amount. The appellate Board's assumption that the first authority had proceeded on a finding of falsity of the buyer's claim was found to be incorrect, since the first authority had only treated the claim as possibly false. The decision further relied on the settled view that, in proceedings under Section 18(2) of the Foreign Exchange Regulation Act, 1973, proof of mens rea was not necessary and liability arose from the proved contravention itself.

Conclusion: The contravention was established and the penalty orders were sustainable; the appellate Board's order was erroneous and was set aside.

---