Foreign exchange penalty fails when later findings confirm import was made for the authorised purpose and no FERA breach survives.

Penalty under the Foreign Exchange Regulation Act, 1973 could not survive once the factual basis for alleging misuse of foreign exchange was displaced. The levy had proceeded on the premise that foreign exchange released to the importer was not used for the intended purpose, but the later finding that the goods imported were iron and steel scrap confirmed that the foreign exchange was in fact applied for the authorised import. With that factual foundation negated, no FERA violation remained established, and the penalty was held unsustainable; the impugned order was set aside.

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Issues: Whether the penalty imposed under the Foreign Exchange Regulation Act, 1973 was sustainable when the factual for alleging misuse of foreign exchange stood negated by the later finding that the imported goods were iron and steel scrap as intended.

Analysis: The penalty had been levied on the premise that the foreign exchange released to the appellant was not used for the purpose for which it was obtained. The later order of the Customs, Excise and Service Tax Appellate Tribunal, as affirmed by the Court, established that the appellant had in fact imported iron and steel scrap, which was the very purpose for which the foreign exchange had been sought and released. Once that factual foundation was displaced, no violation of the Foreign Exchange Regulation Act, 1973 could be said to survive, and the penalty could not stand.

Conclusion: The penalty was unsustainable and the impugned order was set aside in favour of the appellant.

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