Waiver of pre-deposit in foreign exchange penalty matters turns on a strong prima facie case and genuine financial hardship.

Waiver of pre-deposit of penalty may be granted in a foreign exchange appeal where the impugned adjudication is itself doubtful and the appellant shows genuine financial hardship. The court noted that no independent finding of under-valuation was recorded, the adverse conclusion rested mainly on the view that the imports lacked a valid licence, and the imports had in fact been made with RBI permission. Those facts created a strong prima facie case on the alleged contravention and, together with the closure of business and precarious finances, established undue hardship. The pre-deposit was waived and the appeal was allowed.

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Issues: Whether waiver of pre-deposit of penalty was warranted in an appeal arising under the foreign exchange where the adjudicating order itself was of doubtful sustainability and the appellant pleaded financial hardship.

Analysis: The appellant was proceeded against for alleged contravention of the restrictions on use of foreign exchange for the stated purpose of import of goods. The request for waiver had to be examined on the twin considerations of undue hardship and safeguarding realization of the penalty. On the facts, no independent finding of under-valuation was recorded by the adjudicating authority; the conclusion was derived substantially from the customs view that the imports were without a valid licence. Since the imports had been made with RBI permission, the applicability of the alleged contravention itself was in serious doubt. In addition, the business had closed and the financial position was stated to be precarious. These circumstances established both a strong prima facie case and undue financial hardship.

Conclusion: Waiver of pre-deposit was granted and the appeal was allowed.

Ratio Decidendi: Where the sustainability of the impugned adjudication is itself doubtful and the appellant shows genuine financial hardship, pre-deposit may be waived on the basis of a strong prima facie case and undue hardship.

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