Late realisation of export proceeds does not erase foreign exchange contravention, but it can justify reduction of penalty.

Failure to realise export proceeds within the prescribed or extended period constituted contravention of the foreign exchange regime, because compliance had to occur within the statutory time frame and later recovery during the appeal did not erase the completed default. The tribunal therefore sustained the finding of breach. However, where almost the entire export proceeds were subsequently realised and the penalties were imposed at about half the transaction value, the quantum was treated as excessive. Penalty being discretionary and required to be proportionate, the amounts were reduced to half of those originally imposed.

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Issues: (i) Whether non-realization of export proceeds within the stipulated or extended time amounted to contravention under the foreign exchange law despite later realization during the pendency of appeal; (ii) Whether the penalties imposed were excessive and liable to be reduced.

Issue (i): Whether non-realization of export proceeds within the stipulated or extended time amounted to contravention under the foreign exchange law despite later realization during the pendency of appeal.

Analysis: The legal scheme required export proceeds to be realized within the prescribed period or within such extended period as permitted, and the exporter was obliged to take reasonable steps for recovery. The fact that the appellants had not realized the amounts within the permitted period was undisputed. Later realization during appeal did not erase the original default, because compliance had to exist within the statutory time frame and the presumption of contravention remained available once timely realization failed.

Conclusion: The finding of contravention was upheld and the appellants remained liable for breach of the foreign exchange provisions.

Issue (ii): Whether the penalties imposed were excessive and liable to be reduced.

Analysis: The penalties were imposed at approximately half of the amounts involved in the transactions. The appellants had subsequently realized almost the entire export proceeds, thereby making good the foreign exchange loss. In these circumstances, and applying the principle that penalty is discretionary and should not ordinarily be imposed in a disproportionate manner, the penalty amount was considered excessive and fit for reduction.

Conclusion: The penalties were reduced to half of the amounts originally imposed.

Final Conclusion: The appeals succeeded only in part: the findings of contravention were sustained, but the monetary penalties were substantially reduced.

Ratio Decidendi: Later realization of export proceeds does not wipe out a completed contravention for failure to realize within the statutory time, but it may be a relevant mitigating factor for reducing the quantum of penalty.

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