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Issues: (i) Whether the penalty order required to be set aside and the matter remanded because the appellants were not given adequate opportunity to defend themselves and relevant material was not considered; (ii) what is required to establish contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973, in the light of the presumption under section 18(3).
Issue (i): Whether the penalty order required to be set aside and the matter remanded because the appellants were not given adequate opportunity to defend themselves and relevant material was not considered.
Analysis: The application for adjournment had been sent on medical grounds before the hearing, and the failure to place it before the adjudicating authority deprived the appellants of an effective opportunity to defend. The order also did not deal with material circumstances relied upon by the appellants, including correspondence with the Reserve Bank of India, permission for legal action, extension of time, and alleged loss of the cheque by the bank. These defects warranted a fresh adjudication.
Conclusion: The order could not stand and the matter had to be remanded for fresh adjudication.
Issue (ii): What is required to establish contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973, in the light of the presumption under section 18(3).
Analysis: Non-realisation of export proceeds is not punishable by itself. To establish contravention, the department must show absence of extension of time, write-off, or other indulgence by the RBI, and may then rely on the statutory presumption under section 18(3). That presumption can still be displaced by evidence that reasonable steps were taken to realise the export proceeds. The standard is that of a prudent exporter acting in the circumstances, and futile or uncalled-for efforts are not required.
Conclusion: Contravention under section 18(2) is made out only if the exporter fails to show reasonable steps to realise the proceeds after the statutory presumption arises.
Final Conclusion: The appeals succeeded, the penalty order was set aside, and the matter was sent back for a fresh decision on the merits in accordance with law.
Ratio Decidendi: In proceedings for non-realisation of export proceeds, the department must first establish the statutory basis for contravention, and the exporter can rebut the presumption by showing reasonable steps taken as a prudent exporter in the circumstances; where material defence is not considered and opportunity is denied, remand for fresh adjudication is warranted.
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