Quasi-criminal foreign exchange penalty cannot rest on delayed documentary demand when import evidence remains plausible.

Quasi-criminal foreign exchange penalty proceedings required the authority to consider the full surrounding circumstances before imposing sanction. A belated show cause notice, served years after the remittances, left the importer without all original documents, and failure to produce the Bill of Entry at that stage did not by itself prove that the remittances were not used for imports. As the bills of lading made the import explanation plausible and the alleged violation was not established beyond reasonable doubt, the penalty could not be sustained and the impugned orders were set aside.

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Issues: Whether the penalty imposed for alleged contravention of foreign exchange requirements could be sustained when the notice was issued after an inordinate delay and the appellant relied on bills of lading and other surrounding circumstances to show that the remittances were used for imports.

Analysis: The alleged default arose under Section 8(3) and Section 8(4) of the Foreign Exchange Regulation Act, 1973, read with Chapter 7A.20(i) of the Exchange Control Manual, 1995, which required production of the exchange control copy of the Bill of Entry as evidence of import. The record showed that the show cause notice was issued long after the remittances and was served after many years, by which time the appellant was not in possession of all the original import documents. The Court treated such proceedings as quasi-criminal in nature and reiterated that penalty is not to be imposed merely because it is legally permissible; the authority must act judicially and consider all relevant circumstances. It further held that failure to produce the Bill of Entry after such delay did not, by itself, justify an inference that the remittance was not used for import, particularly when the bills of lading made the import explanation plausible.

Conclusion: The penalty could not be sustained and the impugned orders were liable to be set aside in favour of the appellant.

Ratio Decidendi: In quasi-criminal foreign exchange penalty proceedings, a belated demand for documentary proof cannot, by itself, establish contravention where the surrounding material probabilises genuine import and the authority has not proved the alleged violation beyond reasonable doubt.

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