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Issues: (i) Whether the appellants could be held liable for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 for failure to repatriate export proceeds. (ii) Whether appellant J.B.S. Bakshi could be held liable for contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973 for alleged unauthorized acquisition and transfer of foreign currency.
Issue (i): Whether the appellants could be held liable for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 for failure to repatriate export proceeds.
Analysis: Liability under section 18 rests on the exporter who files the undertaking in relation to export value and receipt of sale proceeds. The statutory presumption under section 18(3) arises only against the person who has sold the goods or is entitled to sell them and fails to receive payment within the prescribed period. On the facts, the shipping documents, GRI forms, invoices and export-related formalities stood in the name of MMTC Ltd., which also held the export code, received export benefits, and was the entity entitled to receive the export price in its bank account. The appellants were found to be manufacturers acting under MMTC Ltd.'s arrangement and had not themselves assumed the statutory role of exporter. In the absence of an undertaking under section 18(1) by the appellants, and with no evidence of any omission by them amounting to non-realisation of export proceeds, the presumption under section 18(3) could not be invoked against them.
Conclusion: The appellants were not liable for contravention of section 18(2) read with section 18(3), and the penalty was unsustainable.
Issue (ii): Whether appellant J.B.S. Bakshi could be held liable for contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973 for alleged unauthorized acquisition and transfer of foreign currency.
Analysis: Section 8(1) prohibits acquisition, transfer, or dealing in foreign exchange without prior permission of the Reserve Bank. The allegation against the appellant was that he had acquired foreign currency and transferred it to another foreign entity. The material on record showed that the foreign amount was paid by one foreign buyer to another for release of shipment, with the appellant acting only as a conduit for the transaction. Mere possession or carriage without beneficial interest or capacity to appropriate the money does not amount to acquisition within the meaning of the provision. The enforcement case was not established to the standard required in foreign exchange proceedings, where the burden remains on the department and the allegation must be proved beyond reasonable doubt.
Conclusion: The charge under section 8(1) was not made out against appellant J.B.S. Bakshi.
Final Conclusion: The impugned penalty order could not survive, and the appeals succeeded on merits with the penalties set aside.
Ratio Decidendi: The statutory presumption for non-realisation of export proceeds applies only against the person who is the exporter or is entitled to sell the goods, and foreign exchange liability under section 8(1) requires proof of real acquisition or transfer with beneficial interest, not mere conduit possession.
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