2009 (8) TMI 1302 - AT - FEMA

Tribunal Confirms Penalty for Company Over Foreign Exchange Violations; Partners Cleared of Penalties, Payment Due in 15 Days.

The Tribunal upheld the penalty against the appellant-company for violating sections 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973, due to ... - Issues Involved:1. Contravention of provisions of section 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973.2. Failure to take reasonable steps for realization of export proceeds.3. Adverse legal presumption under section 18(3) of the Foreign Exchange Regulation Act, 1973.4. Adequacy of steps taken by the appellants to recover outstanding dues.5. Quantum of penalty imposed.Issue-wise Detailed Analysis:1. Contravention of provisions of section 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973:The appeals were filed against the Adjudication Order imposing penalties for contravention of section 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973. The appellant-company and its directors were penalized for failing to take reasonable steps to realize export proceeds amounting to US $2,53,429.99 from M/s. Bangladesh Power Development Board (BPDB), Dhaka. The exports were made during 1993-94, and 10% of the total invoice value remained unpaid.2. Failure to take reasonable steps for realization of export proceeds:The appellants argued that they took reasonable steps for the realization of the outstanding dues. They provided details of their efforts, including entering into a contract with BPDB, supplying goods as per specifications, and addressing objections raised by BPDB regarding the quality of materials supplied. Despite these efforts, BPDB did not release the remaining 10% of the proceeds and invoked bank guarantees.3. Adverse legal presumption under section 18(3) of the Foreign Exchange Regulation Act, 1973:Under section 18(3) of the Foreign Exchange Regulation Act, 1973, an adverse legal presumption is raised against the exporter if the export price is not repatriated within the prescribed period. The Tribunal noted that the export price was not repatriated, raising an adverse legal presumption against the appellants. The appellants were required to rebut this presumption by proving that they took all reasonable steps to recover the payments.4. Adequacy of steps taken by the appellants to recover outstanding dues:The Tribunal examined whether the steps taken by the appellants were reasonable. The appellants claimed to have rectified the defects in the supplied goods and initiated legal proceedings against BPDB. However, the Tribunal found that there was no documentary evidence to support the rectification of defects and that the legal proceedings were not effective. The Tribunal concluded that the steps taken by the appellants were routine and casual, and did not constitute reasonable efforts to recover the outstanding dues.5. Quantum of penalty imposed:The Tribunal considered the quantum of the penalty imposed against the appellants. It noted that the penalty amount was commensurate with the violations and was not harsh or excessive. The Tribunal upheld the penalty against the appellant-company but absolved the partners from any penalty, citing a ruling by the Hon'ble High Court of Kolkata that a partnership firm and its partners cannot be held guilty for the same contravention simultaneously.Conclusion:The Tribunal upheld the penalty imposed against the appellant-company for contravening the provisions of section 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973. It found that the appellants failed to take reasonable steps to realize the export proceeds and could not rebut the adverse legal presumption raised against them. The partners of the appellant-firm were absolved from any penalty, and the appellants were directed to deposit the balance amount of the penalty within 15 days.