2008 (12) TMI 841 - AT - FEMA

Tribunal Upholds Penalties for Non-Recovery of Export Proceeds; Orders Remaining Payment Within a Week.

The Tribunal dismissed the appeals, affirming the Adjudication Order imposing penalties for failing to recover export proceeds. The appellants were ... - Issues Involved:1. Challenge to the common Adjudication Order imposing penalties.2. Compliance with pre-deposit order.3. Allegations of non-recovery of export proceeds.4. Reasonableness of steps taken for recovery.5. Jurisdiction and authority of the Special Director as Adjudicating Officer.Detailed Analysis:1. Challenge to the common Adjudication Order imposing penalties:The appellants challenged the Adjudication Order No. ADJ/63/B/SDE/AKB/2001, dated 18-12-2001, which imposed a penalty of Rs. 15 lakhs against the appellant company and Rs. 15 lakhs against each of the other appellants for contravening section 18(2) read with sections 18(3) and 68 of the Foreign Exchange Regulation Act, 1973. The penalties were imposed due to the failure to take reasonable steps to recover the outstanding price of US dollars 7,20,000 after exporting goods to M/s. Prism Jewellers, Dubai.2. Compliance with pre-deposit order:The Tribunal initially rejected the applications for dispensation of pre-deposit of the penalty but allowed the appellants to make the pre-deposit within 30 days. The appellants challenged this order before the Bombay High Court, which modified the pre-deposit requirement to 50% of the penalty. The appellants complied with this modified order. The Tribunal had dismissed the appeals for non-compliance with the original pre-deposit order but restored them after the High Court's intervention.3. Allegations of non-recovery of export proceeds:The appellants argued that the unrecovered price was only US dollars 7,20,000, not US dollars 10,01,205 as alleged. They claimed to have written letters to the foreign buyer, who cited financial constraints, and sought an extension from the authorized dealer, which was not granted. They also filed a suit in the Bombay High Court in 1999 against the foreign buyer, who had disappeared, making recovery impossible.4. Reasonableness of steps taken for recovery:The Tribunal noted that exporters are obliged to take reasonable steps for repatriation of export proceeds. The term 'reasonable' was analyzed, and it was concluded that merely writing letters within six months did not meet this standard. The filing of a suit two years later did not displace the adverse presumption under section 18(3). The appellants failed to prove that they surrendered proportionate export incentives or met the conditions for waiver outlined in the RBI's Master Circular.5. Jurisdiction and authority of the Special Director as Adjudicating Officer:The appellants contended that the Special Director, who passed the impugned order, fell below the rank of Assistant Director and thus lacked jurisdiction. The Tribunal rejected this argument, stating that the hierarchical order described in section 3 of the FER Act, 1973, did not imply a fixed rank for adjudicating officers. It was also noted that the Central Government could entrust functions to any officer under section 5 of the Act, and the Special Director could be appointed from other departments like Customs or Excise.Conclusion:The Tribunal found no merit in the appeals and affirmed the impugned order. The appellants were directed to deposit the remaining penalty within a week, failing which the respondent could recover it in accordance with the law. The Enforcement Directorate was allowed to appropriate the pre-deposit amount towards the penalty.