Foreign exchange recovery duties and non-resident debt acknowledgements can trigger liability when exporters fail to act effectively.

Exporters must take prompt, effective and reasonable steps to secure repatriation of export proceeds, and mere filing of a recovery suit, incomplete litigation, or limited correspondence was insufficient to rebut the statutory presumption of non-realisation. Settlement correspondence with the foreign buyer was treated as an acknowledgement of debt in favour of a non-resident, which fell within the statutory prohibition absent Reserve Bank permission. Failure to recover the unpaid foreign exchange was also treated as a contravention where no effective measure was shown to prevent delay or loss of receipt. The penalties were upheld on the merits.

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Issues: (i) Whether the appellants had taken reasonable steps to secure repatriation of export proceeds so as to rebut the statutory presumption under the foreign exchange law; (ii) Whether the settlement and correspondence with the foreign buyer amounted to an acknowledgement of debt in favour of a non-resident in contravention of the prohibition on such acknowledgement; (iii) Whether the failure to recover US dollars 7500 constituted a contravention arising from an act or omission delaying or preventing receipt of foreign exchange.

Issue (i): Whether the appellants had taken reasonable steps to secure repatriation of export proceeds so as to rebut the statutory presumption under the foreign exchange law.

Analysis: The obligation of an exporter was to take reasonable steps for repatriation of export proceeds, and the statutory presumption under the foreign exchange law arose once the export price remained unrealised beyond the prescribed period. The Tribunal held that mere filing of a recovery suit, an incomplete pursuit of litigation, and limited correspondence with authorities did not amount to reasonable steps in the circumstances. The appellants failed to show prompt, vigorous, and effective efforts sufficient to displace the presumption.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (ii): Whether the settlement and correspondence with the foreign buyer amounted to an acknowledgement of debt in favour of a non-resident in contravention of the prohibition on such acknowledgement.

Analysis: A contravention of the prohibition required the existence of a debt, an acknowledgement of that debt, and the creation or transfer of a right to receive payment in favour of a person resident outside India. The admitted correspondence and settlement reduced the buyer's liability and recognised the claim in a manner that fell within the statutory prohibition. No permission of the Reserve Bank was obtained.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (iii): Whether the failure to recover US dollars 7500 constituted a contravention arising from an act or omission delaying or preventing receipt of foreign exchange.

Analysis: The Tribunal found that the appellants had not shown any effective measure to secure return of the amount paid for the proposed placement of preferential shares. The inability or unwillingness to pursue recovery did not absolve them, and the statutory obligation to refrain from acts or omissions delaying receipt of foreign exchange remained unfulfilled.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Final Conclusion: The impugned penalties were upheld, and all appeals failed on merits.

Ratio Decidendi: In foreign exchange matters, statutory liability turns on whether the exporter took effective and reasonable steps to secure realisation or recovery, and a settlement or inaction that recognises or leaves unpaid a non-resident's claim may attract the relevant prohibitions absent Reserve Bank permission.

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