2007 (8) TMI 829 - AT - FEMA

Tribunal Confirms Penalties for Foreign Exchange Violations: Firm and Partner Fined for Export Proceeds and Currency Misuse.

Sudharshan Exporters Versus Directorate of Enforcement

Sudharshan Exporters Versus Directorate of Enforcement - TMI Issues:Violation of provisions of Foreign Exchange Regulation Act, 1973 - Contravention of sections 18(2) and 18(3) - Penalty imposed on appellant firm and managing partner - Mis-utilization of domestic credit card abroad without RBI permission.Analysis:The judgment pertains to appeals against an Adjudication Order imposing penalties on an appellant firm and its managing partner for contravention of sections 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973. The penalties were imposed for failure to realize outstanding export dues and misuse of a domestic credit card abroad without RBI permission. The appellant firm was penalized for not repatriating the foreign exchange to India and for transferring goods to an alternate overseas buyer without RBI authorization. The managing partner was penalized for acquiring foreign currency in Italy without RBI permission. The appeals challenged the impugned order on grounds of natural justice violation and discrepancies in the allegations made in the Show-Cause Notice. The appellant argued that penalties were imposed on different grounds than those alleged in the SCN, emphasizing events beyond their control and lack of deliberate action. The respondent contended that the appellants failed to make reasonable efforts to realize outstanding dues and provided evidence of non-compliance with RBI directives.The Tribunal analyzed the evidence and legal provisions under sections 18(2) and 18(3) of the FER Act, 1973. It highlighted the obligation of exporters to make reasonable efforts to recover export proceeds within prescribed periods and methods. The Tribunal noted that the appellants did not provide evidence of taking reasonable steps or rebutting the presumption of non-receipt of payments within the prescribed period. Consequently, the appellants were found guilty of indifference towards realizing export proceeds, leading to the imposition of penalties. The Tribunal referenced legal precedents emphasizing the need for deliberate action or refraining from steps in contravention cases.Regarding the quantum of penalty, the Tribunal differentiated between the appellant firm and the managing partner. Citing a Calcutta High Court ruling, it held that both could not be held guilty simultaneously for the same contravention. Therefore, the penalty was imposed only on the appellant firm, absolving the partner from payment. Additionally, the managing partner was penalized for the misuse of a domestic credit card abroad without RBI permission. The Tribunal directed the firm to deposit the penalty amount within a specified period and the managing partner to pay the imposed penalty.In conclusion, the Tribunal upheld the penalties imposed on the appellant firm and the managing partner for violations of the FER Act, 1973. It emphasized the importance of complying with foreign exchange regulations and the consequences of non-compliance, ensuring accountability and adherence to legal provisions.