Technical foreign exchange lapse cannot sustain penalty where remittances were explained by RBI waiver and bank confirmation.

Foreign exchange remittances were found to be duly correlated with the record, including an RBI waiver for identified payments and confirmation from the authorised bank that the bill of entry and exchange control copy had been received for the remaining remittance. On that basis, the obligation to import goods and furnish proof of import was treated as satisfied. The only remaining lapse was non-filing of the exchange control copy and bill of entry, which was treated as a technical violation rather than a substantive contravention under the Foreign Exchange Regulation Act, 1973. Accordingly, the penalty was held unsustainable and was set aside.

---

---

Issues: Whether the penalty imposed for contravention of section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973 could be sustained when the remittances were explained by the RBI waiver and the authorised bank confirmation, and whether the alleged default in filing import proof was only a technical violation.

Analysis: The remittances were correlated with the documents placed on record, showing that the foreign exchange had been utilised for the intended import of goods. The RBI letter granted waiver for the identified remittances, and the authorised bank confirmed receipt of the bill of entry and exchange control copy for the remaining remittance. On that footing, the obligation to import goods and furnish proof thereof stood satisfied. The remaining lapse, namely non-filing of the exchange control copy and bill of entry, was treated as a technical violation and not as a substantive contravention warranting penalty.

Conclusion: The penalty order was not sustainable and was set aside in favour of the appellants.

---