2003 (5) TMI 542 - AT - FEMA

Tribunal Reduces Penalty for Failing to Realize Export Proceeds Under Forex Regulations; Pay Rs. 20,000 in 10 Days.

Sheela Trading Co. Versus Director of Enforcement

Sheela Trading Co. Versus Director of Enforcement - TMI Issues:- Contravention of sections 18(2) and (3) read with sections 68(1) and (2) of the Foreign Exchange Regulations Act- Failure to realize export proceeds for shipments- Legal validity of penalty imposed- Efforts made to realize outstanding export proceeds- Request for write-off of outstanding dues- Reduction of penaltyAnalysis:The judgment pertains to an appeal against an order dated 27-4-2001 in adjudication proceedings before the Assistant Director, Enforcement Directorate Delhi. The respondents were found guilty of contravening sections 18(2) and (3) read with sections 68(1) and (2) of the Foreign Exchange Regulations Act and were each imposed with a penalty of Rs. 70,000. The charge was related to the failure to realize export proceeds for shipments of garments exported to Germany in 1991. The appeal challenged the legality of the orders and questioned the maintainability of the findings and penalty imposed.The main issue for decision was whether the findings and penalty against the appellant were maintainable. The appellant argued that no statutory mandate was violated, and all outstanding export proceeds were realized during the adjudication proceedings. The appellant contended that they had made reasonable efforts to realize the export proceeds, attributing fault to Canara Bank for delays. However, the records revealed that the appellant did not submit any defense in response to the show-cause notice or make efforts to seek an extension of time for realization of proceeds.The appellant further relied on a letter from Canara Bank regarding permission to write off outstanding dues. The appellant claimed that delays by the bank hindered their ability to establish efforts to realize the proceeds. The tribunal found this argument unsubstantiated, noting that the request for write-off was made long after the impugned orders were delivered. The tribunal upheld the impugned findings, emphasizing the lack of evidence of reasonable efforts by the appellant to realize outstanding export proceeds.Regarding the penalty, the tribunal considered the subsequent write-off of part of the export proceeds and partial realization of outstanding dues after the adjudication proceedings. Acknowledging the efforts made by the appellant to rectify the situation, the tribunal reduced the penalty imposed on each appellant to Rs. 20,000. The appellants were directed to deposit the modified penalty before the Directorate of Enforcement within 10 days. The appeal was partly allowed, and the order of penalty was modified accordingly.