Foreign exchange contravention for unauthorised export balance adjustment led to reduced penalties on mitigating circumstances.

Adjustment of unpaid export proceeds without prior Reserve Bank of India permission was treated as a contravention of foreign exchange law because the exporter remained obliged to realise the full export value unless authorised adjustment was permitted. The tribunal nevertheless found mitigating circumstances relevant to penalty: the amount involved was small, most export proceeds had been realised, and the conduct was attributed to business exigency rather than deliberate non-compliance. On that basis, the penalty quantum was reduced, and the separate penalty imposed on the managing partner was deleted.

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Issues: Whether the appellant had contravened the foreign exchange law by allowing adjustment of export proceeds without prior permission of the Reserve Bank of India, and whether the penalty imposed required reduction in view of the circumstances.

Analysis: The adjustment of the unpaid export balance was made without obtaining the necessary permission of the Reserve Bank of India, and the obligation under the law was to realise the full export value unless such adjustment was authorised. The contravention was therefore established. However, the amount involved was small, most of the export proceeds had been realised, and the conduct was found to be driven by business considerations rather than any deliberate intention to violate the law. These mitigating factors justified interference with the quantum of penalty.

Conclusion: The contravention was upheld, but the penalties were reduced, and the separate penalty on the managing partner was deleted.

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