2001 (6) TMI 838 - AT - FEMA

Appeal Successful: Penalty on Firm Overturned After Proving Compliance Efforts Under Foreign Exchange Regulation Act.

The appeal was allowed, and the penalty imposed on the appellants' firm was set aside. The Chairperson concluded that the appellants successfully rebutted ... - Issues:- Imposition of penalty on appellants' firm for non-realisation of export proceeds- Application for dispensation of pre-deposit of penalty amount- Delay in receiving export proceeds due to financial crunch faced by buyer- Appellants' submission of entire export proceeds being received belatedly- Lack of mention of act or omission leading to non-realisation in impugned order- Interpretation of sections 18(2) and 18(3) of the Foreign Exchange Regulation ActAnalysis:1. The appeal challenged the penalty imposed on the appellants' firm for not realizing export proceeds within the extended time limit set by the Reserve Bank of India, citing contravention of sections 18(2) and 18(3) of the Foreign Exchange Regulation Act. An application was made for dispensation of pre-deposit of the penalty amount due to financial constraints.2. Upon review, it was found that the entire export proceeds were eventually received by the appellants' firm between August 2000 and April 2001. Considering the financial position of the appellants and the full realization of export proceeds, pre-deposit of the penalty amount was deemed likely to cause undue hardship and was thus dispensed with.3. The delay in receiving export proceeds was attributed to the buyer's financial difficulties and adverse market conditions. The appellants reached a settlement with the buyer, receiving promissory notes totaling US $52,000. Despite delays, efforts were made to recover the remaining amount, with extensions granted by the RBI up to December 2000 and subsequently to March 2001.4. The appellants argued that the impugned order did not address any specific act or omission on their part contributing to the delay in realizing export proceeds. They contended that since the entire proceeds were eventually received, the charge of non-realization should not stand, especially as they had applied for an extension of time.5. The respondent highlighted that the appellants had undertaken to realize export proceeds within a specified period, which was not met due to payment delays from the buyer. While acknowledging the delay, the respondent failed to pinpoint any specific actions or omissions by the appellants leading to the non-realization within the stipulated time frame.6. The Chairperson analyzed the provisions of sections 18(2) and 18(3) of the Act, emphasizing that non-realization of export proceeds alone does not constitute a contravention. Section 18(2) requires actions securing payment to be taken within the prescribed period, while section 18(3) establishes a presumption of non-compliance unless proven otherwise. The Chairperson noted the appellants' efforts to recover the proceeds, extensions granted by the RBI, and eventual full realization, indicating a successful rebuttal of the presumption.7. Ultimately, the appeal was allowed, and the order imposing the penalty was set aside. The decision was based on the appellants' successful rebuttal of the presumption of non-compliance with the provisions of the Act, given the circumstances surrounding the delay in realizing export proceeds and the subsequent full realization thereof.