Export realisation failure upheld for the firm, while individual penalties on sleeping partners were set aside.
Unrealised export proceeds attracted a sustained finding of contravention under section 18(2) of the Foreign Exchange Regulation Act, 1973, because limited correspondence, no effective recovery efforts after 1990, and an incomplete remittance certificate did not rebut the presumption that the exporter failed to take effective steps to realise the dues. The penalty on the firm was therefore maintained. Individual penalties on the non-managing partners were not sustained, because the record showed the managing partner alone handled business dealings and correspondence, while separate liability for the sleeping partners was not established on the same factual or legal basis. Their penalties were set aside.
Issues: (i) Whether the appellant-firm had contravened section 18(2) of the Foreign Exchange Regulation Act, 1973 by failing to realise the export proceeds and whether the penalty on the firm was sustainable; (ii) Whether the partners other than the managing partner could be independently penalised as partners in the facts of the case.
Issue (i): Whether the appellant-firm had contravened section 18(2) of the Foreign Exchange Regulation Act, 1973 by failing to realise the export proceeds and whether the penalty on the firm was sustainable.
Analysis: The record showed only limited correspondence with the foreign buyer and no effective pursuit of recovery after 1990. The alleged remittance certificate did not identify the relevant GRI number and did not establish recovery of the disputed export proceeds. The partial payment, even if accepted, did not wipe out the outstanding export realisation. The presumption that the exporter failed to take effective steps for recovery was not rebutted by positive evidence.
Conclusion: The finding of contravention against the appellant-firm was sustained and the appeal by the firm was dismissed.
Issue (ii): Whether the partners other than the managing partner could be independently penalised as partners in the facts of the case.
Analysis: The materials on record supported the position that one appellant had acted as the managing partner and had conducted the correspondence and business dealings on behalf of the firm. The other appellants were shown to be sleeping partners, and the basis for imposing individual penalties on them was not established on the same footing as the managing partner. In the absence of a basis to fasten separate liability on them, the penalties could not stand.
Conclusion: The penalties on the other partners were set aside and their appeals were allowed.
Final Conclusion: The decision upheld the penalty against the firm and the managing partner, while relieving the other partners of individual liability and setting aside their penalties.
Ratio Decidendi: In export-realisation matters, a presumption of failure to take effective recovery steps arises when proceeds remain unrealised, and individual partner liability cannot be sustained without a clear legal and factual basis distinguishing the managing partner from other partners.
TaxTMI 
AI Drafter ✕
TaxTMI 
