Export proceeds penalty unsustainable after recovery efforts, settlement, and record errors undermined the adverse inference.

Penalty for non-realisation of export proceeds was found unsustainable where the exporter had taken recovery steps through personal efforts, the Indian Consulate, and proceedings in the United States, and a settlement of the outstanding proceeds had been reached. The connected adjudication had already accepted that the responsibility for realisation had been discharged and had dropped proceedings on that basis. The impugned order also relied on an incorrect date for the relevant GRI, leading to an adverse inference of inaction unsupported by the record. On these facts, the penalty under the Foreign Exchange Regulation Act could not be maintained and was set aside for the firm and its partners.

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Issues: Whether the penalty imposed for non-realisation of export proceeds under section 18(2) of the Foreign Exchange Regulation Act, 1973, and the consequential penalty on the partners under section 68(1) of that Act, could be sustained in view of the later settlement and the steps taken for recovery.

Analysis: The record showed that the exporter had pursued recovery through personal efforts, the Indian Consulate, and court proceedings in the United States, resulting in a settlement for the outstanding export proceeds. The adjudication in the connected matter had already accepted these efforts, recorded that the settlement had been concluded, and dropped proceedings after noting that the responsibility for realisation of the export proceeds had been discharged. The impugned order was also found to have proceeded on an incorrect date for the relevant GRI, which led to an adverse inference about inaction that was not supported by the record. In these circumstances, the penalty order could not be sustained.

Conclusion: The penalty order was unsustainable and was set aside; the appeal succeeded for the appellant-firm and its partners.

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