1997 (12) TMI 672 - AT - FEMA

Tribunal Upholds Violation of Foreign Exchange Regulation Act, Reduces Penalty from Rs. 1.5 Crores to Rs. 1 Crore.

The Tribunal partly allowed the appeal, affirming the contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973, while reducing the ... - Issues:1. Penalty imposed for contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973.2. Violation of principles of natural justice in the adjudication proceedings.3. Failure to realize the proceeds of exports made under 22 GRI forms.4. Efforts made by the appellant to realize outstanding export proceeds.5. Plea for substantial reduction of penalty amount.Analysis:1. The appeal was filed against the imposition of a penalty of Rs. 1.5 crores on the appellant for contravening section 18(2) of the Foreign Exchange Regulation Act, 1973. The appellant sought a waiver of the pre-deposit requirement, emphasizing his inability to pay the penalty amount upfront. The Tribunal decided to waive the pre-deposit and proceeded with the appeal hearing directly, ultimately disposing of the appeal.2. The appellant contended that the adjudication order violated the principles of natural justice by not providing a reasonable opportunity to be heard. However, the Tribunal found this argument baseless, noting that the appellant had been given ample opportunity to present his case and defend himself during the adjudication proceedings. The Tribunal thoroughly reviewed the evidence and submissions before concluding that the appellant had been afforded due process.3. It was established that the appellant failed to realize the proceeds of exports made under 22 GRI forms, amounting to Rs. 5,58,93,761. The appellant only managed to realize a small portion of the export value, with the bulk amount remaining outstanding. The Tribunal noted the regulatory requirement for exporters to realize the full export value within a specified period, which the appellant had not complied with. The absence of any extension granted by the RBI further strengthened the presumption of contravention under section 18(2).4. The appellant attempted to rebut the presumption by providing evidence of efforts made to recover the outstanding export proceeds. However, the Tribunal concurred with the Adjudicating Officer's findings that the appellant's efforts were insufficient to demonstrate reasonable steps taken to recover the outstanding payments effectively. The Tribunal emphasized the necessity for exporters to take prudent and effective measures to secure payment for exported goods, which the appellant failed to establish convincingly.5. The appellant pleaded for a substantial reduction in the penalty amount, citing significant losses suffered due to the exports in question. While acknowledging the appellant's circumstances, the Tribunal highlighted that mere lack of negligence in realizing outstanding amounts was not sufficient to avoid liability. The Tribunal considered various factors, including the appellant's efforts, the buyer's liquidation, and the overall circumstances, before deciding to reduce the penalty from Rs. 1.5 crores to Rs. 1 crore to balance justice and the appellant's situation.6. Consequently, the appeal was partly allowed, affirming the contravention of section 18(2) while reducing the penalty amount to Rs. 1 crore. The appellant was granted 45 days to pay the reduced penalty, failing which the respondent could recover the amount through legal means as per the impugned order.