Non-realisation of export proceeds upheld as contravention, but penalty reduced where deliberate retention was not proved.

Non-realisation of export proceeds was treated as a contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973 because mere correspondence with the foreign buyer, requests for extension, and later attempts to seek write-off did not amount to effective recovery steps; the finding of contravention was therefore upheld. Penalty, however, was assessed by reference to the surrounding facts and degree of culpability: where deliberate retention of proceeds was not shown and the exporter had already suffered loss and sought regularisation, the original penalty was found excessive and reduced to Rs. 50,000.

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Issues: (i) whether the finding of contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973 for non-realisation of export proceeds called for interference; (ii) whether the penalty imposed for such contravention was liable to be reduced.

Issue (i): whether the finding of contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973 for non-realisation of export proceeds called for interference.

Analysis: The export proceeds in respect of the goods covered by the relevant GRs had remained unrealised. The attempts made by the appellant, including correspondence with the foreign buyer, seeking extension of time, and later seeking permission to write off the amount, were held not to amount to effective steps for recovery. A prudent exporter was expected to insist on re-importation of the goods or to take steps to secure the goods and locate an alternative buyer when the original buyer was unable to pay.

Conclusion: The finding of contravention was upheld and was not interfered with.

Issue (ii): whether the penalty imposed for such contravention was liable to be reduced.

Analysis: In determining penalty, the relevant considerations were the facts and circumstances of the case and the degree of culpability. The appellant had not been shown to have deliberately retained the export proceeds outside the country, had already suffered loss on the transaction, and had taken steps such as refunding assistance and seeking regularisation from the Reserve Bank of India. On that basis, the original penalty was found to be excessive.

Conclusion: The penalty was reduced to Rs. 50,000.

Final Conclusion: The appeal succeeded only to the extent of reduction of penalty, while the finding of contravention was maintained.

Ratio Decidendi: In proceedings for non-realisation of export proceeds, the existence of some correspondence or requests for extension does not, by itself, amount to effective compliance; however, penalty must be calibrated to the degree of culpability and the surrounding circumstances, and may be reduced where deliberate retention of proceeds is not established.

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