Penalty for export proceeds non-realisation reduced where write-off and control issues explained part of the default; knowing participation not proved.

Penalty for non-realisation of export proceeds may be reduced where part of the outstanding amount is covered by RBI write-off permission, later realised, or attributable to disputes and other circumstances beyond the exporter's control, but incomplete diligence can still leave residual liability. On the facts, the first exporter was not fully exonerated and its penalty was reduced. A penalty on a second person as one knowingly concerned requires evidence of deliberate participation in the contravention; absent such evidence, the penalty could not stand and was set aside.

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Issues: (i) Whether the first appellant remained liable to penalty for non-realisation of export proceeds where substantial portions of the outstanding amounts had been written off, realised, or were shown to be beyond the appellant's control; (ii) Whether the penalty imposed on the second appellant could be sustained under the provision dealing with contravention by persons knowingly concerned.

Issue (i): Whether the first appellant remained liable to penalty for non-realisation of export proceeds where substantial portions of the outstanding amounts had been written off, realised, or were shown to be beyond the appellant's control.

Analysis: The outstanding export proceeds in respect of most of the GRIs stood covered by RBI permission for write-off, subsequent write-off permission, or later realisation. The delay in recovery of some amounts was explained by disputes with the foreign buyer and other circumstances not attributable to the appellant. However, for the remaining shipments, the explanation was not fully satisfactory and the record did not establish complete diligence in pursuing recovery in every instance.

Conclusion: The first appellant was not fully exonerated. The penalty was reduced, and the first appellant succeeded only in part.

Issue (ii): Whether the penalty imposed on the second appellant could be sustained under the provision dealing with contravention by persons knowingly concerned.

Analysis: No evidence was shown that the second appellant had knowingly acted in a manner causing the non-realisation of export proceeds. The material on record did not justify fastening penalty on that basis.

Conclusion: The penalty on the second appellant could not be sustained and was set aside.

Final Conclusion: The appeal was partly allowed, resulting in reduction of the first appellant's penalty and complete relief to the second appellant.

Ratio Decidendi: Penalty for non-realisation of export proceeds may be reduced where substantial non-realisation is explained by write-off, realisation, or circumstances beyond the exporter's control, but liability cannot be sustained without adequate evidence of deliberate or knowing participation by the person penalised.

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