Export proceeds realisation and pending write-off request made penalty unsustainable and adjudication premature

Credible bank evidence showing that export proceeds had already been realised before the adjudication order made the penalty for contravention of the export-realisation provisions unsustainable on that part of the demand, because the department had to establish that the proceeds remained outstanding. The adjudication was also premature where recovery efforts had been taken and a write-off request before the Reserve Bank of India was still pending, since no final refusal had been made and no contravention would arise if write-off were granted. The impugned penalty order was therefore set aside, leaving scope for fresh proceedings if write-off was later refused.

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Issues: (i) Whether the penalty for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 could stand when the outstanding export proceeds had already been realised before the adjudication order and the bank certificate showing realisation was on record. (ii) Whether the adjudication was premature in view of the pending request before the Reserve Bank of India for write-off of the outstanding export proceeds and the steps taken for recovery.

Issue (i): Whether the penalty for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 could stand when the outstanding export proceeds had already been realised before the adjudication order and the bank certificate showing realisation was on record.

Analysis: The record showed that the appellants had produced material indicating receipt of the outstanding amount, and the bank's certificate specifically certified that the sale proceeds of the relevant GR had been received on 2-2-1996. The impugned order was passed much later, on 2-5-1997, yet the adjudicating authority proceeded on the ground that a duly issued certificate from the bank was absent. The bank certificate constituted evidence of realisation, whereas a mere communication from the bank to the department was only informational. The department was required to establish by evidence that export proceeds remained outstanding, and the authority ought to have enquired with the bank before sustaining the charge.

Conclusion: The penalty could not be sustained to the extent it was based on the already realised amount, and the finding of contravention on that footing was unsustainable.

Issue (ii): Whether the adjudication was premature in view of the pending request before the Reserve Bank of India for write-off of the outstanding export proceeds and the steps taken for recovery.

Analysis: The appellants had taken several recovery steps, including direct correspondence with the foreign buyer, intervention through the Indian Embassy, and assistance from the bank and exporters' association. The pending write-off request before the Reserve Bank of India had not been rejected, and the record indicated that the matter was still under consideration. The Tribunal treated the recovery efforts as reasonably sufficient and noted that if write-off were granted, no contravention of section 18(2) would arise. In those circumstances, proceeding with adjudication without awaiting the Reserve Bank's decision was considered premature.

Conclusion: The adjudication was premature and the matter had to await the Reserve Bank of India's decision on write-off.

Final Conclusion: The impugned penalty order was set aside and the appeal succeeded, leaving the respondent free to initiate fresh proceedings if the write-off request was ultimately refused.

Ratio Decidendi: Where export proceeds are shown by credible bank evidence to have been realised before the adjudication order, and a write-off request regarding the remaining amount is still pending before the Reserve Bank of India, a penalty for contravention of the export-realisation provisions cannot be sustained on a premature adjudication basis.

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