Procedural unfairness and proportionality in foreign exchange penalty matters can justify substantial reduction where import proof is partly established.

In adjudication under SAFEMA, inadequate proof of effective service and a hearing conducted ex parte without proper verification of the company's current address were treated as procedural unfairness affecting the penalty order. The record also showed that import proof was available for a substantial part of the foreign exchange remittances, leaving only limited remittances unsupported. On that basis, the alleged contravention was considered overstated and the penalty was reduced as disproportionate rather than maintained in its original quantum. The matter illustrates that where the evidentiary breach is limited and procedural fairness is deficient, penalty relief may be granted on proportionality grounds.

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Issues: (i) Whether the penalty order suffered from procedural unfairness for want of effective service and opportunity of hearing; (ii) whether the appellant established import of goods against a substantial part of the foreign exchange remittances, so that the penalty required reduction.

Issue (i): Whether the penalty order suffered from procedural unfairness for want of effective service and opportunity of hearing.

Analysis: The notice and hearing material did not clearly show effective service, and the proceedings were proceeded with ex parte without adequate verification of the company's status and current address. The record also indicated haste in completing the adjudication, and the remand was not considered necessary in view of the age of the matter.

Conclusion: The procedural challenge warranted relief to the extent that the penalty could not be sustained in the original quantum.

Issue (ii): Whether the appellant established import of goods against a substantial part of the foreign exchange remittances, so that the penalty required reduction.

Analysis: On the material produced, import proof was found for some remittances, while only two remittances remained unsupported. The alleged total contravention was therefore materially overstated in the impugned order, and the breach was treated as limited in extent and essentially procedural in character. In those circumstances, a drastic penalty was considered disproportionate.

Conclusion: The penalty was reduced to Rs. 2.5 lakhs and the impugned order was modified accordingly.

Final Conclusion: The appeal succeeded only to the extent of substantial reduction in the penalty, while the finding of contravention was not wholly set aside.

Ratio Decidendi: Where the evidence shows that only a limited part of the alleged foreign exchange remittance remains unsupported by import proof, and the adjudication is ex parte with inadequate procedural fairness, the penalty may be reduced on proportionality rather than remanded after long delay.

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