FEMA repatriation liability: overseas buyer-paid commission not treated as exporter's export value; penalty set aside.

Proceedings under FEMA were held not to be barred merely because the same transactions had earlier been the subject of a customs settlement order, as FEMA enforcement could proceed on its own evidentiary basis. Commission paid by an overseas buyer directly to an overseas agent was held not to form part of the Indian exporter's export value where the exporter had no proven legal entitlement to that sum and no obligation to remit it; the amount was therefore not required to be repatriated. In light of that finding, and because the key witness evidence was unreliable and one charge had already been dropped, the penalty order could not stand and was set aside.

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Issues: (i) Whether proceedings under FEMA were barred by the settlement order under the Customs Act. (ii) Whether commission paid by the overseas buyer to the overseas agent formed part of the export value requiring repatriation under FEMA. (iii) Whether the penalty imposed for alleged contravention of the export declaration and repatriation requirements could be sustained.

Issue (i): Whether proceedings under FEMA were barred by the settlement order under the Customs Act.

Analysis: The settlement order under the Customs Act did not exclude independent action under FEMA. The Tribunal held that the enforcement authority could proceed on the basis of evidence gathered in the FEMA investigation and was not barred merely because the same underlying transactions had earlier been the subject of customs settlement proceedings.

Conclusion: The bar under the Customs settlement order did not prevent FEMA proceedings; the issue was decided against the appellants.

Issue (ii): Whether commission paid by the overseas buyer to the overseas agent formed part of the export value requiring repatriation under FEMA.

Analysis: The Tribunal found that the appellants had not paid the commission, the relevant witness lacked personal knowledge of the earlier export transactions, and the statement relied upon was hearsay. It further held that the commission paid directly by the foreign buyer to the foreign agent was not shown to be an amount due or accrued to the appellants, and therefore did not amount to foreign exchange required to be repatriated by them. The Tribunal also accepted that the Master Circular governing exporter-paid agency commission did not fit the factual situation where the exporter had not made the payment.

Conclusion: The commission amount was not required to be repatriated by the appellants; this issue was decided in favour of the appellants.

Issue (iii): Whether the penalty imposed for alleged contravention of the export declaration and repatriation requirements could be sustained.

Analysis: In view of the absence of any liability on the appellants to remit the foreign buyer-paid commission, and in light of the finding that the key witness statement was not reliable for the relevant period, the foundation for the first charge failed. The Tribunal also noted that the second charge had already been dropped by the adjudicating authority. On the material before it, the impugned penalty order could not stand.

Conclusion: The penalty was unsustainable and the issue was decided in favour of the appellants.

Final Conclusion: The impugned penalty order was set aside and the appeals succeeded, with consequential return of pre-deposit, if any.

Ratio Decidendi: A sum paid by an overseas buyer directly to an overseas agent does not become an amount due or accrued to the Indian exporter for the purpose of FEMA unless the exporter is shown to have a legal entitlement to that sum or a proved obligation to remit it; proceedings under FEMA may also proceed independently on their own evidentiary basis notwithstanding prior customs settlement.

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