Importer's failure to prove imports and absence of due diligence sustained FEMA liability, though penalty was reduced.

An importer who, after notice, failed to furnish or preserve documentary proof of import was held liable to adverse inference and penalty under the FEMA framework and RBI directions, because the duty to produce evidence of import rested on the importer and not merely on the authorised dealer. Liability under Section 42 was also upheld against the person responsible for the company's business during the contravention period, as the managing director produced no proof of due diligence. The Tribunal sustained the findings of contravention and responsible-person liability, but reduced the penalty on proportionality grounds.

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Issues: Whether the appellants had contravened the requirement to furnish documentary evidence of import in respect of the remittances and whether the penalty imposed on the company and its managing director called for interference.

Analysis: The Appellate Tribunal held that the appellants had been put on notice in 2002 and had failed to complete their response or produce alternative material to show that the relevant imports were actually made. The plea of delay and laches was rejected because the appellants had knowledge of the enquiry and still did not preserve or produce the necessary documents. The requirement under the FEMA framework and the RBI directions was treated as casting a duty on the importer to furnish evidence of import to the authorised dealer, while the authorised dealer was only required to follow up and report. The Tribunal also held that Section 42 of FEMA fastens liability on persons responsible for the conduct of the company's business during the period of contravention, and the managing director could not avoid responsibility in the absence of proof of due diligence.

Conclusion: The contravention and the liability of both appellants were upheld, but the quantum of penalty was found to be excessive and was reduced.

Final Conclusion: The appeals succeeded only to the extent of reduction of penalty, while the findings of contravention and responsible-person liability were maintained.

Ratio Decidendi: In proceedings under FEMA, an importer who is put on notice must furnish or preserve documentary proof of import, and failure to do so justifies adverse inference and penalty; persons responsible for the company's conduct are liable under Section 42 unless due diligence is shown, though the penalty may be reduced on proportionality grounds.

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