TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 183
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.... had dismissed the above Writ Petitions. 4. Before the Writ Court, the respective Appellants who are the Managing Director of the Exporter and the Exporter had challenged the order of the 1st Respondent Appellate Tribunal passed under the provisions of the Foreign Exchange Regulation Act, 1973 whereby, the order of the 2nd Respondent Special Director of Enforcement, Enforcement Directorate, New Delhi dated 25.11.2003 in Order No. SDE (SSB) IV/58/2003 was affirmed. 5. They had also prayed for a consequential direction to the 3rd Respondent, namely, Reserve Bank of India to pass orders on their application dated 06.11.2003 for write-off of unrealised export proceeds. 6. The brief facts of the case are that the Appellant in W.A.No. 57 of 2023, exported consignments of goods to various countries. However, a part of the export proceeds for a sum of Rs. 1,09,74,431.20/- on the exports made was not recovered by the said appellant. Details of the export made and the shortfall/deficit in recovering the export proceeds are below:- Year Value of Exported Goods (In Rs. ) Amount Realized (In Rs. ) Amount to be realized (In Rs. ) 1991-1992 3,88,87,315.00 3,51,18,419.00 37,68,896.00 1....
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....4-1995 for a sum of Rs. 13,70,66,219.00/- and a sum of Rs. 12,60,91,787.80/- was realized, leaving balance of Rs. 1,09,74,431.20/- which could not be recovered despite best of the efforts of the Appellants. 14. It is the case of the Appellants/Exporters that the proceedings under the provisions of the Foreign Exchange Regulation Act, 1973 was without jurisdiction as the short fall was below 10% which ought to have been considered by the 1st and 2nd Respondents and that the Appellants had also requested the Reserve Bank of India to write-off of the unrealised amount for the aforesaid sum as per the AP (DIR Series) Circular No.61 dated 14.12.2002, which has not been considered by the Reserve Bank of India. 15. It is submitted that despite efforts taken to realize the aforesaid export proceeds, the Appellants/Exporters were unable to realize the same and that the Show Cause Notice was issued in respect of the exports made during 1991- 1992 to 1994-1995 as detailed below:- Year Value of Exported Goods (In Rs. ) Amount Realized (In Rs. ) Amount to be realized (In Rs. ) 1989-1990 1,12,32,733.00 1,12,32,733.00 Nil 1990-1991 4,62,00,125.00 4,62,00,125.00 Nil 1991-1992 3,88,....
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....nder years, which is available in a year cumulatively. Accordingly average realisations of the firm comes to Rs. 2.71 crores and 5% of which is Rs. 13.56 lacs and for seven years it works out to Rs. 94.95 lacs. Though the exporter has requested for writing off Rs. 1,06,06,696.00, a little more of Rs. 11,06,696, than the ceiling fixed by the Circular, we recommend that the unrealized export bills as detailed in the annexure may be permitted to be written of as a special case in view of the all out efforts taken by the Managing director to realize the outstandings and the age of the transactions. Moreover the Managing Director had sincerely refunded the export incentives availed to the Customs and had produced documentary evidence for the same. 19. Thus, it is submitted that the order that was passed by the 2nd Respondent, Special Director of Enforcement, Enforcement Directorate, New Delhi on 25.11.2003, against the respective Appellants/Exporters was unsustainable seeking to levy a penalty of Rs. 8,00,000/- and Rs. 2,00,000/- respectively on the respective Appellants/Exporters. 20. Learned counsel for the Appellants placed reliance on a recent decision of the Hon'ble Supreme....
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....e order of the 1st Respondent Appellate Tribunal. 25. That apart, it is submitted that there are no documents produced by the Appellants/Exporters to show that they have taken effective steps under Section 18 of the Foreign Exchange Regulation Act, 1973 and therefore penalty under Section 50 of the Foreign Exchange Regulation Act, 1973 was correctly awarded by the 2nd Respondent Special Director of Enforcement, Enforcement Directorate, New Delhi. 26. It is submitted that as per Section 18(3) of the Foreign Exchange Regulation Act, 1973, where in relation to any goods to which a notification under Clause (a) of Sub-Section (1) applies, the prescribed period has expired and payment thereof has not been made as aforesaid, it shall be presumed, unless the contrary is proved by the person who has sold or is entitled to sell the goods or to procure the sale thereof, that such person has not taken all reasonable steps to receive or recover the payment for the goods as aforesaid and he shall accordingly be presumed to have contravened the provisions of Sub-Section (2). 27. It is submitted that there are no indication that any meaningful steps have been taken by the Appellants/Exporters ....
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....ndments which was shown to be desirable in the interests of clarity and effectiveness, and also certain additions such as the section relating to the import of currency and gold and the control over the proceeds of exports which are essentially exchange control matters, although administered by collectors of Customs for practical convenience. 34. The provisions of the Foreign Exchange Regulation Act,1947 was drafted in such a manner that a degree of restriction on foreign exchange transactions could be relaxed or increased by executive orders, either generally or for particular foreign currencies, in accordance with the needs of trade and finance or international agreements thus ensuring that flights of capital or wild speculation, which proved so injurious to foreign trade in the period between the two wars, can be immediately controlled. 35. When Foreign Exchange Regulation Act, 1947 was enacted, it was hoped that the world trade and economic conditions would stabilise themselves after the initial post-war period, which was however not fulfilled. The country still continued to be short of foreign exchange and therfore it was fully necessary to ensure that foreign exchange resou....
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.... in as much as they have failed to realize the export proceeds for value of Rs. 1,09,74,431.20/-. 42. As per Section 50 of the Foreign Exchange Regulation Act, 1973, a person contravening the provisions of the Act or any rule, direction or order made thereunder shall be liable to such penalty not exceeding five times of the amount of the value involved in any such contravention or five thousand rupees, whichever is more. 43. However, penalty under Section 50 of the Act is not applicable for contraventions of Section 13, Section18(1)(a), Section 18A and Section 19(1)(a) of Foreign Exchange Regulation Act, 1973. For the sake of convenience, Section 18(2) and Section 50 of the Foreign Exchange Regulation Act, 1973 are reproduced below:- Section 18(2) Section 50. Penalty Where any export of goods, to which a notification under clause (a) of subsection (1) applies, has been made, no person shall, except with the permission of the Reserve Bank, do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing- (A) in a case falling under sub-clause (i) or sub-clause (ii) of clause (a) of sub-section (1),- (a) that payment for the good....
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.... of clarity, Sections 18 (1)(a) of the Foreign Exchange Regulation Act, 1973 is reproduced below:- Section 18. Payment for exported goods:- (1)(a) The Central Government may, by notification in the Official Gazette, prohibit the taking or sending out by land, sea or air (hereinafter in this Section referred to as export) of all goods or of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing- (i) the full export value of the goods; or (ii) if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) has been, or will within the prescribed period be, paid in the pre....
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....(2) shall be instituted, unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period. 49. As per Section 18(2) of the Foreign Exchange Regulation Act, 1973, no person shall, except with the permission of the Reserve Bank, do or refrain from doing anything, or take or refrain from taking any action in relation to goods in respect of any notification under Section 18(1)(a) Foreign Exchange Regulation Act, 1973 has been issued, which has the effect of securing:- Part A B Clause (for securing) (a) the payment for the goods i. is made otherwise than in a prescribed manner, or ii. is delayed bayond the period prescribed under Sub-Section (1)(a) (b) the procceds of sale of the goods exported do not represent the full export value of the goods subject to such deductions, if any, as may be allowed by the Reserve Bank. the sale of goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade. in a case falling under 18(1)(a)(i) 18(1)(a)(ii) 18(1)(a)(i) 18(1)(a)(ii) 18(1)(a)(ii) 50. However, Section 18(2) cannot be read....
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....r which "write-offs" were permitted by their bankers. 3. With a view to ensuring that exporters invariably surrender the export incentives in respect of export bills for which they seek "write-off", authorised dealers should obtain document/s evidencing surrender of export incentives availed of before permitting "write-off" for the relevant outstanding bills. 4. The authorised dealers are advised to put in a place a system under which their internal inspectors or auditors (including external auditors appointed by authorised dealers) should carry out random sample check/percentage check of "write-off" outstanding export bills. 5. The authorised dealers may please note that the terms and conditions stipulated in the circulars referred to above remain unchanged. 6. Authorised dealers may bring the contents of the circular to the notice of their constituents concerned. 7. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the FEMA, 1999 (42 of 1999)." 54. As per the above Circular, authorised dealers were granted powers to permit "write-off" annually upto 5% of average annual realisation to status holder exporters subject to c....
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....n Chamber of Commerce or similar Organization; (v) The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding and turned out to be unrealizable despite all efforts made by the exporter; (vi) The cost of resorting to legal action would be disproportionate to the unrealized amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control; (vii) Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amount has remained unrealized consequent on dishonour of the bills by the overseas buyer and there are no prospects of realization. (d) The exporter has surrendered proportionate export incentives (for the cases not covered under A. P. (DIR. Series) Circular No.03 dated July 22, 2010), if any, availed of in respect of the relative shipments. The AD Category - I banks should obtain documents evidencing surrender of export incentives availed of before permitting the relevant bills to be written....