2000 (3) TMI 1127 - AT - FEMA

Issues Involved:
1. Failure to realize export proceeds.
2. Short-shipment and destruction of goods.
3. Admissibility of evidence.
4. Burden of proof on the department.
5. Efforts made by the appellants to realize payments.
6. Wilful negligence and liability of the Managing Director.
7. Quantum of penalty.

Detailed Analysis:

1. Failure to Realize Export Proceeds:
The appellant-company was penalized for failing to realize export proceeds amounting to US $13,01,477.52 for 31 GRIs as per the adjudication order dated 5-10-1990. The appellants contended that the actual amount was US $12,03,005.14 and provided evidence of short-shipment and partial realization, reducing the balance to US $9,17,969.32. They argued that goods worth US $5,81,985.59 were destroyed by Dubai municipal health authorities, leaving an outstanding balance of US $3,10,752.35.

2. Short-shipment and Destruction of Goods:
The appellants provided documentary evidence of short-shipment notices from Customs Authorities and destruction certificates from Dubai municipal health authorities. The Adjudicating Officer verified the short-shipment notices and part realization but questioned the authenticity of the destruction certificates, concluding they were not official certificates issued by Dubai municipality.

3. Admissibility of Evidence:
The appellants argued that the Adjudicating Officer made inquiries behind their back and relied on inadmissible evidence, violating principles of natural justice. The Board agreed, noting that the evidence of destruction provided by the appellants was contemporaneous and not controverted by any admissible evidence from the department.

4. Burden of Proof on the Department:
The Board emphasized that the burden of proof lies on the department to establish contravention of section 18(2) by proving that the goods were cleared by the foreign buyer, creating an obligation to realize payment. The department failed to investigate and bring crucial evidence on record, such as the negotiation of documents from the bank.

5. Efforts Made by the Appellants to Realize Payments:
The appellants demonstrated that they made bona fide efforts to realize payments, including personal visits abroad and continuous correspondence with the foreign buyer. They argued that the non-realization was due to factors beyond their control, such as the destruction of goods and short-shipment.

6. Wilful Negligence and Liability of the Managing Director:
The Board found no evidence of wilful negligence or deliberate attempt by the Managing Director, K.S. Abdullah, to retain the outstanding amount abroad. The penalty imposed on him under section 68(1) was set aside, as there was no personal interest or company interest in retaining the amount outside India.

7. Quantum of Penalty:
Considering the mitigating circumstances, including the appellants' efforts to realize payments and the substantial losses incurred, the Board concluded that the penalty imposed by the Adjudicating Officer was excessive. The penalty on the appellant-company was reduced to Rs. 2,50,000, reflecting a token penalty rather than a deterrent one.

Conclusion:
The appeal by K.S. Abdullah was allowed, and the penalty against him was set aside. The appeal by the appellant-company was partly allowed, with the contravention amount restricted to US $3,10,752.35 and the penalty reduced to Rs. 2,50,000. The appellants were given 45 days to pay the penalty, failing which the respondents could recover the amount in accordance with law.

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