1997 (11) TMI 553 - AT - FEMA

Summary

Issues:
1. Imposition of penalty under the Foreign Exchange Regulation Act, 1973.
2. Waiver of pre-deposit application.
3. Error in imposing penalty on the firm after dissolution.
4. Finding of contravention under section 18(2) and 18(3) of the Act.

Analysis:

The judgment by the Appellate Tribunal of the Foreign Exchange Regulation Appellate Board pertains to an appeal against an Adjudication Order imposing a penalty under the Foreign Exchange Regulation Act, 1973. The appellant, a partner of a firm, was penalized for contravention of sections 18(2) and 18(3) of the Act for failing to receive the full value of exports made under specific GRI forms. The penalty was challenged, and a waiver of pre-deposit was requested, citing that the Reserve Bank of India (RBI) had granted a write-off for the outstanding export amount. The Tribunal decided to waive the pre-deposit requirement and proceed to hear the case on its merits, ultimately disposing of the appeal.

The Tribunal noted an error in the imposition of the penalty on the firm, which had dissolved following the death of a partner. The penalty should have been imposed solely on the appellant, who had become the sole proprietor of the business. The penalty on the appellant was also questioned as he was penalized as a partner of the firm, although he had become the sole proprietor. These legal infirmities were highlighted, leading to the conclusion that the penalty imposition was flawed.

Regarding the finding of contravention under section 18(2) of the Act, the Tribunal analyzed the essential elements required to prove such contravention. It was established that the RBI's permission was necessary for non-receipt of export proceeds and that proceedings under the Act were premature if an application for waiver was pending RBI's consideration. The Tribunal criticized the Adjudicating Officer's conclusion that RBI had not granted write-off permission, citing correspondence between the appellant's bank and RBI as evidence of the ongoing consideration. Ultimately, since RBI had granted the write-off, the finding of contravention under section 18(2) was deemed invalid, leading to the setting aside of the penalties imposed.

In conclusion, the appeal was allowed, and the impugned order imposing penalties was set aside based on the errors in penalty imposition and the flawed finding of contravention under the Act.