2001 (7) TMI 1338 - AT - FEMA

Summary

Issues:
1. Imposition of penalty for contravention of Foreign Exchange Regulation Act.
2. Dispensation of pre-deposit of penalty based on financial inability.
3. Allegations of non-realization of export proceeds and contravention of section 18(2) of the Act.
4. Appellants' contention of taking all reasonable steps for recovery of payment.
5. Statutory presumption under section 18(3) and burden of proof on the appellants.
6. Failure to approach RBI for extension of time or permission to write off unrealized export proceeds.
7. Lack of action on legal notice from shipping agents and failure to repatriate any surplus from auctioned goods.

Analysis:
1. The judgment pertains to an appeal against a penalty imposed for contravening section 18(2) of the Foreign Exchange Regulation Act, involving non-realization of export proceeds totaling Singapore $3 lakh. The appellants sought dispensation of pre-deposit due to financial inability, which was allowed based on the provided particulars. The appeal was proceeded with in the absence of both parties, considering the age of the case and the amount involved not being substantial.

2. The case revolved around the appellants' contract with a Singapore company, export of goods, refusal of buyers to execute trust receipts, and subsequent issues with banks in Singapore. The appellants' defense included a civil suit against the banks and contentions regarding steps taken for recovery. The Adjudicating Authority found the appellants guilty and imposed the penalty, leading to the appeal.

3. The appellants argued that they had taken all reasonable steps for payment recovery, emphasizing correspondence with banks and informing the RBI. However, the Chairperson noted a misunderstanding of the law, highlighting the statutory presumption under section 18(3) where the burden of proof lies with the seller/exporter to show reasonable steps taken for payment realization. The appellants failed to discharge this onus.

4. The judgment referenced a Madras High Court case emphasizing the importance of seeking RBI permission for actions affecting repatriation of export proceeds. The appellants' failure to approach the RBI for extension of time or permission to write off unrealized proceeds was noted as a critical lapse, absolving them from the statutory presumption under the Act.

5. Additionally, the appellants did not act upon a legal notice from shipping agents regarding auctioned goods, failing to investigate the auction outcome or take steps to repatriate any surplus. The Chairperson concluded that the appellants had not taken all reasonable steps required in the circumstances, leading to the dismissal of the appeal.