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2012 (9) TMI 388 - HC - FEMANon realization of export proceeds - Contravention of provisions of section 18(2) of FERA - penalty imposed on the firm and on each of the partners - Held that - The decision of the Appellate Tribunal that the firm has failed to take reasonable steps for realizing the export proceeds is a finding based on facts that the appellants continued to export despite continuous defaults made by the said party in clearing the outstanding and the importer approached R.B.I., after expiry of about five years thus cannot be faulted. However, looking to the facts that the firm had taken some steps to realize export proceeds though may not be adequate, application for extension of time and to write off the export proceeds was pending consideration before the RBI, part payment was recovered by the firm from the importer, thus this is a fit case for accepting the alternate submission of the assessee that the penalty should be restricted to 35% of the penalty imposed and the amount already paid by the firm may be treated in full and final satisfaction of the penal liability. Penalty on each partner - Held that - The word firm or the firm name is merely a compendious description of all the partners collectively & as the firm acts through its partners both are to be treated as one - as the authority has already imposed separate penalty on the firm & in the absence of lapse/negligence/bonafides on the part of the partners of the firm individually, imposition of penalty on each of the partners is unjustified.
Issues Involved:
1. Whether every non-realization of export proceeds constitutes a violation of Section 18(2) of FERA. 2. Whether the department's failure to aver necessary ingredients of Section 18(2) is sufficient reason for the Show Cause Notice to be set aside. 3. Whether the actions of the firm were sufficient to constitute reasonable steps within Section 18(2) of FERA. 4. Whether the department was correct in issuing the Show Cause Notice when the firm's application for write-off was under consideration by the RBI. Issue-wise Detailed Analysis: 1. Non-realization of Export Proceeds and Violation of Section 18(2) of FERA: The Tribunal upheld the findings of the Special Director, Enforcement Directorate, that the appellants did not take all reasonable steps to receive or recover the payments for the exported goods, thereby contravening Section 18(2) of FERA. The Tribunal noted that the appellants continued to export despite continuous defaults by the importer in clearing the outstanding amounts. The Tribunal also found that the appellants approached the RBI for an extension of time after about five years, which could not be termed as reasonable and effective steps. Thus, the Tribunal concluded that the appellants failed to rebut the presumption under Section 18(3) of FERA. 2. Department's Failure to Aver Necessary Ingredients of Section 18(2): The appellants contended that the Show Cause Notice should be set aside due to the department's failure to aver the necessary ingredients of Section 18(2). However, the Tribunal found that the appellants did not produce adequate evidence to show that they had taken reasonable steps to recover the export proceeds. The Tribunal observed that no material was brought on record to show part payments received from the importer or efforts made to realize overdue export proceeds, except approaching the RBI for an extension of time. 3. Reasonable Steps within Section 18(2) of FERA: The appellants argued that they had taken reasonable steps to recover the outstanding export proceeds, including filing claims with the Official Liquidator and Judicial Administrator in Germany and corresponding with the Reserve Bank of India (RBI) and Bank of Baroda. However, the Tribunal found that the appellants failed to provide documentary evidence of these efforts. The Tribunal noted that the appellants' application for an extension of time and to write off the export proceeds was pending consideration before the RBI, and part payment was recovered from the importer. Despite these steps, the Tribunal concluded that the appellants did not take adequate steps to recover the export proceeds. 4. Issuance of Show Cause Notice during RBI's Consideration of Write-off Application: The appellants contended that the Show Cause Notice was issued while their application for a write-off was under consideration by the RBI. The Tribunal, however, upheld the findings of the Adjudicating Authority that the appellants did not provide sufficient evidence to show that the application was pending with the RBI. The Tribunal also noted that the appellants received part payments from the importer shortly before the importer filed for bankruptcy, which indicated that the appellants did not take timely and effective steps to recover the export proceeds. Judgment: 1. The Tribunal's decision that the firm failed to take reasonable steps to realize the export proceeds was upheld. However, considering the steps taken by the firm, the penalty imposed on the firm was reduced to 35% of the original penalty, and the amount already paid by the firm was treated as full and final satisfaction of the penal liability. 2. The penalties imposed on the partners were set aside, as the Tribunal found that the firm acts through its partners and there was no evidence of individual negligence or lapse on the part of the partners. Order: 1. The penalty against the firm was reduced to 35%, and since 35% of the penalty had already been deposited, the liability stood discharged. 2. The order of penalty imposed against the partners was set aside. 3. There was no order as to costs.
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