2014 (1) TMI 1173 - HC - FEMA

Contravention of provisions of Section 18(2) - Failure to secure export value - Held that - exporters had discharged the burden placed on them by producing before the Board two cheques of Rs.1,88,176/- and Rs.1,17,841/-, which they claimed to have sent to the Commissioner of Customs. Admittedly, the cheques referred to above were never encashed by the Commissioner of Customs. Obviously the cheques could not have been encashed by him without first verifying the extent of export incentive availed by the exporters in respect of GRs which were subject matter of RBI communication dated 24.4.2003. Tribunal was not right in law in saying that the burden with respect to proof of surrendering the export incentive shifted to the Directorate of Enforcement on account of their not producing any documents with respect to the extent of the export incentive availed of by the exporters. The burden in this regard, particularly, in view of the RBI communication dated 24.4.2003, always continued to remain with the exporters and it was for them to satisfy the Adjudicating Officer that all the export incentives which they had availed of in respect of GRs which were subject matter of the RBI letter dated 24.4.2003 had been fully surrendered by them. Even otherwise, an information of this nature is not expected to be in possession of the Directorate. The respondents had to either locate their own record or obtain the relevant information from the concerned Department, and then produce it either before the Bank, or before the Directorate of Enforcement - order passed by the Tribunal is set aside and the matter is remanded back to the Special Director of Enforcement to consider it afresh in the light of the additional documents which the respondents have filed along with affidavit - Decided in favour of Revenue.

Summary

Issues:
Violation of FERA provisions regarding export incentives and duty draw back, Conditional approval for write-off by RBI, Failure to provide documentary evidence of surrendering export incentives, Disagreement in Tribunal's decision, Burden of proof on exporters, Remand of the case for further consideration.

Analysis:
The judgment involves a case where a show cause memorandum was issued to the respondents for contravention of FERA provisions related to duty draw back and export incentives. The respondents were accused of not securing export value for certain goods exported out of India, leading to a penalty imposition by the Special Director of Enforcement. The respondents sought write off/set off of the unrealized amount from RBI, which was subject to conditions, including surrendering export incentives and providing appropriate documentary evidence.

The Enforcement Directorate found the respondents guilty, but the matter was appealed before the Appellate Tribunal for Foreign Exchange. The Tribunal had a split verdict, with one member agreeing with the respondents and another confirming the penalty. The case was then referred to a third member who emphasized the burden of proof on the Enforcement Directorate and the exporters regarding the quantum of export.

The judgment highlighted that the approval for write-off by RBI was conditional and dependent on the exporters satisfying the Bank with documentary evidence of surrendering export incentives. However, the respondents failed to produce such evidence, claiming closure of their business as a reason for not possessing relevant records. The Tribunal's decision to consider two cheques sent to the Commissioner of Customs as evidence of surrendering export incentives was deemed incorrect, as the cheques were never encashed.

The Court held that the burden of proof remained with the exporters to demonstrate the surrender of export incentives, as per RBI's conditional approval. The case was remanded back to the Special Director of Enforcement for reconsideration in light of additional documents filed by the respondents. They were granted the opportunity to submit further documents, and a fresh order was to be passed within a specified timeline.

In conclusion, the judgment set aside the Tribunal's decision, emphasizing the importance of providing documentary evidence of surrendering export incentives and remanding the case for further consideration by the Enforcement Directorate.