2015 (2) TMI 460 - AT - FEMA

Imposition of penalty jointly and severally - failure to take reasonable steps for repatriation of export proceeds of US 23580.02 in respect of goods exported under 3 GRIs - Held that - While going through the order of penalty, I have noted that there is hardly any discussion on the role of the partners that led to non-realisation of the export proceeds of the 3 GRs and the ld. adjudicating officer has not arrived at any finding to show that the partners were responsible for non-realisation of the export proceeds. Section 68(1) of FERA, 1973 lays down the provision for monetary penalty on the partner only when it is found that he was in charge of, and was responsible to, the company for the conduct of business of the company. On this finding only, he shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. While sub-section (2) of Section 68 of FERA, 1973 lays down a provision that where it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Provisions of Section 68 of FERA, 1973 are more explicit in this regard. I, therefore, find that the impugned order imposing joint penalty on the partners before proving that non-realisation of the three GRs was attributable to each of them, is liable to be quashed and set aside. It appears to me from the correspondence exchanged between the appellants and the authorized dealer Punjab National Bank that the appellants had been realizing full amounts of export proceeds against all other exports made under different GRs but payment against three GRs in question could not be realized due to taking delivery of the goods by the foreign buyer fraudulently. That there had been fraudulent delivery of the goods is proved by the certificate dated 20-1-2003 issued by the authorized dealer whereunder they have confirmed the same and also the fact of original complete set of documents in their possession. Therefore, I am led to believe that the appellants were making all reasonable efforts for realizing the export proceeds but realization in respect of three pending GRs could not be made due to circumstance beyond their control. On plain reading of the sub section (2) and sub section (3) of Section 18 of FERA, 1973, it is crystal clear that the Act does not render non-realisation of export proceeds per se punishable thereunder. The essential ingredients of the sub-section (2) of Section 18 is doing or refraining from doing anything or taking or refraining from doing anything or taking or refraining from taking any action which has the effect of securing the result which is envisaged either in clause (a) or (b) of the said sub-section. It would be sufficient for an exporter to discharge the adverse presumption under Section 18(3) of the Act when he shows that reasonable steps within his limitations have already been taken. In the instant case the learned adjudicating officer has failed to correctly appreciate the nature and extent of the presumption to be drawn in terms of Section 18(3) of the Act. In these circumstances, the ld. adjudicating officer appears to have erred while holding the appellant company guilty of the alleged contravention for not taking reasonable steps. - appellants have taken all reasonable steps to rebut the presumption under Section 18(2) of FERA, 1973 and therefore, the view taken by the ld. adjudicating officer in the impugned order is not tenable on the facts and circumstances of the case. - Decided in favour of appellants.

Issues Involved:
1. Non-realisation of export proceeds.
2. Imposition of joint and several penalties.
3. Reasonable steps taken for repatriation of export proceeds.
4. Compliance with Section 18(2) and 18(3) of FERA, 1973.
5. Role and responsibility of partners.
6. Filing of a Civil Suit and its implications.
7. Communication with RBI and authorized dealer.

Detailed Analysis:

1. Non-realisation of Export Proceeds:
The appellants were penalized for failing to repatriate export proceeds amounting to US $ 23,580.02 for goods exported under three GRIs. The Adjudicating Officer found them guilty of contravening Section 18(2) and 18(3) of FERA, 1973.

2. Imposition of Joint and Several Penalties:
The penalty of Rs. 1,50,000 was imposed jointly and severally on the appellant firm and its partners. The tribunal noted that the Adjudicating Officer did not discuss the specific roles of the partners in the non-realisation of the export proceeds. The tribunal referenced a previous order which emphasized that penalties must consider the degree of deliberation shown by the offenders.

3. Reasonable Steps Taken for Repatriation of Export Proceeds:
The appellants argued that they took all reasonable steps to realize the export proceeds, including filing a Civil Suit. They contended that the non-realisation was due to circumstances beyond their control, such as fraudulent actions by the foreign buyer.

4. Compliance with Section 18(2) and 18(3) of FERA, 1973:
The tribunal highlighted that non-realisation of export proceeds is not per se punishable under Section 18(2) and 18(3) of FERA, 1973. The essential requirement is taking reasonable steps to secure payment. The tribunal found that the appellants had taken such steps, including legal action against the foreign buyer.

5. Role and Responsibility of Partners:
The tribunal noted that Section 68(1) of FERA, 1973 requires proof that a partner was in charge of and responsible for the conduct of business to impose a penalty. The Adjudicating Officer failed to establish the partners' specific responsibilities in the non-realisation of export proceeds.

6. Filing of a Civil Suit and Its Implications:
The appellants filed a Civil Suit against the foreign buyer and other parties, which demonstrated their efforts to recover the export proceeds. The tribunal found that the Adjudicating Officer did not properly consider this legal action and its implications.

7. Communication with RBI and Authorized Dealer:
The appellants communicated with the authorized dealer, Punjab National Bank, and informed them of the non-realisation and the Civil Suit. The tribunal found that the RBI was aware of these efforts, contradicting the Adjudicating Officer's finding that no documents were produced to show communication with the RBI.

Conclusion:
The tribunal concluded that the appellants had taken all reasonable steps to realize the export proceeds and that the joint penalty imposed was not justified. The impugned order was quashed and set aside, and the pre-deposited amount was ordered to be returned to the appellants within four weeks.

← Previous Next →