Allowed

FPA-FE-170/CHN/2010 of Sh S. Ponsekar v. The Assistant Director, Directorate of Enforcement, Chennai

ATFP8 Apr 2024FPA-FE-170/CHN/2010

Case brief

AI extract

What is this about?

Appeal against penalty for failure to repatriate export proceeds under FEMA. Tribunal held that appellants proved they took all reasonable steps to realize blocked proceeds via various agencies. Appels allowed; pre-deposit refunded.

What did the court decide?

Appeals allowed. Pre-deposit of penalty amount made by appellants to be refunded.

FPA-FE-170/CHN/2010 of Sh S. Ponsekar Vs. The Assistant… — Service and Employment | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. FPA-FE-169/CHN/2010 M/s. Raja Metals Corp. … Appellant

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2. FPA-FE-170/CHN/2010 Sh S. Ponsekar … Appellant Versus

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… Appellant

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The Assistant Director, Directorate of Enforcement, Chennai

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Mr. B. Satish Sundar, Mr. N. Balaji, Advocates

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For the Respondent

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: Mr. Pranav Mishra, Advocate

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CORAM JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI BALESH KUMAR : MEMBER

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FINAL ORDER 08.04.2024

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This Order disposes of the Appeals Nos. FPA-FE-169/CHN/2010 and FPA-FE-170/CHN/2010 filed by M/s Raja Metals Corporation and Sh. S. Ponsekar respectively against the Adjudication Order No. SDE/SKS/IV/3/2010 dated 28.05.2010 passed by Special Director, Enforcement Directorate, New Delhi. The Impugned Order imposed penalty of Rs. 70 lakhs on M/s Raja Metals Corporation and penalty of Rs. 20 Lakhs on Sh. Ponsekar under Section 13 of FEMA 1999 for contravention of Sections 7 & 8 of FEMA 1999 read with Regulations 9 & 13 of Foreign Exchange Management (Export of Goods and Services) Regulations 2000. Sh. S. Ponsekar was Managing Partner of M/s Raja Metals Corporation. The Appellants were charged for having failed to realise US Dollar 3,93,889.40 equivalent to Rs. 1,94,37,941 even after the stipulated period, for the export of 12 shipments between the period February, 2002 and April, 2002 bearing GR Nos. as detailed in the Impugned Order. 2. The Tribunal had earlier waived the pre-deposit of penalty by certain amount and subsequently dismissed the appeals for non-prosecution. The Appellants filed Civil Miscellaneous Appeal Nos. 1665 & 1948 of 2016 & 2505 & 2506 of 2018 & CMP. Nos. 12688 & 14163 of 2016 & 19128 of 2018 before the High Court of Madras. The Hon’ble High Court vide its Order dated 30.10.2018 set

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FPA-FE-169-170/CHN/2010

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Page 1 of 4

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aside the Order dated 14.09.2018 of this Tribunal dismissing the appeals for non-prosecution and further directed the Appellants to deposit 50% each of the penalty imposed on them. The Appellant complied with the Order and deposited Rs. 45 lakhs vide Receipt ED No. 003347 dated 27.02.2019.

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During the course of hearing on 19.03.2024, Ld. Counsel for the Appellants argued that out of 12 shipments,the export proceed of Rs. 12,23,663/- was realised for 1 shipment. For remaining 11 shipments an amount of Rs. 1,82,14,278/- could not be realised in spite of having made all reasonable efforts. In this regard, he stated that they have furnished outstanding statement relating to 11 shipping bills along with invoice, packing list, bill of lading, export promotion copy and exchange control declaration. He also urged to take into account the claims lodged with Export Credit Guarantee Corporation (ECGC), Indian High Commission at Singapore, M/s Allen Gledhill Singapore the debt collecting agency and M/s Omega Alliance, Mumbai for debt collection. A number of letters were written to the buyer M/s Mohideen & Company Singapore to make the payment for the said shipments. Ld. Counsel argued that they had been exporting stainless steel utensils and other goods to M/s Mohideen & Company in the past as well, which had never resulted in default of payment. He also drew attention to the noting and protesting documents for non-payment of bills. He pleaded that the provisions of the law while requiring payment for the export of goods emphasises that reasonable steps need to be taken to realise and repatriate pending foreign exchange amount.

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Ld. Counsel for the respondent argued that the Appellants claimed to have taken reasonable steps to realise the export proceeds but the fact remains that the same could not be realised. The steps taken by them could not be regarded reasonable in absence of any communication received from the agencies with whom they lodged their claims. He pleaded that the Appeals may be dismissed.

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We have considered the rival submissions. It is an admitted fact that for 11 shipments export proceeds of amount Rs. 1,82,14,278/- could not be realised.

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FPA-FE-169-170/CHN/2010

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Page 2 of 4

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While Section 7 provides for certain obligations to be met by exporter towards Reserve Bank of India so as to ensure realisation of the export proceeds, it is Section 8 which is critical to the dispute before us. Section 8 of FEMA 1999 is reproduced below:

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‘ 8. Realisation and repatriation of foreign exchange - Save as otherwise provided in this Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realise and repatriate to India such foreign exchange within such period and such manner as may be specified by Reserve Bank.’

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Regulations 9 & 13 (Supra) provide for the period within which full export value of goods is to be realised and provide for certain special arrangements.

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The copies of the shipping bills along with the invoices and packing list counter signed and stamped by the Customs Authority do not leave any scope for doubting that the exports were genuinely made to M/s Mohideen & Company Singapore during the relevant period. We have also perused the copy of claim form submitted by the Appellants to ECGC which is also duly stamped acknowledging the receipt of the claim by ECGC. The claim form mentions non realisation of the export proceeds due to default from the buyer side. The claim form has been signed and stamped by the Chief Manager of the Indian Overseas Bank Chennai who were the bankers to the Appellants. Copies of letters to the Indian High Commission Singapore, M/s Allen & Gledhill Singapore and M/s Omega Alliance Mumbai are part of the Appeal Paper Books though without acknowledgment of the recipient. Each of this letter is marked to M/s Mohideen & Company, Singapore. Copies of the letter from the Appellants to M/s Mohideen & Company which are dated 20.06.2003, 05.03.2003, 11.11.2002 & 28.08.2002 bring out the efforts for settling the over-due bills at the earliest in view of severe financial problem. The statements of the export sales for the periods 01.04.1998-31.03.1999,

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FPA-FE-169-170/CHN/2010

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Page 3 of 4

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01.04.1999-31.03.2000, 01.04.2000-31.03.2001 and 01.04.2002-

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31.03.2003 clearly bring out that the Appellants had been exporting to M/s Mohideen and Company, Singapore as well as to some other importers in Sri Lanka, UAE and Singapore. However, except for the shipments mentioned in the Impugned Order, there was no default of payment. The Appellants have furnished as part of the Appeal Paper Books a set of correspondence from the Assistant General Manager, Indian Overseas Bank, Singapore to the Chief Manager, Indian Overseas Bank, Chennai enclosing bills duly protested and notarized for nonpayment at Singapore and relevant to the said shipments.

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The wordings of Section 8 FEMA 1999 make it clear that there is recognition of an eventuality to provide for an exception to the law to repatriate and realise the foreign exchange earning which is due to the country, in case of genuine default by a foreign buyer located abroad. The statute requires reasonable steps on the part of the exporter to realise and repatriate such foreign exchange to India. It is true that where the realisation of the export proceeds is delayed beyond the stipulated period then a presumption would be drawn that the exporter did not take reasonable steps to secure the realisation of the export proceeds. However, it can be rebutted by the exporter by proving that he had taken all reasonable steps to recover the payment for the goods. Under the circumstances of the present case the Appellants have furnished evidence which show that they took all reasonable steps to realise the export proceeds.

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In view of the aforementioned discussions the two Appeals are allowed. Consequently, the pre-deposit of the penalty amount made is to be refunded to the Appellants.

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(Justice MunishwarNathBhandari) Chairman

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(Balesh Kumar) Member

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New Delhi, 08^th April, 2024 ‘ASH’

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FPA-FE-169-170/CHN/2010

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FPA-FE-170/CHN/2010 of Sh S. Ponsekar v. The Assistant Director, Directorate of Enforcement, Chennai

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FPA-FE-170/CHN/2010 of Sh S. Ponsekar v. The Assistant Director, Directorate of Enforcement, Chennai

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