1. Arguments were heard. Since both the appeals are inter related, it would be appropriate to consider them together and make a common order.
2. This appeal has arisen out of the order dated 30-10-1989 whereby a penalty of Rs. 50,000 was imposed by the Adjudicating Officer jointly on the appellants for contravention of section 18(2) of the Foreign Exchange Regulation Act, 1973 ('the Act'). It is alleged that the appellants had exported goods during the year 1987 to Finland. They, however, failed to realise the export proceeds of US $ 4,530. Show-cause notice as required under section 51 of the Act was given to the appellant. As the Adjudicating Officer was not satisfied with the explanation given by the appellant, adjudication proceedings were drawn against them. After having considered the adjudication proceedings, the Adjudicating Officer held the appellants guilty of the contravention of section 18(2) on the basis of his following findings:
(i) that the export proceeds of US $ 4,530 have not been realised by Balwant Bros, against the export made by them during the year 1987;
(ii) that the export was made on COD basis and after the despatch of the goods, the exporter changed the terms of the payment of export from COD to 90 days grace period on their own without any permission of the RBI, and the grant of grace period at that stage was not proper on the part of the exporter and in case the consignee had requested them to do so, they should not have done so and instead should have called back the goods;
(iii) the party's plea that at the later stage the consignee wanted reduction in invoice value and they applied to the RBI for permission, does not absolve them from their responsibility to realise the export proceeds;
(iv) the managing partner of the firm was examined on 23-1-1989 and the documents furnished by them vide their letter dated 23-10-1989 are letters of very casual nature and those letters were written by them after April 1989 which goes to show that the party was silent on the subject and did not care to realise the export proceeds intentionally; and
(v) that no evidence at all had been produced to show that they made any sincere effort to realise the export proceeds and their actions have resulted in loss of foreign exchange worth US $ 4,530.
3. The appellant in Appeal No. 535 of 1989 has challenged the above findings mainly on the following grounds :
(1) that the impugned order is against law and facts on the record of the case;
(2) that the learned Deputy Director has not applied his mind to the material existing on the record of the case;
(3) that the learned Deputy Director has failed to appreciate that the appellants took all steps within their power to recover the export proceeds. They approached their bankers, the Reserve Bank of India and the Ambassador of India in Finland in the matter;
(4) that the learned Deputy Director has failed to appreciate that reason for non-realisation was dispute regarding quality of the goods, consignee offering reduction in prices and the unduly long time taken by the RBI to settle the issue;
(5) that the learned Deputy Director has failed to appreciate that the terms for payment were changed from COD to 90 days after the delivery of the goods as the goods had already passed through Customs and in the best interests of their business, they had no option except to agree to the terms. Telex message and correspondence exchanged on the subject speaks volumes for the bona fide of the appellants;
(6) that the learned Deputy Director has erred in holding that the appellants did not make sincere efforts to realise the export proceeds. He has failed to appreciate that right from the very beginning, the appellants approached their bankers, the Punjab National Bank along with an application for extension of time by RBI as early as on 24-12-1987 and also made protracted correspondence with the buyer, the RBI and the Ambassador of India in Finland. In view of this, the learned Deputy Director ought to have taken a reasonable approach in the matter;
(7) that the learned Deputy Director has erred in holding that the appellants were silent and wrote letters only after April 1989. The facts stated above clearly prove that the appellants were constantly pursuing for realisation of the amount and the chain of correspondence made with the buyer, the RBI and India's Ambassador in Finland contradict the observations made in the impugned order.
(8) that the learned Deputy Director has failed to appreciate that non- receipt of proceeds of exported goods was not ipso facto an offence but, it was non-taking of the reasonable steps to recover the payment. Full efforts having been made to recover the amount, the learned Deputy Director has erred in holding the appellant guilty and imposing a massive penalty of Rs. 50,000;
(9) that in case, the goods are still lying with the customs and as per Indian Embassy's letter dated 7-11-1989, the consignee has not yet taken delivery of the goods. Therefore, the question of any contravention of section 18(2) did not arise.
(10) that even otherwise, the amount of penalty is excessive and disproportionate to the value of the export proceeds.
4. Almost similar grounds in substance have been raised in Appeal No. 533 of 1989 also.
5. During the course of arguments, it was contended on behalf of the appellants that appellants had, in fact, made sincere efforts to realise the export value of the goods and that as regards reduction of the GR value, they have approached the RBI for the grant of permission which is still awaited on account of the failure of the Enforcement Directorate to give NOC. The learned counsel had also drawn attention of the Board to the various correspondence in support of the contention that the appellants had made sincere efforts to realise the export proceeds. As against the above, it was contended on behalf of the respondent that section 18(2) casts an obligation to realise the export value of the goods within the prescribed period of 6 months or within such a period as may be extended by the RBI and that since RBI was not approached for extension in time, a presumption could be raised that appellants did not make sincere efforts. It was further contended that the mere fact that the appellants had approached the RBI for permission to realise the reduced value of the goods would not make any difference. The counsel for the respondent also contended that when the buyer offered US $ 3,000, the appellants should have at least realised that much amount.
6. Payment for the goods otherwise than in the prescribed manner is prohibited under section 18(2A)(a)(i). Rule 9 of the Foreign Exchange Regulation Rules, 1974 prescribes the manner of payment of export value of goods. That rule provides that "unless otherwise authorised by the Reserve Bank, the amount representing the full export value of goods exported to the countries specified in the Third Schedule shall be paid through an authorised dealer and in the manner specified in the said Schedule". Change of the terms of payment from COD to 90 days after receipt of the goods does not fall within the ambit of the manner specified in that Schedule. Even otherwise, such a mere change of the terms of payment may not be justifiably regarded as a basis for taking a view that the exporter has not made sincere efforts to realise the export value of the goods. Such change may sometimes be a bona fide need of the hour. There is no material to indicate that the appellants changed the terms of payment from COD basis to 90 days AD with ulterior motives.
7. Similarly, the plea that the appellants should have realised at least US $ 3,000 in place of the full export value, when the same was offered by the foreign buyers is also not legally tenable. In law, a buyer is not supposed to realise the reduced value of the goods without permission of the Reserve Bank. If a buyer chooses not to adopt a course which is contrary to law, it cannot form basis to infer non-seriousness of the seller in the matter of realisation of the export proceeds. The expression 'reasonable steps' occurring in section 18(3) embraces within its fold only such steps as may be in conformity with statutory provisions. Steps contrary to any statutory provision cannot be regarded as reasonable and as such, they are not contemplated under section 18(3).
8. It is well settled that non-realisation of the export value of the goods within the prescribed period would not amount to violation of section 18(2) if it is shown that the exporter has taken all reasonable steps to repatriate the export value of the goods. It is not in dispute that the appellants had exported the goods in issue to Finland during the year 1987 and that the export proceeds of US $ 4,530 have not been realised by the appellant within the prescribed period. Therefore, the vital issue that requires consideration in this case is as to whether the appellants have taken all reasonable steps to recover the payment for the goods.
9. The Adjudicating Officer has mentioned in his order dated 30-10-1989 that the documents furnished by the appellants vide their letter dated 23-10-1989 are letters of very casual nature and those letters were written by them after April 1989 which goes to show that the party was silent on the subject and did not care to realise the export proceeds intentionally. A perusal of the paper book filed by the respondent indicates that the letter No. BB/47/1989-90 dated 10-3-1989 was also enclosed with the aforesaid letter dated 23-10-1989. The letter dated 10-3-1989 contains reference to certain correspondence made by the respondent even during the prescribed period of six months. It does not appear from a perusal of the adjudication order that the Adjudicating Officer had considered the facts mentioned in the aforementioned letter dated 10-3-1989. Nor does the adjudication order indicates that the appellants were afforded opportunity to produce the documents/letters mentioned in that letter. Further, the paper book filed by the respondent also contains letters dated 2-2-1988, 17-11-1988, 25-2-1989,10-3-1989 and 18-1-1989 which all relate to the period prior to April 1989. That apart, the paper book filed by the respondent also contains letters of the month of April 1989. These letters cannot also be regarded to have been written after April 1989 as stated in the adjudication order. Since the adjudication order does not contain any discussion of those letters, it is obvious that the said letters were also not considered by the Adjudicating Officer. That apart, certain other correspondence have also been filed by the appellants before the Board which go to show that number of steps were taken by the appellants to recover the payment for the goods prior to the show-cause notice dated 20-2-1989. Without the assistance of a clear finding of the Adjudicating Officer in regard to the aforesaid correspondence and facts not earlier considered by him, it would be difficult for the Board to arrive at a just and fair conclusion.
10. Whether or not penalty should be imposed for violation of any statutory provision is of course a matter of discretion but such discretion has to be exercised judiciously by considering all the relevant facts before arriving at a decision to impose penalty. Non-consideration of all the relevant facts would naturally render the decision legally untenable.
11. In view of the above, both the cases (Appeal Nos. 533 and 535 of 1989) are remanded to the Adjudicating Officer for passing a fresh order in accordance with law within three months from the date of receipt of this order, failing which the penalty deposited by the appellant pursuant to the Board's order dated 24-8-1990 shall be liable to be refunded. Parties may be afforded fresh opportunity to produce evidence.