FINAL ORDER

16.07.2024 Dictated by Rajesh Malhotra Present appeal u/s 19(1) of the Foreign Exchange Management Act, 1999 and Sub-Rule 1 of Rule 10 of Foreign Exchange Management (Adjudicating Proceedings and Appeal) Rules, 2000 is filed by the appellant, Union of India against the impugned order dated 18.03.2021 passed by the Adjudicating Authority, vide which penalty of Rs. 2 lakh each was imposed on respondent no. 1 & 2 respectively for contravention of section 7(3) of the Foreign Exchange Management Act, 1999, r.w. Regulation 9 of Foreign Exchange Management (Export of Goods and Services) Regulation, 2000, for delay in realization of the export proceeds to the extent of US$ 9,93,652 (equivalent to INR 6,08,85,128/-).

2. As per the facts of the case, information was received that out of the 21 foreign remittances, the export obligations were not completed within the prescribed period of financial year, as detailed at page 5 of the impugned order. During investigation, it is revealed that out of 21 remittances reported by RBI vide letter dated 23.07.2019, 2 remittances are duplicate entries which are closed and remaining remittances were not utilized and in the following 2 cases, there was delay in utilization beyond the period of 9 months;

The below table reflects that M/s Yahoo Software Development India Pvt Ltd has exported services of USD 4,80,335.71/- (equivalent to INR 2,92,57,248/- at USD=Rs. 60.91) and USD 5,31,356.27/- (equivalent to INR 3,16,27,880/- at USD = 61.61) on 14.08.2014 and 21.01.2015 respectively, but received the proceeds on 21.06.2018, which is beyond prescribed time of 12 months.

Date of Date of Amount of Time Taken to Time taken for Export remittance Utilization in USD receive the proceeds realization

14.08.2014 21.06.2018 4,80,335.71 4 years 2 years 8 months 21.01.2015 5,13,356.27 3 years 3 years 2 months

3. During arguments, Ld. Counsel for the appellant ED submitted that Ld. Adjudicating Authority failed to consider the objective of FEMA, 1999 that it is an Act to consolidate and amend the law relating to Foreign Exchange with the object forfacilitating external trade and payments and for promoting the orderly development and maintenance of Foreign Exchange market in India. He submitted that Ld. Adjudicating Authority failed to appreciate the language and significance of section 13(1) of the FEMA, which narrates the contravention and penalties, that if any person contravenes any provision of FEMA or contravenes any rules, regulation, notification, direction or order issued in exercise of the powers under the Act, or contravenes any condition subject to which an authorization is issued by the RBI, he shall, upon adjudication, be liable to a penalty upto thrice of the sum involved in such contravention, where such amount is quantifiable, or upto 2 lakhs where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend upto five thousand rupees every-day after the first day during which the contravention continues.He stated that Ld. Adjudicating Authority did not consider that the contravention under FEMA shall affect the financial systems of the country.He submitted that once the Adjudicating Authority decided that the respondents have contravened the provisions of FEMA, the maximum penalty might have been imposed within the ambit of section 13(1), on both respondents based on the nature of the contravention.Prayer is accordingly made to allow the present appeal and thereby impose the penalty upto thrice the sum involved in the contravened is quantifiable in the present case to the extent of US$ 9,93,692/- (equivalent to INR 6,08,85,128/-).

4. On the other hand, Ld. Authorised Representstive for the respondent submitted that only technical contravention occurred in the present case on account of delay in realization of export proceeds rather than non-realization. He pointed out that as all the export proceeds were realized by the respondents and thus,