Ralson Industries Ltd. Vs Joint Director (Appellate Tribunal Under SAFEMA Delhi)
The Appellate Tribunal decided five connected appeals relating to unrealised export proceeds of ₹3.36 crore by M/s Ralson Industries Ltd. (now D.A. Rubber Industries Ltd.) in exports of bicycle tyres & tubes during 2002–2007 to a Dubai buyer, Emirates Technologies LLC. The buyer withheld payment for 32 consignments in 2007, citing defects in earlier shipments. Despite multiple follow-ups-including visits to Dubai in 2010 & 2013-the proceeds remained unrealised.
The Enforcement Directorate held that the company violated Section 8 of FEMA read with Regulations 3, 8 & 9, which mandate taking all reasonable steps to realise foreign exchange within the prescribed period. Penalty of ₹75 lakh was imposed on the company & ₹5 lakh each on four directors under Section 42.
The Tribunal upheld the finding of contravention, observing that:
- A pending application before RBI seeking write-off does not suspend the statutory duty to realise proceeds.
- The company failed to show adequate steps such as legal action, re-import of goods, or RBI approval.
- The SCN was valid, & no prejudice was caused to the appellants.
Applying the Supreme Court’s ruling in Shailendra Swarup (2020), the Tribunal held that personal liability under Section 42 applies only to directors in charge during the period of contravention. Since Sham Sunder (appointed 2008) & Praveen Chawla (appointed Dec 2007) joined after the violations occurred, their penalties were set aside entirely. Conversely, Rajnish Pahwa (handling exports) & P.S. Sharma (production/management) were found responsible for compliance during the relevant period.
Given that the unrealised amount was only about 9% of total exports & considering the efforts made, the Tribunal found the original penalties excessive & substantially reduced them:
