AT-SAFEMA Upholds Penalty as Exporter Violated FERA by Failing to Prove Shipment of Goods Under State Credit Scheme

Case Details: Vishal Exports Overseas Ltd. v. Deputy Director Directorate of Enforcement - [2025] 172 taxmann.com 602 (SAFEMA-New Delhi)

Judiciary and Counsel Details

• G.C. Mishra & Balesh Kumar, Members
• Aditya Kumar, Adv. for the Petitioner.
• A.R. Aditya & Ms Anwesha Mishra, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant company had availed of the benefits of the Scheme for Export of Goods and Services against Repayment of State Credits granted by the erstwhile Soviet Union. The said scheme was the result of a trade agreement between the Governments of India and Russia.

Under the said scheme, the foreign buyer was not required to remit any money directly to the Indian exporter, and the Indian exporter was to get his payment from the RBI through his (exporter’s) Bank. The relevant RBI circulars stipulated that funds from repayments of State Credits were to be utilised for the export of goods to the Russian Federation only, and no third-country exports were permitted to be financed out of funds from such repayments of State Credits.

The appellant company shipped 500 metric tons of wheat flour intended for Russia in compliance with directions issued by the RBI to exporters for the export of goods and services to consignees in Russia, against repayment of State Rupee credits. However, the appellant company failed to fulfil the specific requirement of the said scheme.

Further, the appellant company also failed to furnish any documentary evidence to show that goods reached Russia, which was required as per the ‘Scheme of Export of Goods and Services against Repayment of State Credits granted by the erstwhile Soviet Union.

Appellate Tribunal Held

The Appellate Tribunal held that, after having opted for the said Scheme, the appellants could not have agreed to adhere to only a few terms of the Scheme and not to other terms. Thus, the appellant company and its director were in contravention of section 48 of FERA, and a penalty was validly imposed on them.

List of Cases Reviewed

• Nestle India Ltd v. Commissioner of Central Excise, Chandigarh, 2009 (235) ELT 577 (SC)
• Commissioner of Central Excise, Mumbai v. Burroughs Wellcome (I) Ltd., 2006 (202) ELT 737 (SC) [Para 14]; distinguished.

List of Cases Referred to

• Contship Container Lines Ltd. v. D K Lall, 2013 (297) ELT 321 (SC) (para 3 and 14)
• Nestle India Ltd. v. CCE 2009 taxmann.com 355/235 ELT 577 (SC) (para 4).