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PETITIONER: TOOLSIDASS JEWRAJ

       Vs.

RESPONDENT: ADDITIONAL COLLECTOR OF CUSTOMS AND OTHERS

DATE OF JUDGMENT13/03/1991

BENCH: KASLIWAL, N.M. (J) BENCH: KASLIWAL, N.M. (J) RAMASWAMY, K.

CITATION:  1991 AIR 1061            1991 SCR  (1) 821  1991 SCC  (2) 443        JT 1991 (1)   680  1991 SCALE  (1)422

ACT:     (Sea Customs Act, 1878/Foreign Exchange Regulation, Act, 1947:   Ss.  167(8),  167(37)/ss.  12(1),  23A,   23B-Export Declaration of incorrect F.O.B. values in shipping bills and G.R.1  forms--Object  being  unethical  and  objectionable-- Undervaluation detected before goods actually shipped--Order of confiscation, fine and penalty--Validity of.)

HEADNOTE:      The appellant firm, a jute goods exporter, entered into contracts  on December 19, 1961 for shipment of goods  to  a foreign  company  in  January 1962. Due to  appreciation  in price   in  Jan.  1962,  the  firm  arranged  to  ship   the consignment in June,  1962, and before actually shipping the goods, on 1.6.1962 submitted to the Customs authorities  the shipping bills and G.R. forms wherein F.O.B. was found to be undervalued. The firm waived show cause memo  and agreed  to abide  by the decision of the Customs authorities. The  ship left without taking the consignment.      The  Additional  Collector  of  Customs  held  that   a "phatka’  business  was being carried on by  the  consignees abroad in which the shippers had, as brokers, undertaken  to remit   to  them  invisibly  the  profits  so   earned,   by harnessing   into  service  the medium of  the  said  export business,  and  the  firm in attempting to  ship  the  goods without   making  proper  declaration  of  (1)  the   amount representing  full  export  value, and (2)  the  period  and manner  of  payment, violated s. 12(1) of  Foreign  Exchange Regulation Act, 1947 and committed offences under s.  167(8) of Sea Customs Act, 1878 read with s. 23A and 23B of Foreign Exchange Regulation Act, 1947. He confiscated the goods  and imposed fine and personal penalty on the appellant firm.      On  appeal, the Central Board of Revenue  affirmed  the order of confiscation and penalty but reduced the fine.  The firm filed writ petition before the High Court.      The  Single Judge, relying on two decisions**  of  this Court  held that once a declaration incorrect or untrue  was filed,  s.  12(1)  of Foreign Exchange  Regulation  Act  was complied with, and the Additional                                                        822 Collector,  Customs had no jurisdiction to pass  the  order;

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and  allowed the writ petition. Revenue appealed before  the Division  Bench of the High Court, which  distinguished  the decisions  relied  on by the Single Judge, and  allowed  the appeal. Hence the present appeal by the  shippers.      Dismissing the appeal, this Court,      HELD:  The appellant firm had made an attempt to  remit profits to the consignees abroad by discounting it from  the sale  price and declaring the export value of the  goods  at the  lower  rate.  It was a  case  where  undervaluation  in respect  of  full export value of goods  was  detected  even before  the  goods were actually shipped  or  exported.  The Additional  Collector,  Customs was right  in  holding  that there  was  Violation  of  s.  12(1)  of  Foreign   Exchange Regulation  Act, 1947 and the appellant firm thus  committed offences  under s.167(8) of the Sea Customs Act,  1878  read with  ss,   23A and 23B of the Foreign  Exchange  Regulation Act, 1947. [828E-F; 826C-F]      The  Division  Bench  rightly  distinguished  the   two decisions  relied on by Single Judge, and  rightly  reversed his  order and maintained the order of the Central Board  of Revenue. [828F-G]      **Union  of India & Ors. v. M/s Rai Bahadur  Shree  Ram Durga  Prasad (P) Ltd. & Ors., [1969] 2 SCR 727  and  Becker Gray & Co. Ltd. and Ors. v. Union of India & Anr., [1970]  3 SCR 445, distinguished.      The  shipping bills and G.R.1 forms filed on behalf  of the appellant firm  showed that the value mentioned  therein was  less  than the full export value of the  goods  in  the market  at the relevant time. The F.O.B. values declared  by the shippers in the G.R. forms were, on their own admission, incorrect  and the  object of these  incorrect  declarations was  unethical  and otherwise highly objectionable  on  more than one ground of economics. [826D-E; 827A-B]

JUDGMENT:      CIVIL  APPELLATE JURISDICTION Civil Appeal No.  893  of 1976.      From  the  Judgement and  Order dated  6.2.1975  of  the Calcutta High Court in Appeal from Original Order No. 200 of 1972.      A.K.  Ganguly, S. Sukumaran, Ms. Amrita Misra and  D.N. Misra for the Appellants.                                                        823      Kapil  Sibbal, Additional Solicitor General,  A.  Subba Rao,   P.   Parmeshwaran  and  C.V.  Subba  Rao    for   the Respondents.      The Judgement of the Court was delivered by      KASLIWAL,  J. This Appeal by Special Leave is  directed against  the  judgement of Calcutta  High  Court  dated  6th February, 1975 setting aside the order of the learned Single Judge of the High Court dated 9th June, 1972.      Brief facts of the case are that M/s. Toolsidass Jewraj (hereinafter referred to as the ’petitioner firm’) had  been carrying on the business of export of Jute goods from  India to   foreign   countries  including   United   States.   The petitioner firm entered into contracts on December  19, 1961 for  shipment in January, 1962 of Jute goods to  M/s.  Franc Samuel and Co. of New York, through their agents M/s.   C.J. Dammann Inc. of New York, U.S.A. According to the petitioner firm  in January, 1962 the price of Jute  goods  appreciated considerably  and to avoid serve losses the petitioner  firm through  the said agent arranged for switching the  shipment over  to  April/June, 1962. The petitioner  firm  thereafter

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made arrangements for shipment of a consignment of 435 bales of  Hessian Cloth by s.s. "City of Singapore" and  submitted shipping  bills  alongwith  G.R.-I Forms  with  the  Customs authorities  on  June 1, 1962. The gain resulting  from  the sale of goods was allowed to the buyers and their profit was discounted  from the sale price for subsequent shipment  and shown  accordingly in the  shipment bills and  G.R.-I  forms which  was thus not the full export value of the  goods.  On June  5,  1962  Shantimoy Mukherjee Customs  Sarkar  of  the petitioner  firm and M.V. Ashar appeared before the  Customs Appraiser and supplied to him all information regarding  the consignment. the Appraiser apparently satisfied dictated  to them  a letter to be written by the petitioner firm  to  the Customs  authorities  on the basis whereof  the  consignment could be permitted to be exported. In the letter of June  5, 1962  the adjustment of price as aforesaid was  admitted  on behalf of the petitioner firm and it was further stated that there  was no mala fide in the account and the firm did  not want  any  showcause memo and would agree to  abide  by  the decision  of Customs authorities. Thereafter, they  appeared before the Additional  Collector of Customs, Calcutta  where few questions were put to them. In  the meantime s.s.  "City of Singapore" left without taking the consignment.      The Additional Collector of Customs took the view  that a sort of                                                        824 "phatka"  business  was being carried on by  the  so  called consignees  abroad  and in the said business the  so  called shippers  in  India were playing the role  of  brokers.  The shippers appeared to be conscious that they could not  remit the aforesaid profits legally, and hence they had chosen  to harness  into service the medium of export business in  this connection.  The F.O.B. values declared by the  shippers  in the G.R. forms were on their own admission incorrect and the object of making these incorrect declarations was  unethical and otherwise highly objectionable. The Additional Collector thus  held that an attempt had been made by M/s.  Toolsidass Jewraj  to ship the goods covered by the shipping bills  and the G.R. forms mentioned in  the appendix, without making  a declaration  that  the amount representing the  full  export Value  of the goods had been or will, within the  prescribed period,  be paid in the prescribed manner. The  shippers  as such  had  committed offences attracting the  provisions  of Sec. 167(8) of the Sea Customs Act read with Section 23A and 23B  of  the  Foreign  Exchange  Regulation  Act,  1947  (as amended).  The goods were therefore liable  to  confiscation and  the shippers were liable to personal penalty under  the aforesaid  Sections  and  also under  Sec.  167(37)  of  the Customs   Act.  The Additional Collector of Customs  by  his order dated June 6, 1962 gave the following directions:                "In  view of the foregoing, I confiscate  the           goods in question under Section 167(8) of the  Sea           Customs  Act,  read with Section  23A  of  Foreign           Exchange Regulation Act. In lieu of  confiscation,           I impose fine of Rs. 3,00,000 (Rupees three  lakhs           only).  the  fine  should be paid  within  a  week           hereof.  A personal penalty of Rs. 50,000  (Rupees           fifty  thousand  only)  is  also  imposed  on  the           shippers  under  Section 167(8)  the  Sea  Customs           Act.  The personal penalty should be  paid  within           three days of the receipt of this order."      The  petitioner firm preferred an  appeal  against  the said  order  to the Central Board of Revenue  which  by  its order  of December 10, 1963 affirmed the findings and  order of  the Additional Collector. The Board, however, felt  that

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the fine of Rs. 3,00,000 in lieu of confiscation was  rather excessive and accordingly reduced the fine to Rs,.  1,85,000 and  directed the fund of Rs. 1,15,000 which the  petitioner has  received  without prejudice. The petitioner  firm  then filed a writ petition under Article 226 of the  Constitution and  prayed for quashing the impugned orders dated  June  6, 1962 and December 10, 1963 and to refund the  aforementioned amounts of Rs,. 1,85,000 as well as the sum                                                        825 of  Rs.  50,000  imposed  as  personal  penalty.  Sabyasachi Mukherji,  J.  learned  single Judge of  the  Calcutta  High Court,  (as he then was) proceeded to consider the  case  on the  assumption  that the facts stated in the order  of  the Additional collector to the effect that the petitioner  firm waived  its  right to  receive show cause  notice  and  M.V. Ashar repeated the request for disposal of the case  without issuing  any  show cause notice. Learned single  Judge  held that   even   according  to  the  Customs   authorities    a declaration  was  filed under Section 12(1) of  the  Foreign Exchange  Regulation  Act,  1947  which  was  incorrect  and untrue. Learned single Judge held that even according to the Customs  authorities a declaration was filed  under  Section 12(1) of the Foreign Exchange Regulation Act, 1947 which was incorrect  and untrue. Learned single Judge placed  reliance on  the decisions of this Court in Union of India & Ors.  v. M/s  Rai  Bahadur  Shree Ram Durga Prasad (P)  Ltd.  &  Ors. [1969] 2 SCR, 727 and Becker Gray & Co. Ltd. & Ors.  1930 v. Union of India & Anr., [1970] 3 SCR, 445 and held that  once a  declaration  incorrect  or untrue  was  filed  there  was compliance  with the provisions of Section 12(1) of  Foreign Exchange  Regulation  Act and the  Additional  Collector  of Customs  as also the Board had no jurisdiction to  pass  the impugned   orders.  The  above  orders  of  the   Additional Collector  and  the Board or Revenue were  quashed  and  the authorities were directed to refund the amount.      The  Union  of India assailed the above  order  of  the learned single Judge by filing an appeal before the Division Bench  of  the High Court. The Division Bench  of  the  High Court distinguished the afore mentioned cases of this  Court on  which reliance was placed by the learned  single  Judge. In the  result, the Division Bench allowed the appeal,   set aside  the order of the learned single Judge by order  dated 6th  February, 1975. The petitioner firm  aggrieved  against the order of the Division Bench of the High Court have  come in appeal by grant of special leave.      It  was contended on behalf of the appellant  that  the case  was  fully covered by the decision of  this  Court  in Union  of India & Ors. v. M/s. Rai Bahadur Shree  Ram  Durga Prasad (P) Ltd. & Ors., supra. which was further followed in Becker  Gray  & Co. (1930) Ltd. & Ors. v. Union of  India  & Anr.,  supra. We have thoroughly considered the  record  and have  perused the cases on which reliance is placed  by  the learned counsel for the appellant. In our view the facts  of the  case before us are totally distinguishable and as  such the  above  mentioned cases do not help the  appellant.  The facts  of the case as found by the Additional  Collector  of Customs  are that the petitioner firm had initially  entered into  four contracts dated December 19, 1961 for  supply  of Jute  goods  to M/s. Franc Samuel and Co. of  New  York  for shipment  in January,  1962. In January, 1962 the  price  of Jute goods appreciated and the petitioner firm  arranged for switching the ship-                                                        826 ment  over  to April/June, 1962. The  petitioner  thereafter made arrangements for shipment of a consignment of 435 bales

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of  Hessian Cloth by s.s. "City of Singapore" and  submitted shipping  bills  alongwith  G.R.-I forms  with  the  Customs authorities on June 1, 1962. the full export value of  goods was not correctly stated in the above documents. On June  5, 1962  M.V. Ashar appeared on behalf of the  petitioner  firm and submitted a letter mentioning therein that the firm  did not want any show cause memo and would agree to abide by the decision   of  Customs  authorities.  the  petitioner   firm subsequently took the stand the M.V. Ashar had no  authority on  its behalf to waive the issue of show cause memo  or  to agree to abide by the  decision of the Customs  authorities. However, the said stand had not been believed by any of  the Customs  authorities  or even by the High Court. It  may  be noted  that  in the meantime s.s. "City of  Singapore"  left without taking the consignment. The Additional Collector  of Customs  in these circumstances passed an order on  June  6, 1962. It is, therefore, important to note that it is a  case where  undervaluation  in respect of full  export  value  of goods  was detected even before goods were actually  shipped or exported. In view of the fact that the representative  of the  petitioner  firm  was in hurry and  pressing  hard  for exporting  the  goods, it was clearly stated in  the  letter dated 5th June, 1962 waiving the issuance of any show  cause notice  and agreed to abide by the decision of  the  Customs authorities.  A  perusal of the shipping  bills  and  G.R.-I forms  filed on behalf of the petitioner firm goes  to  show that  the value mentioned was 802d. (per 100 yards) when  in fact the full export value of the goods in the market at the relevant time was 867d. In the face of these admitted  facts the  Additional  Collector of Customs  correctly  held  that there was violation of Section 12(1) of the Foreign Exchange Regulation Act, 1947 (hereinafter referred to as the  ’Act’) and  thus  committed offences attracting the  provisions  of Section  167(8) of the Sea Customs Act readwith Section  23A and  23B of the Act. It may be noted that according  to  the petitioner  firm’s own showing the rate fixed was  955d.  in December  1961 which had appreciated to 1034d.  In  January, 1962  when  the  goods were to be exported.  Thus  gain  was allowed  to the buyers and by an agreement the shipment  was switched over to April/June, 1962. In June, 1962 the  market value was 867d. but the profit of 79d.  was discounted  from the sale price bringing it down to [867-79]=788d. by  adding brokerage,  commission  the  value was fixed  at  802d.  The Additional  Collector  of Customs, in  these  circumstances, held that the explanations revealed that a sort of  "phatka" business  was  being carried on by the  socalled  consignees abroad  and the shippers in india were playing the  role  of brokers  and in that role  they had undertaken to  remit  to them invisibly the profits                                                        827 earned  out  of  the  "phatka"   business.  The   Additional Collector   further  held that the shippers appeared  to  be conscious that they could not remit the profits legally  and hence they had to harness into service the medium of  export business in  this connection. the F.O.B. values declared  by the shippers in the G.R. forms were, on their own admission, incorrect and the object of these incorrect declarations was unethical  and otherwise highly obejectionable on more  than one ground of economics. It was not assailed at any stage of proceedings, not even before us that the actual market price of  the  goods in question in June, 1962 was 867d.  and  the value  mentioned  in the shipping bills and G.R.  forms  was shown as 802d.      So far as cases of this Court in Union of India &  Ors. v. M/s. Rai Bahadur Shree Ram Durga Prasad (P) Ltd. &  Ors.,

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(supra) and Becker Gray & co. (1930) Ltd. & Ors. v. Union of India & Anr., (supra) are concerned, were cases wherein  the controversy  had arisen after the export of goods.  In  that context  in Union of India & Ors. v. M/s Rai  Bahadur  Shree Ram Durga Prasad (P) Ltd. & Ors., (supra) the Court observed as under:           "If  we are to hold that every  declaration  which           does not state accurately the full export value of           the  goods  exported  is a  contravention  of  the           restrictions imposed by s. 12(1) then all  exports           on  consignment basis must be held  to  contravene           the  restrictions imposed by s. 12(1).  Admittedly           s. 12(1) governs every type of export. Again it is           hard to believe that the legislature intended that           any minor mistake in giving the full export  value           should  be penalised in the manner provided in  s.           23(A).  The  wording of s.12(1) does  not  support           such  a  conclusion. Such a  conclusion  does  not           accord with the purpose of s.12(1)."      The Court further observed as under:           "There are two facts in every export, one relating           to   the goods exported and the other relating  to           the  foreign  exchange earned as a result  of  the           export.  Broadly  speaking the  former  aspect  is           dealt  with  by the Customs  authorities  and  the           latter  either  by  the Reserve  Bank  or  by  the           Director  of Enforcement........ These  provisions           go  to  indicate that so far as the value  of  the           goods  exported  is concerned the matter  is  left           primarily  in the hands of the Reserve  Bank,  and           the Customs authorities are not                                                        828           burdened  with  that  work.  This  aspect  becomes           relevant  in  ascertaining the true  scope  of  s.           12(1).  If we bear in mind the scheme of the  Act,           it is clear that so far as the Customs authorities           are concerned all that they have to see is that no           goods   are   exported  without   furnishing   the           declaration  prescribed under s. 12(1). Once  that           stage is passed the rest of the matter is left  in           the hands of the Reserve Bank and the Director  of           Enforcement."      In  the above case the goods had already been  exported and  the  charge  was failure to  repatriate  a  portion  of foreign  exchange  earned  by the  shippers  as  also  given declaration which did not comply with Rule 5 of the  Foreign Exchange  Regulation Rules. The above decision was  followed in (Becker Gray & Co. (1930) Ltd. & Ors.) v. (Union of India &  Anr.)  (supra)  where  the  goods  which  were  sent   on consignment basis had already left the shores of  India. The declaration  was  filed in form G.R.-I prescribed  by  Rules under  Section 27. In interpreting the above  decision,  the Court  followed  the earlier decision in which it  was  held that under valuation in a declaration under Section 12(1) of the Act does not amount to contravention of the restrictions imposed by that provision. In the case in hand before us the Additional  Collector  of  Customs had held  that  a sort of "phatka"  business  was  being carried on  by  the  socalled consignees abroad and the shippers in India were playing the role  of  brokers and in that role they  had  undertaken  to remit  to them invisibly the profits earned out of  "phatka" business.  It  had  been  further  held  that  the  shippers appeared  to be conscious that they could not remit  profits legally  and  hence  they had to harness  into  service  the medium  of  export business in this  connection.  The  above

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facts clearly disclose that the  petitioner firm had made an attempt to remit the profits to the cosignees by discounting the  profit of 79d. from the sale price and  thus  declaring the  export value of the goods at a lower value.  The  above device was detected even before the export of goods. Thus in our  view  the  present case  stands  on  totally  different circumstances and the ratio of the above mentioned cases  of this Court cannot be applied to the case in hand before  us. The learned Judge of the Divisional Bench of the High  Court had correctly distinguished the above cases and  we find  no reason to take a different view.      In the result we find no force in this appeal and it is accordingly dismissed with costs. R.P.                                            Appeal dismissed.                                                        829