Case: South India Coir Mills Poochakkal Vs. The Additional Collector Of Customs And Central Excise Anda

In this appeal by special leave an important question of law falls for our determination. It concerns the interpretation of section 12(1) of the Foreign Exchange Regulation Act, 1947, Central Act 7 of 1947 as it stood amended at the relevant time by Act 40 ofappellant is a firm, one of the partners or proprietors of which is Shri T. K. Seethy. It is a dealer in Coir Yarn and exports the said commodity to foreign buyers also. On March 24, 1971 a shipping bill was filed on behalf of the appellant for the export of 150 bales of Coir Yarn to Trieste a port in Italay. The consignees name in the shipping bill was shown as M/s Ferolektro, Sarajavo, Yugoslavia. Indisputably the Central Government had published a notification in the official gazette under section 12(1) of the Foreign Exchange Regulation Act prohibiting the export of coir yarn from India to certain places specified in the notification including Italy unless certain conditions were fulfilled. The exporter was, therefore, required to comply with the requirement of the said provision of law and file a declaration in the prescribed form. The relevant prescribed from in the Foreign Exchange Regulation Rules, 1952- hereinafter referred to as the Rules-framed under section 27 of the Act of 1947 was Form G.R.I. The Invoice and G. R. I. Form were drawn up by the appellant on rupee terms in accordance with the contract dated 1.3.1 971 which it claimed to have had with M/s Ferolektro, Sarajavo, Yugoslavia. The Customs Authority found that the goods were attempted to be exported to Italy while payment, according to the form, was to be received in rupees. So the appellant was asked to explain the discrepancy in the declaration. A request was made on behalf of the appellant to amend the Invoice and G.R.I. showing payment in Sterling. It was not allowed to do so. On April 20, 1971 the premises of the appellant firm and the house of its owner were simultaneously searched and certain documents including some letters exchanged between the appellant and some foreign firms of Italy were seized. It appeared to the Assistant Collector of Customs, Customs House, Cochin that the goods in question were being bought by M/s Tobia Giacomini, Italy while the buyer shown in the shipping document was M/s Ferolektro, Sarajavo, Yugoslavia. Such a discrepancy in the bill was against the provisions of section 50 of the Customs Act, 1962-Central Act 52 of 1962. The Assistant Collector further found that in the declaration furnished by the appellant in accordance with section 12(1) of the Foreign Exchange Regulation Act the manner of payment for the goods sought to be exported was contrary to Rule 7 of the Rules. The misdeclaration or untrue declaration made by the appellant in the shipping bill and G.R.I. Form was prima facie not true in material particulars and violated section 12(1) of the Foreign Exchange Regulation Act. In view of the 11th section in the Customs Act, the violation attracted the confiscation of the goods under section 113 (d) and imposition of penalty under section 114 of the said Act. A showcase notice dated May 19 , 1971 was issued by the Assistant Collector to the appellant. The appellant filed a long reply to the show cause notice. The Additional Collector of Customs by his order dated July 6, 1971 held:"By declaring the buyers name as FEROELETRO YUGOSLAVIA and the port of discharge and country of final destination as Trieste and Italy respectively in the shipping bill and the mode of payment as in rupees in the shipping bill as well as in the G. R . I. form, the exporters have misdeclared the material particulars regarding the prescribed manner of payment and have thus clearly contavened the provisions of Section 12(1) of the F.E.R.A. read with section 11 of the Customs Act. The goods are, therefore, liable for confiscation under section 113(d) and 113(i) of the Customs Act and the exporters are liable for penalty under section 114 of the Customs Act."He accordingly confiscated the goods, giving an option to the appellant to redeem them on payment of Rs. 5, 000/- in lieu thereof. A penalty of Rs. 25, 000/- was imposed under section 114 of the Customsappellant filed a writ petition in the Kerala High Court to challenge the order of the Additional Collector. It had exercised its option of getting the goods released on payment of Rs. 5, 000/-. The fine of Rs. 25, 000/- was also paid. A learned single Judge of the High Court took the view that there was no violation of section 12(1) of the Foreign Exchange Regulation Act and quashed the order of the Additional Collector.The Customs Authority took the matter in appeal before a Bench of the High Court. The Bench has allowed the appeal and up held the order of the Additional Collector. Hence this appeal was filed after obtaining special leave of this Court.

Reasoning:
In the instant case on the findings of fact recorded by the Additional Collector which were accepted to be correct by the High Court, both by the single Judge and the Division Bench, the stress seems to have been laid on the alleged violation of the requirement of giving true material particulars in thethe present case the absence of affirmation had its own signficance. It was difficult, almost impossible, for the appellant to affirm that the full export value of the goods was to be paid in one of the three modes prescribed in the Second Schedule to the Rules for the export of the goods to Italy. We are, therefore, of the opinion that although the statement in the declaration that the value of the goods mentioned in column 4 at Rs. 63, 301.50 was to be received in India in Indian rupees for the export of goods to Italy was not untrue, the affirmation, if made, would have been either false or contrary to the requirement of the law. If in the affirmation the appellant had stated that for the value of the goods exported to Italy it was to receive the payment in Indian rupees through the Chartered Bank Ltd. Cochin as per the declaration, then the affirmation would have violated section 12(1) as it would not have been an affirmation stating that the export value would be paid in the prescribed manner. Absence of affirmation in the declaration furnished by the appellant is tant amount to failure on the part of the appellant to comply with the requirement of the law engrafted in section 12(1) of the Foreign Exchange Regulation Act. That being so, the decision of the Division Bench of the High Court that the appellant had attempted to export goods in violation of the restrictions imposed under section 12(1) of the Foreign Exchange Regulation Act is fit to be upheld, but on a different basis.In cases of economic offences and specially in relation to the law of Foreign Exchange no leniency in the quantum of punishment is warranted. But o n the facts and in the circumstances of this case we feel persuaded to reduce the amount of penalty imposed upon the appellant from Rs. 25, 000/- to Rs. 15, 000/-. The direction as to the payment of Rs. 5, 000/- in lieu of confiscation of the goods is upheld. Since the law engrafted in the amended Section 12(1) of the Foreign Exchange Regulation Act was not very clear either to the Custom Authorities or to the High Court resulting in the recording of the findings against the petitioner on a wrong basis, although not affecting the substance of the view that the appellant had violated Section 12(1) of the Foreign Exchange Regulation Act, we have thought it fit to reduce the quantum of penalty by Rs. 10,we part with this case we may just mention that now the Foreign Exchange Regulation Act in force is an Act of 1973-Central Act 46 of 1973. Section 18(1)(a) is almost the same as Section 12(1) of the Act of 1947.