1977 (9) TMI 128 - HC - FEMA

Summary

Issues Involved:
1. Violation of Section 12(1) of the Foreign Exchange Regulation Act, 1947.
2. Application of Sections 113 and 114 of the Customs Act, 1962.
3. Validity of the Collector of Customs' findings and conclusions.

Issue-wise Detailed Analysis:

1. Violation of Section 12(1) of the Foreign Exchange Regulation Act, 1947:

The central issue in these writ appeals was whether the writ petitioners violated Section 12(1) of the Foreign Exchange Regulation Act, 1947. Section 12(1) mandates that exporters must furnish a declaration of the full export value of the goods, or if not ascertainable, the expected value, and affirm that the full export value will be paid within the prescribed period in the prescribed manner. The court noted that the violation of Section 12(1) could be penalized under the Customs Act, as per Section 23-A of the Foreign Exchange Regulation Act.

2. Application of Sections 113 and 114 of the Customs Act, 1962:

The writ petitioners were issued show cause notices under Sections 113(d) and (i) read with Section 50 of the Customs Act, 1962, for the confiscation of goods and imposition of penalties. The Collector of Customs relied on materials obtained from a search of the premises of the agents (Simson and McConechy Ltd.) and concluded that the real contract was with Bevington and Sons, Ltd., London, not the German firm Zentral Kommerz. Consequently, he inferred that the payment was to be made in Sterling rather than Indian Rupees, thus violating Section 12(1) of the Foreign Exchange Regulation Act.

3. Validity of the Collector of Customs' Findings and Conclusions:

The court scrutinized the Collector of Customs' findings and found that there was no material evidence of any secret agreement between Bevington and Sons, Ltd., and Zentral Kommerz. The court emphasized that the violation of Section 12(1) must be based on tangible proof, not mere speculation. The court noted that the materials available, such as correspondence and pencil notings, were insufficient to prove any underhand dealings. The court reiterated that the degree of proof required for penal provisions is akin to that in criminal cases, necessitating concrete evidence.

The court referred to the judgments of Palaniswami, J., and the Supreme Court in Becker Gray and Co. v. Union of India and S. I. Goir Mills v. Addl. Collector of Customs, which highlighted that the declaration must be true in all material particulars and that the mode of payment must comply with the prescribed manner. The court agreed with Palaniswami, J.'s conclusion that there was no material before the Collector to justify the confiscation and penalties imposed on the exporters.

Conclusion:

The court dismissed the appeals, affirming that there was no violation of Section 12(1) by the exporters. The court also extended this conclusion to the agents, as there was no evidence indicating that the contracts were not with the German firm as stated. The court directed the appellants to pay the costs of the respondents in all these appeals.

Separate Judgments:

The court delivered a single judgment for all the appeals, applying the same reasoning and conclusions uniformly across the cases.