2003 (7) TMI 74 - SC - Customs

Whether over-invoicing of the goods for export would mean attempt to export prohibited goods ? Whether, while exporting the good, exporter has to give value of the goods as provided under Section 14 of the Customs Act, 1962 (hereinafter referred to as the Act ) or the value of goods which he expects to receive on sale of goods in the overseas market? Held that - In the present case, as found by the authorities, 28,000 pieces of ladies skirts at the rate of 10.25 per piece, export value of which was mentioned as ₹ 1,21,54,447/-, were sought to be exported. The market price of such skirts was ascertained to be ₹ 45/- per piece and on that basis total value of the goods came to be ₹ 9,53,280/-. The exporter claimed a drawback of ₹ 21,87,800/- on the consignment on the basis that value of each skirt was ₹ 78/- per piece. No doubt, during the enquiry exporter admitted that the market price of ₹ 45/- per piece was acceptable to him and the claim for drawback was withdrawn. Thereafter, the exporter has not led any evidence that export value mentioned in the shipping bill was the true sale consideration for the goods sought to be exported. Considering the aforesaid facts and also the fact that this was the second case belonging to the same exporter, the authorities arrived at the conclusion that it was an organized racket to claim fraudulent drawback or an act of deliberate over-invoicing the readymade garments. Hence, the authority imposed redemption fine as well as levied penalty. In our view, this finding arrived at by the authorities below cannot be said to be, in any way, unreasonable which would call for interference by this Court in this appeal. In the result, the appeal is dismissed.

Issues Involved:
1. Whether over-invoicing of the goods for export constitutes an attempt to export 'prohibited goods'.
2. Whether the exporter must declare the value of the goods as per Section 14 of the Customs Act, 1962, or the value expected to be received from the overseas market.

Issue-wise Detailed Analysis:

Issue A: Over-invoicing and Prohibited Goods
The primary issue was whether over-invoicing of export goods equates to an attempt to export 'prohibited goods' under the Customs Act, 1962. The appellant, engaged in garment export, had over-invoiced ladies' skirts at $10.25 per piece, while the market price was Rs. 45/- per piece. The Customs Commissioner found this to be a deliberate act to claim fraudulent drawback, noting it was the second such instance by the same exporter. Citing Section 113(d) of the Act, the Commissioner held that the goods were liable for confiscation as they were attempted to be exported contrary to prohibitions imposed by law. The Tribunal upheld this decision, leading to the present appeal.

The Supreme Court referred to Section 2(33) of the Act defining 'prohibited goods' and Section 11 empowering the Central Government to impose conditions on import/export. The Court emphasized that non-compliance with prescribed conditions renders goods 'prohibited'. The Court cited the precedent in Shekih Mohd. Omer v. Collector of Customs, Calcutta, affirming that 'any prohibition' includes all types of restrictions. The Court concluded that over-invoicing, resulting in unauthorized foreign currency transactions, constitutes a violation of export conditions, thus making the goods 'prohibited'.

Issue B: Declaration of Export Value
The second issue was whether the exporter must declare the value as per Section 14 of the Customs Act or the expected overseas market value. The appellant argued that the exporter should declare the value expected from the overseas purchaser, not the market value in India. The Court, however, referred to Section 18 of the Foreign Exchange Regulation Act, 1973, which mandates exporters to declare the full export value or the expected value in the overseas market, affirming that the full value will be received. The Court also referenced Section 14 of the Customs Act, which provides the procedure for determining the value of goods for assessment purposes, emphasizing that the declared value must reflect the true sale consideration in international trade.

The Court stated that even if no duty is leviable, the method for determining the value under Section 14 must be followed to ascertain the true export value. The Court noted that the appellant had admitted the market price of Rs. 45/- per piece and had not provided evidence to support the higher declared value. The Court dismissed the hypothetical argument that higher export value could be genuine, stating it depends on the facts and evidence of each case. The Court concluded that the appellant's over-invoicing was not justified and upheld the penalties imposed by the authorities.

Conclusion:
The Supreme Court dismissed the appeal, affirming that over-invoicing constitutes an attempt to export 'prohibited goods' and that exporters must declare the true export value as per the Customs Act and Foreign Exchange Regulation Act. The Court upheld the penalties imposed for fraudulent drawback claims and deliberate over-invoicing.

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