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TMI Blog1978 (10) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... be held against it on the ground that the firm failed to repatriate the entire invoice value or the total export proceeds in respect of a consignment of dried prawns sent to Hong Kong during 1970. The charge proceeded to state that even out of the amounts actually realised by the sale of the goods at the foreign port, certain deductions had been made, for which the permission of the Reserve Bank of India had not been obtained and that hence there was a contravention of the provisions of section 12(2) of the Act. That the transaction of export was by way of consignment sale was not disputed by the department. In reply to the aforesaid notice the appellant submitted that the firm had been exporting prawns on consignment basis for the past fifty years to its accredited Hong Kong agents and that the usual system recognised and accepted by the customs authorities and the Reserve Bank of India was to allow the goods to be exported on consignment or on account sale basis after making out a provisional invoice where under the value will be put at as high a rate as possible. It was further pointed out that the practice was that a substantial portion of the invoice value will be drawn by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ened section 12(2) of the Act since the firm had not obtained the prior permission of the Reserve Bank of India for deduction of the sale commission of 3% paid to the consignee at Hong Kong. On the basis of the said conclusion reached by him the Deputy Director passed separate orders in the two cases imposing on the appellant a penalty of Rs. 5,000 in each case under section 23(1)( a ) of the Act. The appellant thereupon preferred two appeals before the Foreign Exchange Regulation Appellate Board reiterating its contention that the firm had not contravened the provisions of section 12(2) of the Act. The Appellate Board agreed with the contention advanced on the side of the appellant that in the case of consignment sales the value mentioned in the invoice could be only an estimate and that it was open to the exporter to show by appropriate evidence that the money actually realised by the transaction was less than the figure shown in the invoice. The Board also took note of the fact that vouchers had been produced by the appellant in respect of the items of deductions representing the expenses incurred by the foreign company and that those vouchers had been already shown to the Reser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsignee and the commission agreed to be paid to the consignee had been repatriated to India and that hence there was no contravention of section 12(2) of the Act. These contentions were rejected by the Deputy Director and by two separate orders he imposed on the appellant-firm a penalty of Rs. 2,500 in each case. The appellant took up the matter in appeal before the Foreign Exchange Regulation Appellate Board reiterating its contention that the firm had not in any manner contravened the provisions of section 12(2) of the Act. The appeals filed by the appellant were heard by the Board along with the appeals filed by M/s. N.A. Paul Co. (the appellant in M.F.A. No. 39 of 1976) and the Board found that the facts in both sets of cases were exactly similar. In respect of the above transactions of the appellant firm also, the Board found that they were only consignment sales. However, in view of the conclusion reached by it in the appeals filed by N.A. Paul Co. (disposed of by order dated 29th March, 1976), that the failure to obtain prior permission of the Reserve Bank for the deduction in respect of commission paid to the foreign party constituted contravention of section 12(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the prescribed period has expired and payment for the goods representing the full amount as aforesaid has not been made in the prescribed manner. " It is not disputed that dried prawns is a category of goods covered by the notification issued by the Central Govt. under sub-section (1) and that hence the provisions of sub-section (2) are applicable in these cases. The question to be decided is whether in respect of consignment sales effected by an exporter the prior permission of the Reserve Bank is necessary for allowing the consignee to deduct the agreed commission from out of the proceeds realised by the sale of the goods in the foreign country. As pointed out by the Supreme Court in Union of India v. Shreeram Durga Prasad (P.) Ltd., AIR 1970 SC 1597, in the case of goods exported on consignment basis, the exporter can give at the time of making the declaration under sub-section (1) only an estimated value because it will not be possible for him to know the exact value for which the goods will ultimately be sold in the foreign market. The incidents of such consignment sales have been succinctly stated as follows in the Business Encyclopaedia and Legal Adviser by W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the consignor under the statement of account (account sales) by way of the balance of sale proceeds after deduction of expenses and the agreed commission. It is not contended on the side of the department that the case put forward by the appellants regarding the rate of commission agreed as between them and the consignee is not bona fide and true. Inasmuch as it has been found by the Appellate Board that the transactions in question were truly consignment sales and there being nothing to show that the deductions made by the consignee in respect of expenditure and commission were not factually true and not commercially reasonable, it cannot, in our opinion, be said that the payments received in India by way of repatriation did not represent the full amount payable to the appellants by the foreign buyer in respect of the goods. In our opinion, the permission of the Reserve. Bank is necessary under clause ( b ) only if any deduction is to be made from out of the amount payable to the consignor by the foreign buyer. In the case of consignment sales the amount payable to the consignor can be only the net proceeds left after deducting the expenses incurred by the consignee as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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