9911796707
TMI Blog1995 (5) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in these appeals. This order, therefore, disposes of the appeals on merits. 3. The facts relied on in the impugned order are not disputed. The appellants entered into two contracts with Janssen of Belgium on 18-6-1991 and 1-7-1991 for supply of certain quantities of the bulk drug named 'Cinnarizine'. The price of Cinnarizine in the two contracts was at the rate of US $195.50 per kg. and US $192.34 per kg. respectively. The same prices were shown in the invoices under which imports were made by the appellant. The Customs authorities found that in the invoice of Ethnor Ltd., Bombay, a subsidiary of Janssen who had imported the drug from Janssen, and the invoices of Geno Pharma, Goa and Glanwork Pharma, Bombay who had also imported Cinnarizine of Belgium origin, the price was US $55, US $58 and US $48 per kg. respectively. The Customs suspected that the invoices of the appellants were unusually inflated and that the inflated extra funds in foreign exchange were probably to be adjusted against some dutiable goods which would be under-invoiced. 4. It is also not disputed that Cinnarizine is bulk drug used as a raw material in the manufacture of formulation having Janssen&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable as there is nothing in section 72 of the Act to shut out other evidence, ie., the evidence other than that of the seized documents, being taken into consideration for substantiating any charge of contravention. Ground No. (D) is not material as the findings are not solely or substantially based on the certificate of the said Statutory Auditors. Ground No. (E), (G) and (H) are misconceived insofar as they dispute the acquisition of foreign exchange. When the foreign exchange is released for payment to foreign buyers, it is for and on behalf of the person who applies for the release of the foreign exchange. The fact that in such cases the foreign exchange is not physically handed over to the importer is only for operational and regulatory reasons. The appellants could not have imported the goods and become owner thereof without making payment therefor in foreign exchange. In legal terms the transaction has to be treated as if the appellants by making payment of equivalent amount in Indian currency acquired foreign exchange and made payment to the foreign seller who supplied the goods to the appellants. Physical handing over of foreign exchange is not necessary, in all cases, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice and also during the course of personal hearing; I that it is false representation of facts to state as has been done oh page 10 of the impugned order, that 'there is enough conclusive evidence of over-invoicing of this produce which has not been disputed' by the appellant; that there is no evidence on record to show that US $were siphoned out of the country, as held in the impugned order, or, that the same were retained abroad or that there was a secret understanding with Janssen of Belgium; that the appellants have been held guilty merely on the basis of suspicion and surmises, instead of establishing the charge beyond all reasonable doubts as is required in a quasi-criminal proceedings. 11. There is some substance in the contention that the show-cause notice containing the charges of contravention is vague. It is alleged in the notice that the appellant acquired foreign exchange of US $8,51,614.60 for payment towards supply of 4,870 kgs. of goods while the actual price ought to have been US $2,67,850; that the appellant paid an excess amount totalling to US $5,83,764.60 thereby not using the foreign exchange, to the extent of the said excess amount, for the purpose fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question whether the foreign exchange has been used for the purpose or not has to be examined in the sense of de facto utilisation and not in the sense of artificial meaning of non-utilisation based on the presumption. 13. The case of the appellant as stated on pp. 6-7 of the impugned order is as under: (1) The import price was a package price tied up with exports. The product was developed and marketed by Janssen under its brand name and registered in the then USSR. (2) Higher foreign exchange earning to the country was because of higher value addition. As a result of this transaction there is a net gain to the country. This has also reduced India's debt to USSR which otherwise would have to be paid for. (3) Based on the agreement of Janssen with Lupin, Lupin was not able to change the import price nor the selling price of Stugeron, since the approval of Janssen was necessary. Thus, if Lupin would not have agreed to this import price, Lupin would not have got the export contract as it was a pre-condition to import from Janssen at X-price and to export Stugeron formulations to USSR. In other words, it was imperative for Lupin to import at this price to fulfil the export cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the grant of advance licence does not help the appellant. It has also been observed that the grant of an advance licence does not permit the holder of the licence to bring/import goods of a value less than the foreign exchange released and acquired for the purpose. It appears that the learned adjudicating officer has proceeded on the assumptions that since the invoice price of Cinnarizine imported by other parties was much lower than the invoice price of Cinnarizine imported by the appellants, the appellants, have imported goods of less value than the amount of foreign exchange released to them for the purpose of that import. If this assumption, which obviously is based on the comparision of the invoices, is correct, one cannot find fault with his observations that the explanations furnished by the appellant were misconceived or fallacious or irrelevant. The issues that arise consideration, therefore, are as to what was the value of the import made by the appellant and what was the purpose for which the foreign exchange was acquired, and whether the same was utilised for that purpose ? It will be useful to set out the legal premises in which these issues are required to be exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-invoicing being followed sometimes by the importer to avoid payment of full customs duty. However, there is an important distinction between the two. Where a question arises as to whether there is an over-invoicing for the purposes of section 8(4) what is material is to see whether the importer has paid the price, actually and in good faith agreed between him and the foreign supplier, or, whether there is a clandestine understanding or arrangement whereby he has paid excess amount over and above the price of the goods, with the understanding that the excess amount would be held to the account of the importer. This inquiry is necessary because the import price of the goods varies from supplier to supplier and from importer to importer. Besides, the price may also vary if the supply is added with certain obligations or rights which may be applicable to one importer but not to others. In view thereof unless there is evidence direct or circumstantial, of a part of the invoice amount being held for the benefit of the importer, it will not be appropriate to allege over-invoicing merely on the basis of the evidence of the same goods being supplied to other importers at a lower price, pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the said para 14A.7(h) refers, is in exercise of the powers delegated to him by the RBI. Therefore, the release of foreign exchange by the authorised dealer will have to be considered as sanction of foreign exchange by the RBI after satisfying itself about the bona fides of the application and correctness of the statements made therein. Of course, if the sanction for foreign exchange has been obtained by any misrepresentation or fraud, it may lead to cancellation of the sanction but so long as the sanction remains which, in the circumstances, is evidenced by the release of foreign exchange, it is not open to any authority to question the release. 20. The above discussion should provide the correct perspective for examining the three issues set out earlier for our consideration. 21. The first issue that arises for examination is as to what should, if correctly considered, be taken the value of Cinnarizine as imported by the appellant; whether it should be the price as agreed between the appellant and Janssen or the price at what it was imported by three other parties ? It cannot be disputed, in view of the evidence on record, that the invoice price of Cinnarizine imported by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the true invoice value of the imports made by the appellant as the foreign supplier did not transfer to any of them the right to export and right to export under Janssen's brand name Stugeron. The fact that Stugeron was registered in the USSR also had commercial value which enabled the appellants to straightway export Cinnarizine with that brand name to the USSR instead of applying for registration of their own brand name. Not only that such registration process normally would have taken a minimum of two years, there was a possibility of rejection of the application. In view of these factors the price of Cinnarizine for the purpose for which the import was intended would definitely be much more than the price paid by other importers to whom all these commercial advantages of monetary value were not made available by the supplier. If these factors are taken into account there would be no justification to conclude that the higher price paid by the appellants was not the agreed price. 23. There is no evidence to suggest that apart from the contract concluded between the appellants and Janssen there was another contract or secret understanding that a lower price was actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the bona fide and correctness of the particulars mentioned therein. In the present case, the application for release of foreign exchange is backed by the advance licence which obviously is granted after consideration of the proposal on merits. The proposal contained in the application for advance licence contained the proposed price and quantity of import and export. It would be too much to say that these authorities who are directly concerned with the grant of permission for import and export and release of foreign exchange did not consider the justification for the higher price agreed to be paid for the proposed import. Since the foreign exchange was released by the bank after due consideration of the application, it will have to be accepted that the said foreign exchange was acquired by the appellant for the purpose of payment to Janssen for the supply of the specified quantities of Cinnarizine at specified price and it has been so utilised by the appellants. It is important to note that the foreign exchange was released against the application of the appellant, it cannot, therefore, be said that the foreign exchange was released to the appellants for import of Cinnarizin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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