Union of India (UOI) and Another vs Marcel Nevens and Others

P. Govindan Nair, C.J.—These Writ Appeals are taken respectively from the judgments in Writ Petition Nos. 792, 2573, 1427, 1426,

1425, 2548, 1428, 885, 1424 and 246 all of the year 1971. Writ Petition Nos. 792, 1427, 1426, 1425, 2548, 1428 and 1424 of 1971 were

taken by, what we may term, agents, which term will be clarified when we state the facts. The other writ petitions, to which reference has been

made were by the exporters.

The short question that arose for decision before Rama prasada Rao, J., in the Writ petitions was whether there had been violation of Section

12(1) of the Foreign Exchange Regulation Act, 1947, by the Writ Petitioners. We shall extract Section 12(1) as amended presently. Section 23-A

of the same Act has provided that the restriction or prohibition imposed by Section 12(1) shall be deemed to have been imposed u/s 11 of the

Custom Act and all the provisions of that Act shall have effect accordingly. It is by virtue of this provision in the Foreign Exchange Regulation Act

that a show cause notice was issued to the writ Petitioner relying on Sections 113(d) and (i) read with Section 50 of the Customs Act, 1962,

asking them to explain why the goods, which were sought to be exported, should not be confiscated and why penalty should act be imposed on

them applying Sections 113, and 114 of the Customs Act. It is at this stage necessary to extract Section 12(1) of the Foreign Exchange Regulation

Act, 1947, as amended:

12(1). The Central Government may, by notification in the official gazette prohibit the taking or sending out by land, sea or air (hereinafter in this

section referred to as export) of all goods or of any goods or class of goods specified in the notification from India directly or indirectly to any

place so specified unless the exporters furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as

may be prescribed or so specified and trot in all materials particulars which, among others shall include the amount representing-

(i) the full expert value of the goads; or

(ii) if the full export value of the goods is not ascertainable at live time of expert the value which the exporter, having regard to the prevailing market

conditions expects to receive on the sale of the goods in the course of international trade.

and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) has been or within the

prescribed period be, paid in the prescribed manner.

Earlier the same question arose before this Court and it was dealt with by Palaniswami J., in the common judgment disposing of Writ Petition

Nos. 3758 to 3761 of 1970 and certain other writ Petitions. The learned Judge came to the conclusion that there was no material whatsoever

before the Collector of Customs, who took action u/s 113 and 114 of the Customs Act, for confiscating the goods and imposing penalties on the

Petitioners before the learned Judge. Ramaprasada Rao, J. followed the decision of Palaniswami J. and allowed the two sets of writ petitions, one

by the exporters and the other by the agents and set aside the confiscation orders and the orders imposing the penalty by applying the principle of

the decision rendered by Palaniswami, J. There is no discussion in the judgment under appeal in these cases. Reliance has been placed solely on

the reasoning of Palaniswami, J. in the judgment referred to.

It is argued on behalf of the Union of India and the concerned Secretary, the Appellants before us, that the reasoning of the Collector and the

observations made by him and the inferences apparently drawn by the Collector would indicate that there was some secret understanding or

agreement between Messrs. Simson and Mc Conechy Ltd., functioning in India who are admittedly the agents of Messrs. Bevingtons and Sons

Limited, London and Bevingtons and Sons and the principals and the agents had similar agreement with the German firm Messrs. Zentral

Kommerz that the goods despatched by the writ Petitioners allegedly intended for the German firm, were not really intended for them but for

Bevington

and Sons Limited, London. The Collector of Customs heavily relied on the materials said to have been collected by the customs authorities on the

search of the premises of Messrs. Simson and Me Conechy Limited and certain doubtful entrees in the contract and came to the conclusion that

the real contract of export was between the exporter and Messrs. Bevington and Sons Limited, and not between the exporter and the German firm

Zental Kommerz. The Collector of Customs also; as a consequence f his understanding, came to the conclusion that the mode of payment for the

goods exported were to be in Sterling and not to be in Indian rupees. Therefore, the Collector of Customs had no difficulty in holding that the

declaration that had been made, as envisaged by Section 12(1) and the affirmation that had been made u/s 50(2) were not true. Palaniswamy J.,

has dealt with the matter in detail in the judgment referred to by Ramaprasada Rao J., in the judgment under appeal in these cases and it is not

necessary to state all the grounds mentioned therein. We would, however, like to emphasise certain aspects which we consider are the salient

features of this type of cases.

The first aspect that we would like to point out that it is the violation of Section 12(1) of the Foreign Exchange Regulation Act that may be

penalized by applying the provisions of the Customs Act and not the violation of any of the rules framed or any direction issued under any of the

provisions of the law. We need not elaborate on this, because the point is covered by the decision of the Supreme Court reported in Becker Gray

and Co. (1930) Ltd. and Others Vs. Union of India (UOI) and Another, .

The Second aspect which we must refer to is what has been emphasized by the Supreme Court in the decision reported in South India Coir

Mills, Poockakkal Vs. The Additional Collector of Customs and Central Excise and Another, We shall extract paragraph 8 of this judgment:

The declaration of the buyer�s name even if wrong in the shipping bill and invoice did not attract the provisions of Section 12(1) of the Foreign

Exchange Regulation Act. In the from prescribed under Rule 3 of the Rules (G.R. 1 being one such form) the buyer''s name was not to be inserted.

It was not given in the declaration furnished by the Appellant in that form. But the finding of the Additional Collector is that the destination of the

goods was Trieste in Italy and in the declaration furnished in form G.R. 1 the Appellant had stated that the payment was to be received in India in

Indian rupees and this statement was untrue as being against the prescribed manner.

The leaned Judge of the Kerala High Court, who dealt with the writ petition (which give rise to the appeal before the Supreme Court) had

dismissed it, held that Section 12(1)(ii) would not apply had the obligation of the exporter was:

(a) to furnish to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed;

(b) which declaration must be true in all material particulars and that among others shall include the amount representing the full export value of the

goods ; and

(c) he must affirm in the said declaration that the full export value of the goods will within the prescribed period, be paid in the prescribed manner.

The learned single Judge stating that there was no case that there was no affirmation in the declaration held that Section 12(1) was not violated.

The Division Bench, before which the matter went up in appeal noticed that the declaration furnished by the Appellant did not contain an

affirmation as required by the last portion of the said sub-section. But since the mode of payment mentioned lithe declaration being contrary to Rule

7 of the rules, the Division Beach upheld the view of the Additional Collector that the Appellant had misdeclared the material particulars and

attempted to export the goods in question in contravention of the prohibition contained in Section 12(1) of the Act;

The Supreme Court referring to this conclusion reached by the Division bench observed:

On the facts and in the circumstances of this case we are constrained to held that even after the statement in column 2 of Form G.R.I. that the

country of destination of goods was Italy the statement in column 5 that the payment was to be received in India in Indian rupees was not untrue.

However, the appeal was dismissed and the decision of the Division Bench of the High Court was upheld on the ground that had he, the exporter,

made a declaration then he would certainly have violated Section 12(1) of the Act by giving such a. declarations and the omission to give a

declaration (There was no declaration) was also a violation of Section 12(1).

Here, on the face of the documents that have been filed by the exporter, there is nothing to indicate that there is any violation of Section 12(1).

The exporters had stated that the destination of the goods was a company in G.D.R., and the payment was to be made in rupees for which credit

facilities would be provided to the agents of Messrs. Bevington and Sons Ltd., in India. The Collector of Customs went behind the face value of

these statements in the relevant documents, on the basis of the impressions formed by v going through the documents obtained by a search of the

agent''s premises the Collector of Customs assumed that the real sale in question was in favour of Bevington and Sons Ltd., London and not in

favour of the German firm Zental Kommerz, Berlin. The Collector of Customs naturally came to the further conclusion that the payment would

have to be made in Sterling, since England fell under Group A in Schedule I of the Foreign Exchange Regulation Act and that, therefore, the

statement that the payments are to be made in rupees was alone an untrue statement. The whole approach was made by the Collector of Customs

on the basis of the initial impression formed. It is stated by the Collector of Customs in the earlier part of the order after referring to the contentions

raised on behalf of the exporters and the agents, in paragraph 17 of his order:

I am afraid that I am unable to accept the explanation famished by them. The correspondence seized from the premises of Messrs. Simson and

M.C. Conechy provide ample evidence to show that they had a good deal of hand in planning the mode of payment for the purchase made by

them for and on behalf of Messrs. Bevington and Sons. This kind of elaborate planning including alteration and addition in crucial documents like

contracts would not have been necessary if these exports were in the nature of a straight sale by the Indian Exporters to the so-called consignee in

the Eastern European countries with Messrs. Bevington and Sons playing just the role of brokers as made out by their agents Messrs. Simson and

Mc. Conechy.

One aspect that has to be noted in this connection is that there was no material whatever before the Collector of Customs which would reveal

any secret arrangement or agreement between Bevington and Sons Ltd., and the German firm Zental Kommerz. On the other hand, the material

that was available before the Collector of Customs, to which reference was made by him, indicated that the German firm Zental Kommerz had

opened Letters of Credit for a large sum of money with the agents for the purpose of paying the exporters the value of the goods. What is

noteworthy is that a contract identical to that entered into between Bevington and Sons Ltd., through their agents Simson and Mc. Conechy in

India and the exporters had also been entered into between the exporters and the German firm. We think, with great respect, the learned Judge

Palaniswamy J., in giving importance to the opening of the Letters of Credit and the contract between the exporter and the German firm.

Proceeded on right lines arid it was on that basis that the learned Judge came to the conclusion that there was nothing to indicate that the statement

made in the documents filed by the exporters were untrue. The learned Judge also observed that there was no material to indicate, assuming that

the documents said to have been recovered from the agent Messrs Simson and Ms. Conochy Ltd., indicated that there was some underhand

dealing between Simsons and Mc. Conechy and Messrs. Bevington and Sons on which aspect the learned Judge did not reach any conclusion bat

only assumed that the ; conclusion of the Collector was correct, because the question did not arise before the learned Judge, was the writ petitions

before the Judge were all by the exporters that the exporters knew about it and had thereafter made any false declarations. It was pointed but that

the same information that must be taken to have been available to the agents Messrs. Simson and Mc. Conechy could not be attributed to the

exporters. The statements made by the exporters were accepted to be true. The order of the Collector of Customs was set aside and the writ

Petitions were allowed by Palaniswamy J., we have no doubt whatsoever that the facts being identical, the same result should follow in the case of

the applications made by the exporters which have been allowed by Ramaprasada Rao J., under the judgment under appeal. Hence Writ Appeal

Nos. 310, 316 of 1974 as wells as Writ Appeal Nos. 358 of 1973 have to be dismissed. We do so.

Regarding the other appeals, which are all by the agents, Nevene, and Simson and Mc. Conechy Ltd., a further question arose, in view of the

conclusions reached by the Collector of Customs, whether there was any material before the Collector of Customs on which a reasonable man

acting quasi judicially could reach the conclusion that was reached by the Collector of Custom Mr. Govindswaminathan, on behalf of the

Appellants in this batch of cases, we think, rightly contended that the material available was only the correspondence or documents exchanged

between the agents counsel was appearing for Messrs. Simson and Mc. Conechy Ltd., and their principals or the pencil notings said to have been

made by the said agents in the originals of these contracts and that this by no stretch of imagination can reveal that there was any understanding or

agreement between the principals Bevington and Sons Ltd., and the German firm Zental Kommerz. It is not enough if there was material to make a

guess that there could possibly have been a similar agreement between Messrs. Bevington and Sons Ltd., and the German, firm but there must be

some tangible proof. Speculations certainly should be avoided particularly when orders of confiscation and imposition of penalty are to be made.

The provision is of a penal nature. The degree of proof that is required for the penalty to be imposed is that which is required in a criminal case.

We would expect some material on the basis of which a reasonable conclusion is possible. In fact, the conclusion must not only be a possible

conclusion but must be the only conclusion that could be reached on the material before the authorities. There was no such material at all before the

Collector of Customs. In view of this, though Palaniswamy, J.''S. judgment did not deal with the case of agents, we think the conclusion reached

by the learned Judge Must apply to the agents as well since there is nothing to indicate that the contracts were not with the German firm as stated in

the contract for which payments were arranged by the German firm in rupees. We accordingly dismiss Writ Appeal Nos. 309, 311, 812, 313,

314, 315 and 317 of 1974 as well. We direct the Appellant to pay the costs to the Respondents in all these appeals.