: In accordance with the opinion of the majority, these appeals are dismissed with costs. One hearing fee.
P.K. Goswami, J.
(33). We had the advantage of studying the judgment just now delivered by our brother Sikri, J., but we regret that we are unable to agree with the conclusions reached by him. After carefully analysing the arguments advanced before us we have come to the conclusion that no grounds were made out to interfere with the order of the Appellate Bench of the Madras High Court. We shall now proceed to give our reasons in support of our conclusion.
(34) The respondents in these appeals are exporters of manganese ore. It is said that they had exported large quantities of manganese ore after ostensibly complying with the formalities of law but in reality they had under-invoiced the various consignments sent by them and further that they had failed to repatriate foreign exchange of the value of about three crores of rupees obtained by them as the price of the manganese ore exported. It is said that by so doing they had contravened Section 12(1) of the Foreign Exchange Regulation Act, 1947 (to be hereinafter referred to as the Act) read with Section 23(A) of that Act and Sections 19 and 167(8) of the Sea Customs Act. The case for the appellants is that during the search of the houses of some of respondents on suspicion that they had hoarded gold, certain documents from the house of some of the respondents were seized and those documents disclosed the facts set out above. On the basis of the said information the Deputy Collector of Customs, Visakhapatnam issued several notices to the respondents requiring them to show cause why action should not be taken against them under the aforementioned provisions. On receipt of those notices the respondents moved the High Court of Madras under Article 226 of the Constitution praying that that Court may be pleased to quash the show cause notices in question and prohibit the appellants from taking any further action on the basis of those notices.
(35) Those petitions were dismissed by Kailasam, J., on September 1, 1966, but his orders were reversed by the Appellate Bench of that Court by its Judgment, dated September 12, 1967. The Appellate Bench granted the reliefs prayed for by the respondents. It is as against that decision these appeals have been brought after obtaining the necessary certificates from the High Court.
(36) The only question that arises for decision in these appeals is whether on the facts set out in the show cause notices, which facts have to be assumed to be correct for the purpose of these proceedings, the respondents can be held to have contravened Section 12(1) which reads :
'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 any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless a declaration supported by such evidence as may be prescribed or specified, is furnished by the exporter to the prescribed authority that the amount representing the full export value of the goods has been, or will within the prescribed period be, paid in the prescribed manner.'
(37) On August 4, 1947, the Central Government issued a notification prohibiting the export of all goods to any place outside a India unless a declaration supported by such evidence as may be prescribed is furnished by the exporter to the prescribed authority that the amount representing the full export value of the goods has been or will within the prescribed period be, paid in the prescribed manner. Rule 3 of the Foreign Exchange Regulation Rules, 1952, framed under Section 27 of the Act provides that a declaration under Section 12 of the Act shall be in one of the forms set out in the First Schedule as the Reserve Bank may by notification in the Official Gazette specify as appropriate to the requirements of a case. The form that is relevant for our present purpose is G.R. 1. Rule 5 empowers the Reserve Bank, the Collector of Customs or the postal authorities to require the exporter to furnish such evidence in support of the declaration as may satisfy them, that the exporter is a person resident in India or has a place of business in India. These authorities may also require the exporter to produce in support of the declaration such evidence as may be in his possession or power to satisfy them, (i) that the destination stated on the declaration is the final place of destination of the goods exported, (ii) that the invoice value stated in the declaration is the full export value of the goods and (iii) that the amount representing the full export value of the goods had been or will be paid to the exporter. Form G.R. 1 stipulates that the exporter should furnish the information called for therein. Therein the exporter is also required to make the following declaration :
'I hereby declare that I am the seller/consignor of the goods in respect of which this declaration is made and that the particulars given above are true and (a) that the invoice value declared is the full export value of the goods and is the same as that contracted with the buyer; (b) that this is a fair valuation of the goods which are unsold.
I/My principals undertake that I/they will deliver to the bank mentioned below the foreign exchange/rupee proceeds resulting from the export of these goods or before ..............'
(38) It is not denied that the respondents before exporting the goods in question had furnished declarations in the prescribed forms. Therein they had declared that the full export value of the goods has been or will within the prescribed period be paid in the prescribed manner. It is also not denied that they had furnished to the appropriate authorities the prescribed evidence. The case against them as mentioned earlier, is that they had under-invoiced the goods and failed to repatriate a portion of the foreign exchange earned by them. It is also alleged that they gave incorrect information in their declarations. If these allegations are correct which we have to assume to be correct for the purpose of this case, then it is obvious that the declarations given by the respondents do not comply with the requirements of Rule 5.
(39) Section 22 of the Act provides that no person when making an application or declaration to any authority or person for any purpose under the Act shall give any information or make any statement which he knows or has reasonable cause to believe to be false or not true, in any material particular.
(40) Section 23 prescribes that if any person contravenes the provisions of Section 12 or of any rule, direction or order made thereunder he shall (a) be liable to such penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place, or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement in the manner provided in the act or (b) upon conviction by a court, be punishable with imprisonment for a term which may extend to two years, or with fine, or with both. In view of these provisions it was not disputed before us that if the information given by the respondents in the aforementioned declarations was false to the knowledge of those who made those declarations or if they had reasonable cause to believe that it was false or not true in any material particular then they are liable to be dealt with under Section 23.
(41) Sub-section (2) of Section 12 provides that :
'where any export of goods had been made to which a notification under sub-section (1) applies, no person entitled to sell, or procure the sale of the said goods shall, except with the permission of the Reserve Bank, do or refrain from doing anything or take or refrain from taking any action which has the effect of securing that :
(b) payment for the goods is made otherwise than in the prescribed manner or does not represent the full amount payable by the foreign buyer in respect of the goods, subject to such deductions, if any, as may be allowed by the Reserve Bank or is delayed to such extent as aforesaid .......'
(42) The contravention of the above provisions is punishable under Section 23. Hence the respondents' failure to repatriate any part of the foreign exchange earned by them by the sale of the manganese ore exported can be penalised by imposing on them a penalty not exceeding three times the value of the foreign exchange in respect of which the contravention had taken place or Rs. 5,000/- whichever is more as may be adjudged by the Director of Enforcement in the manner provided in the Act. Hence it is open to the Director of Enforcement to levy on such of the respondents as have contravened Section 12(2), penalty not exceeding three times the value of the foreign exchange not repatriated which in the present case can be about nine crores of rupees. They may also be punished under Section 23(1)(b). This position is conceded by the Counsel appearing for the appellants. But it is urged on behalf of the appellants that for the offences committee by the respondents they are not only liable to be punished under Section 23 but also under Section 23(A). The Appellate Bench of the Madras High Court negatived that contention. Section 23(A) as it stood at the relevant time provided that -
'without prejudice to the provisions of Section 23 or any other provision contained in this Act, the restrictions imposed by .......... sub-section (1) of Section 12 . ....... shall be deemed to have been imposed under Section 19 of the Sea Customs Act, 1878, and all provisions of that Act shall have effect accordingly, except that Section 183 thereof shall have effect as if for the word 'shall' therein the word 'may' were substituted.'
(43) If the allegations mentioned in the show cause notices come within the scope of Section 23(a) then it necessarily follows that they will be governed by the provisions of Section 19 and Section 167(8) of the Sea Customs Act, 1878. Section 19 of the Sea Customs Act provides -
'that the Central Government may from time to time by notification in the Official Gazette prohibit or restrict the bringing or taking by sea or by land goods of any specified description into or out of India across any customs frontiers as defined by the Central Government.'
(44) This section is similar to Section 12(1) of the Act. Section 167(8) provides for punishments for offences under that Act. That section to the extent material for our present purpose reads :
'The offences mentioned in the first column of the following schedule shall be punishable to the extent mentioned in the third column of the same with reference to such offences respectively :- Offences Sections of Penaltiesthis Act towhich offencehas reference.8. If any goods, the 18 and 19 Such goods shall beimportation or exportation liable to confiscation;of which is for the time andbeing prohibited or restrictedby or under Chapter any person concerned inIV of this Act, be imported any such offence shall beinto or exported from India liable to a penalty notcontrary to such prohibition exceeding three times theor restriction; or value of the goods, ornot exceeding onethousand rupees.'if any attempt be made so toimport or export any suchgoods; orif any such goods be foundin any package produced toany Officer of Customs ascontaining no such goods;orif any such goods, or anydutiable goods, be foundeither before or afterland or shipment to havebeen concealed in anymanner on board of anyvessel within the limitsof any port in India; orif any goods, the exportationof which isprohibited or restrictedas aforesaid, be broughtto any wharf in order tobe put on board or anyvessel for exportationcontrary to such prohibitionor restriction.
(45) If an offence falls under Section 23-A the fact that the said offence is also punishable under Section 23 is immaterial. The provisions of Section 23(A) are without prejudice to the provisions of Section 23. The mere fact that the offences alleged against the respondents are punishable under Section 23 would not exclude the application of Section 23(A). Therefore all that we have to see is whether those offences fall within the ambit of Section 23(A). If they do then the impugned show cause notices must be held to be valid. If they do not, then no proceedings can be taken on the basis of those notices.
(46) Before a case can be held to fall within the scope of Section 23(A) it must be shown that there has been a contravention of the restrictions imposed by Section 12(1). Therefore we have to find out what those restrictions are The only restrictions placed by Section 12(1), read with the Central Government Notification, dated August 4, 1947, is that no one should export any goods from this country without furnishing the declaration mentioned in Section 12(1). Admittedly the stipulated declarations in the prescribed forms have been furnished. The evidence specified have also been given. Therefore, prima facie, there was no contravention of Section 12(1). What is said against the respondent is that the invoice price mentioned by them in the declarations did not represent the full export value; hence the declarations given by them are invalid declarations which means that the concerned goods were exported without furnishing the declarations required by Section 12(1). It is not possible to accept this argument. The declarations given do satisfy the requirements of Section 12(1), though they do not correctly furnish all the informations asked for in the form. Such declarations cannot be considered as non-est. The informations called for in the prescribed form cannot be considered as restrictions imposed by Sections 12(1). They are merely informations called for the proper exercise of the powers under the Act. Many of them do not relate to the restrictions imposed by Section 12(1). Neither Section 12(1), nor any other provision in the Act empower the rule making authority to add to the restrictions imposed by Section 12(1). For finding out the restrictions imposed by Section 12(1) we have only to look to that section. The requirement of that section is satisfied if the stipulated declaration supported by the evidence prescribed or specified is furnished. The contravention complained of in this case is really the contravention of Section 12(2) and Rules 5. The former is punishable under Section 23 and the latter under Section 23, read with Section 22.
(47) The declaration required by Section 12(1) is only to the effect that the amount representing the full export value of the goods has been or will within the prescribed period be, paid in the prescribed manner. This is as it should be because this section governs both the goods sold to the foreign buyers as well as to those sent on consignment basis. So far as the goods sold to the foreign buyer are concerned it is generally possible for the exporter to know the exact export value but that would not be the position when the goods are sent on consignment basis. In the case of goods sent on consignment basis, the exporter can give only an estimated value. The main purpose of Section 12(1) is to get a declaration from the exporter that he has either brought or will bring back the amount representing the full export value of the goods exported. There are other provisions in the Act to deal with other situations. We shall presently refer to them.
(48) If we are to hold that every declaration which does not state accurately the full export value of the goods exported is a contravention of the restrictions imposed by Section 12(1) then all exports on consignment basis must be held to contravene the restrictions imposed by Section 12(1). Admittedly Section 12(1) governs every type of export. Again it is hard to believe that the Legislature intended that any minor mistake in giving the full export value should be penalised in the manner provided in Section 23(A). The wording of Section 12(1) does not support such a conclusion. Such a conclusion does not accord with the purpose of Section 12(1).
(49) It is true that the regulations contained in the Act are enacted in the economic and financial interest of this country. The contravention of those regulations, which we were told are widespread are affecting vital economic interest of this country. Therefore, the rigour and sanctity of those regulations should be maintained but at the same time it should not be forgotten that Section 12(1) is a penal section. The true rule of construction of a section like Section 12(1) is, if we may say so with respect, as mentioned by Plowman, J.,in Re H.P.C. Productions Ltd (1962) Ch D 466. Therein learned Judge observed :
'I approach the question of the construction of the Exchange Control Act in the light of the principles stated by Upjohn, J., in London and Country Commercial Properties Investments v. Attorney-General to which Mr. Begnall referred. In that case the court was concerned with the construction of the Borrowing (Control and Guarantees) Act, 1946 and the Control of Borrowing Orders, 1947. Upjohn, J., said : 'The first question I have to consider is what are the principles of construction which I must adopt in construing this Act and this order ......... I have to bear in mind that this is a penal statute. It indeed, I suppose, represents the high water-mark of the Parliamentary invasion of the traditional rights of the subjects of this realm.' Then he went on to explain why that was so and continued : 'In those circumstances what are the canons of construction to be adopted I do not propose to refer to the authorities at length. I think that the proper approach to the construction of such a statute as this is that I must construe it as I would any other instrument, that is to say, I must look at all the surrounding circumstances, I must look at the mischief intended to be remedied, I must above all give effect to the words that have been used in the section. That is plain from the decision in Dyke v. Elliot (1872) LR 4, P C 184, see, in particular, the judgment of James, L.J., but if on construing the relevant sections of the Act and the order there appears any reasonable doubt or ambiguity, then being a penal statute I must apply the principles laid down succinctly by Lord Esher in Tuck and Sons v. Priester (1887) 19 QBD 629.'
(50) In London and North Eastern Rly. Co. v. Berriman (1946) AC 286 , Lord Macmillan observed :
'Where penalties for infringement are imposed it is not legitimate to stretch the language of a rule, however beneficent its intention, beyond the fair and ordinary meaning of its language.'
This Court in Tolaram Relumal and another v. State of Bombay : 1SCR158 , speaking through Mahajan, C.J., observed :
'It is not competent to the Court to stretch the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature.'
(51) Herein before we have examined the language of Section 12(1) and its purpose. We have also referred to the provisions which provide for the punishment of the contraventions complained of in these cases. Those provisions are adequate to meet the situation. In our opinion the language of Section 12(1) does not permit the acceptance of the interpretation placed on it by the appellants nor are we able to come to the conclusion that the Legislature intended that the offences complained of in these proceedings should be made punishable under Section 23(A). If the interpretation sought to be placed by the appellants on Section 12(1) is accepted it may result in unnecessary hardship in numerous cases.
(52) There are two facets in every export, one relating to the goods exported and the other relating to the foreign exchange earned as a result of the export. Broadly speaking the former aspect is dealt with by the Customs authorities and the latter either by the Reserve Bank or by the Director of Enforcement. The price of the goods exported has to be mentioned in the invoice. But the Reserve Bank has power to examine whether the price mentioned in the invoice is correct. Section 12(5) provides that where in relation to any goods exported the value as stated in the invoice is less than the amount which in the opinion of the Reserve Bank represents the full export value of those goods, the Reserve Bank may issue an order requiring the person holding the shipping documents to retain possession thereof until such time as the exporter of the goods has made arrangements for the Reserve Bank or a person authorised by the Reserve Bank to receive on behalf of the exporter payment in the prescribed manner of an amount which represents in the opinion of the Reserve Bank the full export value of the goods. Sub-section (6) of Section 12 says that for the purpose of ensuring compliance with the provisions of that section and any orders or directions made thereunder, the Reserve Bank may require any person making any exports of goods to which a notification under sub-section (1) applies to exhibit contracts with his foreign buyer or other evidence to show that the full amount payable by the said buyer in respect of the goods has been or will within the prescribed period be paid in the prescribed manner. These provisions go to indicate that so far as the value of the goods exported is concerned the matter is left primarily in the hands of the Reserve Bank and the Customs authorities are not burdened with that work. This aspect becomes relevant in ascertaining the true scope of Section 12(1). If we bear in mind the scheme of the Act. It is clear that so far as the Customs authorities are concerned all that they have to see is that no goods are exported without furnishing the declaration prescribed under Section 12(1). Once that stage is passed the rest of the matter is left in the hands of the Reserve Bank and the Director of Enforcement.
(53) In view of our above conclusion it is unnecessary for us to examine the other contentions advanced on behalf of the parties. In the result these appeals fail and they are dismissed with costs. One hearing fee.