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J.K.A. Rajappa Chettiar Vs. the Director of Enforcement, New Delhi - Court Judgment

LegalCrystal Citation
SubjectCriminal
CourtChennai High Court
Decided On
Case NumberA.A.O. No. 223 of 1977
Judge
Reported in1982CriLJ1562
ActsForeign Exchange Regulation Act, 1947 - Sections 12(2), 23 and 23(1)
AppellantJ.K.A. Rajappa Chettiar
RespondentThe Director of Enforcement, New Delhi
Appellant AdvocateT.V. Ramanathan, ;A. Moiz and ;R. Ramanatha Iyer, Advs.
Respondent AdvocateK. Swamidurai, Adv.
Excerpt:
.....against for contravention of section 12(2) of the act, for the failure to realise the full export value of the said shipments from the concerned foreign consignee within six months from the date of the said consignment in the prescribed manner. the show cause notice only proceeds on the basis that there has been a failure to repatriate the full export value of the shipments from the concerned foreign consignees within six months as prescribed and that amounts to a contravention of s. if really there has been an over invoicing and the appellant knew that he cannot realise the full amount covered by the invoice, he would not have approached the reserve bank in february 1967, that is four years after the goods had been exported and undertaken to repatriate the full invoice value..........to his conduct in over-invoicing the export value. what all he has stated therein is that the goods exported did not fetch the invoice price and that the purchasers have absconded. it is for that reason he was not able to repatriate the full export value. the director of enforcement, however, in his order dt. 25-5-1972 referred to the fact that in the months of november and december 1963 the appellant has exported zari goods to singapore after heavily over invoicing their value with a view to obtain from the government of india the import entitlements under the export promotion scheme, which was then in force. but he did not go into the question as to what is the extent of the over invoicing with reference to each of the six consignments. however, while dealing specifically with the.....
Judgment:

Ramanujam, J.

1. This is an appeal directed against the order of the Foreign Exchange Regulation Appellant Board, dt. 21st October, 1976 upholding the order of the Director of Enforcement dt. 25-4-1972 imposing a penalty of Rs. 1,00,000/- on the appellant for violation of Section 12(2) of the Foreign Exchange Regulation Act, 1947 hereinafter referred to as the Act.

2. The appellant herein exported two shipments of G.R.I. goods as representing a firm by name Kullappa Textiles, Komarapalayam of handicrafts goods to the value of Rs. 85,000/- during November, 1963 out of which he repatriated only a sum of Rs. 7,000/- leaving a balance of Rs. 78,000/- to be repatriated. On the basis of the said export to the value of Rs. 85,000/- he obtained import entitlements to the value of Rs. 62,862/-.

3. He also sent four shipments of Zari goods to Singapore for the total invoice value of Rs. 13,44,428/- during December, 1963 as representing the firm M/s. Rajalakshmi Textiles, Komarapalayam. Out of the said invoice value only a sum of Rs. 22,000/- was repatriated leaving a balance of Rs. 14,07,428/- to be repatriated. On the basis of the said exports he also obtained import entitlements to the value of Rs. 4,78,366/-.

4. Since the portions of the declared invoice value remain un-repatriated, the Director of the Enforcement issued two show cause notices dt. 19th March, 1966 to the appellant to show cause why he should not be proceeded against for contravention of Section 12(2) of the Act, for the failure to realise the full export value of the said shipments from the concerned foreign consignee within six months from the date of the said consignment in the prescribed manner. For the said show cause notices the appellant sent a reply to the following effect :-

1. That the monies realised by the sale of goods covered by concerned G. R. I. Form were remitted towards an earlier or other bill, as all the businesses under the various Vilasams were his;

2. That since there was a great slump in the market they had to give credit facilities to the purchasers and the purchasers later made themselves scarce with the result the portions of the invoice amount could not be realised;

3. That the exported goods did not fetch the invoice price or that a few debtors absconded or that the political situation was disturbed as to obstruct normal commerce.

After considering the explanation of the appellant to the show cause notices, the Director of Enforcement, after conducting an enquiry, held that the appellant having repatriated only a sum of Rupees 22,000/- out of the total declared value of the exports of Rs. 14,29,428/- there remained Rs. 14,07,428/- un-repatriated and that the appellant not having taken any effective steps to have the said amounts repatriated he has contravened Section 12(2) of the act. In that view he imposed a penalty of Rupees 1,00,000/- on Kullappa Textiles, Komarapalayam and Rajalakshmi Textiles, Komarapalayam under Section 23(1)(a) of the Act. Aggrieved by the order of the Director of Enforcement the appellant filed an appeal before the Foreign Exchange Regulation Appellate Board (hereinafter referred to as the Appellate Board) raising various contentions. The Appellant Board, however, rejected those contentions and agreed with the view taken by the Director of Enforcement that there has been a violation of S. 12(2) of the Act and that the penalty of Rupees 1,00,000/- levied under Section 23 of the Act cannot be regarded as excessive having regard to the foreign exchange involved and the benefit of import entitlements obtained by the appellant. Aggrieved by the decision of the Appellate Board the appellant has come before this Court. The learned counsel for the appellant has raised substantially the following three contentions.

5. Firstly he contends that the Director of Enforcement proceeds on the basis that the appellant has resorted to over invoicing and that if there is in fact over invoicing the charge of non-repatriation cannot be sustained in view of the decision of the Supreme Court in Director, Enforcement Directorate, Ministry of Finance v. M/s. K. O. Krishnaswamy : [1980]1SCR1092 . The next contention advanced by the learned counsel is that even if there is a factual non-repatriation of certain amounts, the mere non-repatriation will not bring the appellant under the mischief of Section 12(2) for S. 12(2) contemplates the intention not to repatriate and that in this case there is enough material to indicate that the appellant took all possible steps to repatriate the amounts which remain un-realised. The third contention urged is that in any event the penalty of such a large sum of Rs. 1,00,000/- is not justified in this case where the appellant has repatriated more than 90 per cent of the total value of the exports and therefore the authorities below should not have imposed such a large amount as penalty.

6. Taking the first of the above three contentions it is seen that the show cause notice does not actually proceed on the basis that the appellant has resorted to over-invoicing. The show cause notice only proceeds on the basis that there has been a failure to repatriate the full export value of the shipments from the concerned foreign consignees within six months as prescribed and that amounts to a contravention of S. 12(2) of the Act. In the reply given by the appellant to show cause notices there is no reference to his conduct in over-invoicing the export value. What all he has stated therein is that the goods exported did not fetch the invoice price and that the purchasers have absconded. It is for that reason he was not able to repatriate the full export value. The Director of Enforcement, however, in his order dt. 25-5-1972 referred to the fact that in the months of November and December 1963 the appellant has exported zari goods to Singapore after heavily over invoicing their value with a view to obtain from the Government of India the import entitlements under the Export Promotion Scheme, which was then in force. But he did not go into the question as to what is the extent of the over invoicing with reference to each of the six consignments. However, while dealing specifically with the exports made by the two firms viz. Kullappa Textiles and Rajalakshmi Textiles it found that there was non-repatriation to the extent of Rupees 14,07,428/- as against he export value of Rs. 14,29,428/- and this non-repatriation has not been properly explained. Since the admitted non-repatriation of the proceeds to the extent of Rs. 14,07,428/- has not been duly explained the appellant has violated S. 12(2) of the Act. Before the Appellate Board the appellant has contended that since the Director of Enforcement has himself found that the appellant is guilty of over invoicing the finding of the Director of Enforcement of non-repatriation of the full invoiced value cannot be sustained. The learned counsel refers to the decision of the Supreme Court in Director, Enforcement Directorate, Ministry of Finance v. M/s. K. O. Krishnaswamy : [1980]1SCR1092 , where it was held that once the over invoicing is found by the Enforcement Directorate, then to that extent of over invoicing the purchaser in foreign country is not under obligation to pay the full value of the exports, that so long as there is no obligation on the part of the purchaser to pay the amount to the exporter then the offence under Section 12(2) of the act of non-repatriation of the full export value cannot be sustained. According to the Supreme Court the expression 'the full amount payable by the foreign buyer in respect of the goods' occurring in Clause (b) would mean merely the total amount which is due from the foreign buyer in respect of the goods actually exported; and what would be due from a foreign buyer has to be merely the price which he has agreed to pay and not any fanciful, unreal or inflated price which the exporter may choose to falsely incorporate in the invoice with any ulterior motives, and that the foreign buyer cannot, by any stretch of imagination, be held to be liable to pay any amount over and above the price which he has promised to pay for the goods received by him and any difference between that price and the price given in the invoice can therefore not have the attribute of having become 'payable' by him. In the case before the Supreme Court the Director of Enforcement has specifically given a finding that the non-repatriation was due to deliberate over invoicing. It is in the face of that finding the court held that if there is an over invoicing the full amount payable by the foreign buyer in respect of the goods being less than the declared value, there cannot be a violation under Section 12(2)(b) for non-repatriation of the admitted over invoice value.

7. As already pointed out in this case the charge does not proceed on the basis that non-repatriation was due to the deliberate over invoicing by the appellant. Even in his objection the appellant does not take plea of over invoicing. It is true that the Director has stated that the appellant has resorted to heavily over invoicing the export value as undertaken by him and such wilful non-repatriation amounts to a violation of S. 12(2). As a matter of fact though the Tribunal referred to the appellant's persistent conduct in over invoicing the export value while dealing with the actual two shipments by Kullappa Textiles and four shipments by Rajalakshmi Textiles there is no reference to over-invoicing at all. After analysing all the materials on record the Director found that the appellant was intentionally keeping quiet without making any effort to repatriate the amount of Rs. 14,07,428/- and this will attract S. 12(2). But we do not think that the decision of the Supreme Court in Director, Enforcement Directorate, Ministry of Finance v. M/s. K. O. Krishnaswamy : [1980]1SCR1092 will be of any help to the appellant. The facts of that case are entirely different from those on hand. Here the show cause notices and the reply sent by the appellant only proceed on the basis that there has been intentional non-repatriation though there is a causal reference in the order of the Director of Enforcement that the appellant has been resorting to the over-invoicing of the export value for purpose of obtaining the import entitlements. In the case before the Supreme Court there was a specific finding by the Enforcement authorities as regards the extent of over invoicing and it is for the amount found to have been over invoiced the exporter was proceeded against for non-repatriation under Section 12(2). It is on that specific circumstance the Supreme Court was of the view that if there is an extent of over invoicing there is no question of repatriation for that it not the amount which the purchaser in a foreign country is liable to pay in respect of the goods exported. In the case before us there is no material to indicate as to what is the extent of over invoicing. We are therefore, of the view that the causal reference to the appellant's conduct in over invoicing the export value cannot be taken to prevent the department from proceeding under Section 12(2). In this view the first submission made by the learned counsel fails.

8. In connection with the second submission the learned counsel for the appellant refers to certain correspondence that has passed between the appellant and his agents by name Balaraman and Ramaswamy at Singapore. before initiating the proceedings under the Foreign Exchange Regulation Act there was a raid in the appellant's house and in the house of Ramaswamy. In the course of search the said letters have been seized. One of the letters so seized is a letter dt. 23-3-1964 written by the appellant to Balaraman. In that letter he has asked Balaraman to collect all the amounts outstanding towards the sale price of the goods exported and if necessary the remaining unsold goods can be sold even by reducing the price. Another letter is written by Balaraman to Venkatesan at Singapore. In that letter Balaraman while calling upon the details for the part payments made in respect of the consignments sent by Rajalakshmi Textiles stated that all future collections need not be remitted towards the bills issued by Rajalakshmi textiles, but may be remitted towards the bills payable to Thirumalaiswami Industries. Another letter which was produced at the time of enquiry is a letter from Ramaswamy to Rajalakshmi Textiles, dt. 6-2-1967, stating that the amounts due to various parties can be collected within a short time; that he is taking steps to collect the amounts and send them towards the appellant's bills. Relying on these letters the learned counsel for the appellant contends that the appellant had in fact made sincere attempts to repatriate all the amounts covered by the bills and the fact that he has not succeeded in his attempt will not bring him within the mischief of S. 12(2) of the Act. Even if these letters are taken to be genuine that can only show that the appellant has called upon his agent Ramaswamy or Balaraman to collect the sale price of the goods from the foreign buyer. But so long as there is no reason as to why he or his agent has not succeeded in realising the sale price from the various purchasers the appellant cannot be taken to have made all efforts to realise the sale proceeds. As a matter of fact the appellant on behalf of Rajalakshmi Textiles has approached the Reserve Bank of India as early as on 11-2-1967 seeking extension of time till 30-6-1967 for repatriation of the amounts and was undertaken to realise the same. If really there has been an over invoicing and the appellant knew that he cannot realise the full amount covered by the invoice, he would not have approached the Reserve Bank in February 1967, that is four years after the goods had been exported and undertaken to repatriate the full invoice value within 30-6-1967. This conduct of the appellant seeking extension of time for repatriation before the Reserve Bank of India will indicate that the plea of over invoicing is clearly an afterthought conceived with a view to take advantage of the decision of the Supreme Court in Director, Enforcement Directorate, Ministry of Finance v. M/s. K. O. Krishnaswamy : [1980]1SCR1092 . Merely from the fact that the appellant had sent one or two letters to his agents at Singapore he cannot be taken to have made sincere efforts to repatriate the full sale value. Even if the appellant's agents at Singapore were not able to realise the full value from the purchasers the appellant should have been informed by them of the reason for non-realisation of the amount. In this case at no stage of the proceeding the appellant has given any explanation as to why the amount could not be realised by the purchasers. As already stated the total amount for which the goods have been exported is Rupees 14,29,428/- out of which a sum of Rupees 22,000/-, has been repatriated and a substantial portion of the export value, that is, Rs. 14,07,428/- remains unrepatriated. For non-realisation of a substantial portion of the sale price the appellant has not given any reason. In those circumstances, the appellant merely by sending a letter or two to his agent at Singapore asking him to collect the amounts as early as possible cannot relieve him of his obligation to repatriate the full export value. The learned counsel for the appellant would contend that mere non-repatriation will not be an offence under Section 12(2) and that only intentional non-repatriation can come within the mischief of that Section. In this connection the learned counsel refers to an amendment to S. 12(2) by the amending Act 55 of 1964, which was brought into force from 1st April, 1965. Both the authorities below have proceeded on the basis that it is the provision under Section 12(2) as amended in 1964 will apply. But according to the learned counsel non-amended provision will apply as the contravention has taken place in this case when the non-repatriation took place, within six months after the date of export which is admittedly before the amendment of the S. 12(2) of the Act. We are inclined to agree with the learned counsel for the appellant that it is the unamended provision of S. 12(2) that will apply and not the amended provision. The unamended provision of Section 12(2) reads as follows :-

'12(2). Where any export of goods has 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 any act with intent to secure that -

(a) the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade, or

(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'.

Thus the unamended provision of Section 12(2) will come into operation only when it is shown that the exporter has refrained from doing any act with intent to secure unreasonable delay in the sale of the goods and non-repatriation of the full amount in the prescribed manner. In this case according to the learned counsel there was no intention on the part of the appellant not to secure the payment for the goods exported. The Appellate Board has taken the direction given in one of the letters written on behalf of the appellant not to send the future collections towards the bills due to Rajalakshmi Textiles as an intention not to repatriate the value for the goods sold by Rajalakshmi Textiles. In addition to the above circumstance there is another significant admission made by the appellant in his reply to the show cause notices, wherein he has stated that monies realised by the sale of goods covered by one G.R.I. From were remitted towards an earlier or other bill, as all the business under the various Vilasams were his. Thus even if the collections have been made towards the six shipments it it possible that the amounts realised would have been credited towards other earlier bills in connection with the other firms. Therefore, we are inclined to agree with the finding of the Appellate Board that the collections made in Singapore towards the bills had not purposely been appropriated towards the six shipments referred to above. Thus there is an attempt on the part of the appellant not to repatriate the collections made in respect of the six shipments. In this view we are of the opinion that the appellant has come within the clutches of S. 12(2) of the Foreign Exchange Regulation Act.

9. Coming to the third submission made by the learned counsel for the appellant that the penalty awarded in this case is excessive, we find that under Section 23 for the contravention of S. 12(2) the maximum penalty leviable is three times the value of the foreign exchange in respect of which the contravention has taken place, or five thousand rupees, whichever is more. In this case the value of the foreign exchange in respect of which the contravention has taken place is more than Rs. 14 lakhs and the maximum penalty leviable is Rs. 42 lakhs. However the Director of Enforcement has chosen to levy a penalty of Rs. 1,00,000/-. Apart from this in levying the penalty the Director of Enforcement is justified in taking into account the benefit which the appellant obtained by way of import entitlement based on his declared invoice value for the exports made by him. Considering all these circumstances we are of the view that the penalty of Rupees 1,00,000/-, levied on the appellant cannot be said to be excessive at all. In this view of the matter the appeal fails and is dismissed with costs.

10. The learned counsel for the appellant seeks leave to appeal to Supreme Court against the judgment just now pronounced. We do not think that this is a fit and proper case which involves a substantial question of law of general importance, to be decided by the Supreme Court, as our decision mainly rests on the special facts of this case.

11. Appeal dismissed.


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