K.S. Palaniswamy, J.
1. Three firms named Messrs. Srinivas and Company, M/s. Zubaida Leather Company and M/s. Farida Prima Tannery, who are doing the business of exporters in tanned sheep skin, have filed these petitions, each firm separately with regard to its own transactions. In respect of certain exports, the respective firms either directly or through its agent, filed the concerned shipping bill and other documents before the customs officials. The Assistant Collector of Customs, on an examination of the relevant documents, came to the conclusion that the goods were actually bought only by M/s. Bevingtons and Sons, London, and not by M/s. Zentral Kommerz, GmbH Berlin, as stated in the respective declarations and that the payment ought to be in sterling 'pounds' and not in terms of rupees as stated in the original G.R.I. form filed in the Customs House and that these statements were mis-declarations contravening the provisions of Section 12 (1) of the Foreign Exchange Regulation Act, 1947. Having come to these conclusions, he set out these reasons and issued show cause notices to the petitioners stating that the goods were liable for confiscation under Sections 112-D and 113 (1) of the Customs Act, 1962, and that the exporters were liable for penal action under Section 114 of the said Act. The exporters were required to show cause why action should not be accordingly taken. The exporters gave written explanations stating inter alia-that M/s. Bevingtons and Sons, London, were dealers having extensive business connection with traders all over Europe and were acting as agents for various purchasers, that the real purchaser was M/s. Zentral Kommerz, GmbH, Berlin, and that, therefore, there was no mis-declaration either with regard to the place of destination or with regard to the consignee or with regard to the mode of payment. The Collector of Customs gave a personal hearing to the exporters who were represented by their Counsel and appears to have reserved orders. At that stage, the petitioners came to this Court with petitions to quash the show cause notices. But in the meanwhile the Collector of Customs passed orders directing confiscation of the goods and imposing personal penalties. Subsequently, the exporters filed separate petitions to quash those orders. M/s. Srinivas and Company, have filed W.P. No. 3716 of 1970 to quash the show-cause notice and W.P. No. 4076 of 1970 to quash the order of confiscation and imposition of penalty. M/s. Zubaida Leather Company, who were concerned with three transactions, have filed petitions for similar reliefs. W.P. No. 3761 and W.P. No. 4348 of 1970 relate to one transaction. W.P. Nos. 3759 and 4349 of 1970 relate to another transaction. W.P. Nos. 3758 and 4351 of 1970 relate to a third transaction. M/s. Farida Prima Tannery are petitioners in W.P. Nos. 3760 and 4350 of 1970. Though appeals lie to the Central Board of Excise and Customs, New Delhi, against the impugned orders of the Collector, the petitioners have straightaway approached this Court contending inter alia that the action by the Collector is without jurisdiction and the order is void.
2. In these petitions the petitioners have put forward the same grounds as those which they put forward in their explanations given in answer to the show cause notices, in support of their contentions that the Collector has acted without jurisdiction and that the impugned notices and orders that followed those notices are invalid. In substance, their case is that M/s. Bevingtons and Sons, Limited, London, have acted as agents of M/s. Zentral Kommerz, Berlin, that as per the terms of the contract, the amount was to be paid by M/s. Zentral Kommerz, Berlin, that, therefore, the place of destination of the goods was mentioned, as G.D.R., and that the method of payment is Indian currency. It is therefore, contended by the petitioners that they are not guilty of any mis-declaration.
3. The contention urged on behalf of the respondents is that the real purchasers are M/s. Bevingtons and Sons Ltd., London and not M/s. Zentral Kommerz, Berlin, that the place of destination is, therefore, not G.D.R., and that the method of payment is not Indian currency but sterling. It is, therefore, contended by the respondents that the petitioners are guilty of having given untrue particulars with regard to the place of destination of the goods and the method of payment and that, therefore, they have violated Section 12 (1) of the Act.
4. Before adverting to the details, which, according to the respondents, constitute mis-declaration, it is necessary prefer to Section 12 (1) of the Act. That section, as it stands at present, reads:
12. Payments for exported goods.--
(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 exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing--
(i) the full export value of the goods; or
(ii) if the export value of the goods is not ascertain able at the time of export, 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 or in a case falling under Clause (ii), the full value for which the goods are sold has been, or will within the prescribed period be, paid in the prescribed manner.
This sub-section was substituted by Central Act (XL of 1969), Section 2. Section 12 (1) as it originally stood ran as follows:
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 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 so 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.
5. The substitution of the present section was made as a result of the decision of the Supreme Court in Union of India v. Rai Bahadur : 2SCR727 . In that case, certain exporters of manganese ore filed a declaration under Section 12(1) as it then stood mentioning a certain amount as the price of the goods. The Customs Department took action under that section alleging inter alia that the exporters under-invoiced various consignments and failed to repatriate foreign exchange obtained by them. Even at the stage of the show-cause notice, the exporters approached this Court with a petition under Article 226 of the Constitution praying for an order prohibiting the Department from taking further action in pursuance of the notice. Kailasam, J., dismissed the petition. But on appeal, a Bench of this Court allowed the petition and granted-.the relief prayed for. In the appeal preferred by the Department before the Supreme Court, the question considered was whether the exporters could be said to have contravened Section 12 (1) of the Act. It was contended on behalf of the Union of India that the invoice price mentioned by the exporters in the declaration did not represent the full export value and that, therefore, the exporters made invalid declarations thereby contravening Section 12 (1). A majority of the Judges held that the declarations given by the exporters satisfied the requirements of Section 12 (1), though the exporters did not correctly furnish all the information asked for and that such declarations were not non-est. Hegde, J., who spoke for the majority of the Judges, observed at page 108:
The information called for in the prescribed form cannot be considered as restrictions imposed by Section 12 (1). They are merely information, 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 empowers the rate-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 Rule 5. The former is punishable under Section 23 and the latter under Section 23, read with Section 22.
It is to get over the said decision the amending Act was passed substituting the present Sub-section (1) of Section 12. A reading of the sub-section as it originally stood and as now substituted, gives room for serious doubt as to how far the Legislature has achieved its object in making the amendment. So far as the export value of the goods is concerned, the exporter has got to give either the full export value of the goods or, if the export value of the goods is not ascertainable at the time of the export, 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. He should also affirm in the said declaration that the full export value of the goods or in a case falling under Clause (ii), the full value for which the goods are sold has been, or will within the prescribed period be, paid in the prescribed manner. No doubt, the amendment has made the position as regards export value, clear. But as regards other matters, the section itself does not contain any language from which any restriction could be inferred. From the passage of the judgment of the Supreme Court extracted above it would be seen that for finding out what the restrictions are one must look only to the section, and that the Central Government cannot do anything by way of restrictions under Sub-section (1) of Section 12. It is only the restrictions imposed by Sub-section (1) of Section 32 among others which could be deemed to have been imposed under Section 11 of the Customs Act, 1962, and only then by virtue of Section 23-A of the Foreign Exchange Regulation Act, the provisions of the Customs Act would have effect. In other words, only if a violation of the restrictions under Sub-section (1) of Section 12 can be made out, the provisions of the Customs Act will apply. As already pointed out, the amended section has made the position clear only as regards export value and as regards other matters the section itself does not contain any restriction.
6. Mr. Parasaran, Counsel appearing for the Central Government, contended that though the amended section has rot set out in detail what the restrictions are, the amended section has to be interpreted in such a way as to achieve the object for which the amendment was made. The Counsel submitted that any declaration made with incorrect particulars would attract Sub-section (1), as it would amount to exporting goods in violation of the prohibition contained therein. It is true that it is a sound rule of interpretation that a statute should be so construed as to prevent the mischief and to advance the remedy according to the true intention of the makers of the statute. But where the language is obscure, Courts cannot incorporate additional words and that too in a section which is penal in nature. Therefore, the language of Sub-section (1) of Section 12, as amended, has to be given effect to in its literal sense, and it has to be found out whether the declarations furnished by the petitioners in these cases were not ' true in all material particulars ' within the meaning of that expression occurring in Sub-section (1) of Section 12.
7. As already noticed, three firms figure as petitioners in these cases separately. It is necessary to have an idea of the particulars which are relevant for consideration of the point in controversy. I shall set out briefly below the particulars with regard to each of the firms:
1. Messrs. Sreenivas and Company (Petitioner in W.P. Nos. 3716 and 4076 of 1970.) Declaration in the Shipping Marseilles in transit Bill as to the port of to G.D.R.destination : Country of destination : G.D.R. Consignee : Messrs. Zentral Kommerz GmbH, Berlin.G.R.I. Form Country of destination : France in transit to G.D.R.Method by which payment has to be received in India : Indian currency. (Petitioners in W.P. Nos. 2. Messrs. Zubaida Leather Company : 3761 and 4348 of 1970). Port of discharge : Genoa in transit to G.D.R. Country of final destination : Italy/G.D.R.G.R.I. Form Country of destination : Genoa in transit to G.D.R.Method by which payment has to be received in India : Indian currency.3. Messrs. Zubaida Leather Company : (Petitioners in W.P.Nos. 3759 and 4349 of 1970.)(The particulars are as in No. 2 above)4. Messrs. Farida Prima Tannery : (Petitioners in W.P.Nos. 3760 and 4350 of 1970)Port of discharge : Marseilles in transit toG.D.R.Country of final destination : France/G.D.R. Name of Consignee : Messrs. Zentral KommerzGmb H., Berlin.G.R.I. Form : Country of destination : Marseilles in transit to G. D. R.Method by which payment is received in India : Indian currency. 5. Messrs. Zubaida Leather Company : (Petitioners in W.P. Nos. 3758 and 4351 of 1970)
(The particulars are as in No. 4 above.)
8. Both in the impugned show cause-notices and the impugned orders, the points that have been put against the petitioners are (1) that the country of destination was not G.D.R., and (2) that the payment was not in rupee currency. These, according to the respondents, were untrue statements so as to fall within the scope of Sub-section (1) of Section 12. The basis for this contention is that in the contract form in each case sent by Messrs. Bevingtons and Sons Limited, it was expressly stated that the said Messrs. Bevingtons and Sons Limited, had bought the goods and that the contracts do not show that the purchases were made by Messrs. Bevingtons and Sons on behalf of Messrs. Zentral Kommerz, Berlin. As against this circumstance, there are two circumstances which outweigh that circumstance and go to show that the petitioners cannot be said to have made the declaration with untrue particulars. The first and foremost circumstance is the admitted fact that in all contract orders it was explicitly stated:
G.D.R. Facilities will be made available by Messrs. Simpson and McConechy Limited, P.B. 2016.18 Sydenhams Road, Periamet, Madras.
It is the common case of all the parties that Messrs. Simpson and McConechy Limited, are agent of Messrs. Bevingtons and Sons Limited, London. This circumstance, taken along with the fact that the petitioners subsequently produced orders of Messrs. Zentral Kommerz with regard to each consignment, goes a long way to probablise the case of the petitioners that the deal was concluded by Messrs. Bevingtons and Sons only as agents of Messrs. Zentral Kommerz. The Collector of Customs has commented upon the fact that the petitioners did not produce in the first instance the contract orders of Messrs. Zentral Kommerz Limited. The petitioners' explanation is that it was not usual to produce such orders, as along with the shipping bill it is usual only to place the order which, in these cases, was placed by Messrs. Bevingtons and Sons. It is not suggested on behalf of the respondents that the contract orders as having been issued by Messrs. Zentral Kommerz are fabrications.
9. The next important circumstance is that Messrs. Zentral Kommerz G.D.R., issued a letter of credit for Rs. 7,50,000 which was a bulk transferable letter of credit opened by a G.D.R. bank by order of Zentral Kommerz in favour of Messrs. Simpson and McConechy Limited. The petitioners were assured of payment on the basis of this letter of credit. On the basis of these particulars, the petitioners gave the particulars already adverted to.
10. The Collector of Customs has taken note of the fact that all the contracts stated that G.D.R. facilities would be made for payment. He has also taken note of the letter of credit opened on the order of Messrs. Zentral Kommerz. But he has failed to give due weight to these two circumstances. He has observed that the letter of credit had not been directly open -ed in favour of any of the petitioners and that it also does not directly cover the contracts in question. This reasoning is unsound as a letter of credit is not expected to contain such particulars. The further point mentioned by the Collector is that the bills of lading were endorsed in blank and this is pointed out as showing that Messrs. Zentral Kommerz cannot be considered to be the buyers of the goods. It is pointed out by the petitioners that the general practice is to have the Bills of lading endorsed in blank in all such transactions, so that the bank will have a lien on the goods till the monies are realised. There is nothing improbable in this explanation.
11. The Collector of Customs is conscious of the fact that the petitioners are not guilty of making any untrue statements with the knowledge that the statements made by them were in any respect untrue. He has observed:
The evidence on record clearly goes to show that though the goods were sold to Messrs. Bevingtons and Sons the exporters deliberately condescended to accept payment in other than the prescribed manner for the goods in question in violation of the provisions of the Foreign Exchange Regulation Act as mentioned in the show cause notice.
There are no materials to show that the petitioners condescended, much less deliberately condescended, as observed by the Collector. The further observation of the Collector is:
The exporter should not, therefore have allowed himself wittingly or unwittingly to become a tool in the hands of their London firm by agreeing to export the goods bought by them as per the contract issued by Messrs. Bevingtons and Sons, against a rupee payment from G.D.R. by declaring the country of that nation in G.R.I, form and shipping bill as G.D.R.
Even to warrant this observation there are no materials. The Collector of Customs has referred to certain documents seized from Simpsons and McConechy as probablising his inference that the goods were bought only by Messrs. Bevington and Sons Limited, and that Messrs. Bevingtons and Sons Limited, merely made arrangements with Messrs. Zentral Kommerz, : Berlin, for making payment to the petitioners in the Indian currency. It appears that the premises of Messrs. Simpson and McConechy Ltd., were searched and certain documents were seized and that 1 those documents related to certain cables and correspondence that passed between Messrs. Simpson and Mc. Conechy and Messrs. Bevingtons and Sons with regard to the contracts in question. Let us assume that those documents are genuine. But the question is whether the petitioners had knowledge of those documents and whether they should have, by exercise of due diligence, come to know the passing of such correspondence between Messrs. Bevingtons and Sons and their agents Messrs. Simpson and McConechy Limited There are absolutely no materials to show that the petitioners had any reason to-know about the passing of such correspondence.
12. The two outstanding facts are (1) that in the contracts it was explicitly stated that G.D.R. facilities would be made available with regard to payment, and (2) Messrs. Zentral Kommerz opened letters of credit to the tune of Rs. 7,50,000 in connection with the payments to the petitioners. That is fortified by the further fact that orders of Messrs. Zentral Kommerz, corresponding to the identical orders placed by Messrs. Bevingtons and Sons have also been produced by the petitioners. In these circumstances, can it be said that the petitioners gave a mis-declaration with untrue particulars? I have already pointed out that there are no materials to show that the petitioners. had knowledge of any correspondence between Messrs. Bevingtons and Sons and their agents Messrs. Simpson and McConechy Limited. As bona fide exporters, they relied upon the statement in the contract orders sent by Messrs. Bevingtons and Sons that G.D.R. facilities would be made available. This was. followed by orders of Messrs. Zentral Kommerz, Berlin, and there was the further fact of opening of letters of credit by Messrs. Zentral Kommerz. In these circumstances, the petitioners had reason, to believe that the country of destination was G.D.R. and that payment was in Indian currency. To hold the petitioners guilty of breach of Sub-section (1) of Section 12, it is necessary on the part of the respondents to show that the material particulars were not true. It is one thing to say that certain material particulars are not true and it is entirely a different thing to say that the particulars are incorrect. The term 'true particulars' is not synonymous with 'correct particulars'. The word 'true', though in one sense may mean accurate, is used in Sub-section (1) of Section 12 as meaning 'not false'. Falsity is different from incorrectness. The test whether a statement made by a person is true or not is a process of examination of certain relevant facts subjectively from the position of that person : What are the materials on the basis of which such a statement was made Had he reason to believe that those materials could be relied upon to make the statement Did he act bona fide, as a man of ordinary prudence would act in similar circumstances If these broad tests are satisfied, the person whose statement is the subject of examination, cannot be charged with making an untrue statement, if the statement, on examination of facts, which were not within his knowledge and which he could not have known under ordinary circumstances, is found to be not true. The petitioners in these cases, as bona fide exporters took it that Messrs. Zentral Kommerz is the ultimate consignee, as that company opened a letter of credit for payment of the amount due to them in fulfilment of the undertaking embodied in the orders placed by Messrs. Bevingtons and Sons, and in those circumstances, the petitioners had legitimate ground to think that the country of destination was G.D.R. and that the payment was in rupee. I am, therefore, of the view that from the available materials it cannot be said that the petitioners furnished untrue facts with regard to material particulars in connection with the exports in question. The Collector of Customs misdirected himself in examining the question at issue as if the point for consideration was whether the goods in question were in fact sold to Messrs. Bevingtons and Sons or not. Even if that is the relevant question for consideration, it would not automatically follow on answering that question in the affirmative that the petitioners made untrue statements on material particulars. It was open to Messrs. Bevingtons and Sons, as purchasers, to stipulate with the exporters that the goods may be sent to any particular country, not being their own country and that the exporters would be paid for the goods in the manner in which payment could be made from the country of destination. The crux of the matter is what are the terms of the contract as regards the place of destination and as regards the method of payment of the value of the goods If the exporters are bona fide satisfied that they would get the value of their goods, they are not bound to probe into the matter to find out why they are asked to send the goods to and to look for payment from, a country other than the country of the person who places the order for export, unless it be that the exporters are charged with conspiracy with a foreign purchaser to evade any provision of law. In these cases under consideration, the bona fides of the petitioners are beyond question. If the intention is to make the exporters liable even in such cases, necessary statutory provision is necessary. On the facts of these cases, it cannot be said, having regard to the language of Section 12 (1) that the petitioners violated that provision.
13. Inasmuch as the show cause notices are no longer outstanding and as orders have been passed in pursuance of those notices, no orders are necessary in W.P. Nos. 3716, 3758, 3759, 3760 and 3761 of 1970, in which the validity of those notices is challenged. The other writ petitions are allowed and the impugned orders are quashed. In the circumstances, I make no order as to costs.