JUDGMENT

UNTWALIA, J.:— In this appeal by special leave an important question of law falls for our determination. It concerns the interpretation of Section 12 (1) of the Foreign Exchange Regulation Act, 1947, Central Act 7 of 1947 as it stood amended at the relevant time by Act 40 of 1969.

2. The appellant is a firm, one of the partners or proprietors of which is Shri T. K. Seethy. It is a dealer in Coir Yarn and exports the said commodity to foreign buyers also. On March 24, 1971 a shipping bill was filed on behalf of the appellant for the export of 150 bales of Coir yarn to Trieste a port in Italy. The consignee s name in the 1529 shipping bill was shown as M/s. Ferolektro. Sarajavo, Yugoslavia, Indisputably the Central Government had published a notification in the official gazette under Section 12 (1) of the Foreign Exchange Regulation Act prohibiting the export of coir yarn from India to certain place specified in the notification including Italy unless certain condition were fulfilled. The exporter was, therefore, required to comply with the requirement of the said provision of law and file a declaration in the prescribed form. The relevant prescribed form in the Foreign Exchange Regulation Rules, 1952 - hereinafter referred to as the Rules - framed under Section 27 of the Act of 1947 was Form G. R. 1. The Invoice and G. R. 1 Form were drawn up by the appellant on rupee terms in accordance with the contract dated 1-3-1971 which it claimed to have had with M/s. Ferolektro, Sarajavo, Yugoslavia. The Customs Authority found that the goods were attempted to be exported to Italy while payment according to the form, was to be received in rupees. So the appellant was asked to explain the discrepancy in the declaration. A request was made on behalf of the appellant to amend the Invoice and G. R. I showing payment in Sterling. It was not allowed to do so. On April 20, 1971 the premises of the appellant firm and the house of its owner were simultaneously searched and certain documents including some letters exchanged between the appellant and some foreign firms of Italy were seized. It appeared to the Assistant Collector of Customs, Customs House. Cochin that the goods in question were being bought by M/s. Tobia Giscomini, Italy while the buyer shown in the shipping document was M/s. Ferolektro, Sarajavo, Yugoslavia. Such a discrepancy in the bill was against the provisions of Section 50 of the Customs Act 1962 - Central Act 52 of 1962. The Assistant Collector further found that in the declaration furnished by the appellant in accordance with Section 12 (1) of the Foreign Exchange Regulation Act the manner of payment for the goods sought to be exported was contrary to Rule 7 of the Rules. The misdeclaration or untrue declaration made by the appellant in the shipping bill and G. R. 1 Form was, prima facie, not true in material particulars and violated Section 12 (1) of the Foreign Exchange Regulation Act. In view of the 11th section in the Customs Act, the violation attracted the confiscation of the goods under Section 113 (d) and imposition of penalty under Section 114 of the said Act. A show-cause notice dated May 19, 1971 was issued by the Assistant Collector to the appellant. The appellant filed a long reply to the show cause notice. The Additional Collector of Customs by his order dated July 6, 1971 held:

"By declaring the buyer s name as FERDELETRO YUGOSLAVIA and the port of discharge and country of final destination as "Trieste and Italy respectively in the shipping bill and the mode of payment as in rupees in the shipping bill as well as in the G. R. 1 Form, the exporters have misdeclared the material particulars regarding the prescribed manner of payment and have thus clearly contravened the provisions of Section 12 (1) of the F. E. R. A. read with Section 11 of the Customs Act. The goods are, therefore, liable for confiscation under Section 113 (d) and 113 (i) of the Customs Act and the exporters are liable for penalty und