IMPORTANT POINT
In cases where the export value is not correctly stated, but there is intentional over-invoicing for some other purpose, that is, not mentioning true sale consideration of the goods, then it would amount to violation of the conditions for import/export of the goods.

Headnote:Customs Act, 1962-Sections 2(41), 14, 76, 111(d) & 113-Foreign Exchange Regulation Act, 1973-Section 18-Over-invoicing of goods for export-Appellant engaged in export of garments-Order received from an overseas buyer for supply of ladies skirts-28000 pieces at the rate of $ 10.25 per piece, export value of which was mentioned as Rs. 1,21,54,447/- were sought to be exported-Market price of such skirts was ascertained to be Rs. 45/- per piece-Exporter claimed a drawback of Rs. 21,87,800/- on consignment on the basis that value of each skirt was Rs. 78/- per piece-However, during enquiry exporter admitted that market price of Rs. 45/- per piece was acceptable to him-Claim for drawback was withdrawn-Imposition of redemption fine-Levy of penalty held justified.
       Held : Exporter is not concerned with the prevailing market price in India of the goods sought to be exported, but he is required to disclose true export value of goods. That is to say, exporter has to disclose full and true sale consideration - export value of the goods. The notification issued in exercise of the power under Section 18 also inter alia provides that Central Government prohibits the export of all goods unless exporter furnishes to the prescribed authority a declaration in the prescribed form of material particulars including the full export value of the goods or in the alternative the value of the goods which he expects to receive on their sale in overseas market. Hence, importance is given to the value of goods which exporter is to receive. It also provides that the exporter shall affirm in the declaration that full export value of the goods has been or will within prescribed period be paid in the prescribed manner. (Para 14)
       From the aforesaid provisions, mainly, Section 2(41) read with Section 14 of the Act and Section 18 of the Foreign Exchange Regulation Act, 1973, it is crystal clear that:-
        (a) Exporter has to declare full export value of the goods (sale consideration for the goods exported).
        (b) Exporter has to affirm that the full export value of the goods will be received in the prescribed manner.
        (c) If the full export value of the goods is not ascertainable, the value which the exporter expects to receive on the sale of the goods in the overseas market.
        (d) Exporter has to declare true or correct export value of the goods, that is to say, correct sale consideration of the goods. Criterion under Section 14 of the Act is the price at which such or other goods are ordinarily sold or offered for sale in the course of international trade where the seller and buyer have no interest in the business of each other and the price is the sole consideration for sale or offer for sale. (Para 18)
       In cases where the export value is not correctly stated, but there is intentional over-invoicing for some other purpose, that is to say, not mentioning true sale consideration of the goods, then it would amount to violation of the conditions for import-export of the goods. The purpose may be money laundering or some other purpose, but it would certainly amount to illegal/unauthorised money transaction. In any case, over-invoicing of the export goods would result in illegal/irregular transactions in foreign currency. (Para 20)
       In the present case, as found by the authorities, 28,000 pieces of ladies skirts at the rate of $10.25 per piece, export value of which was mentioned as Rs.1,21,54,447/-, were sought to be exported. The market price of such skirts was ascertained to be Rs. 45/- per piece and on that basis total value of the goods came to be Rs. 9,53,280/-. The exporter claimed a drawback of Rs.1,21,87,800/- on the consignment on the basis that value of each skirt was Rs. 78/- per piece. No doubt, during the enquiry exporter admitted that the market price of Rs. 45/- per piece was acceptable to him and the claim for drawback was withdrawn. Thereafter, the exporter has not led any evidence that export value mentioned in the shipping bill was the true sale consideration for the goods sought to be exported. Considering the aforesaid facts and also the fact that this was the second case belonging to the same exporter, the authorities arrived at the conclusion that it was an organized racket to claim fraudulent drawback or an act of deliberate over-invoicing the readymade garments. Hence, the authority imposed redemption fine as well as levied penalty. In our view, this finding arrived at by the authorities below cannot be said to be, in any way, unreasonable which would call for interference by this Court in this appeal. (Paras 23 & 24)

JUDGMENT

Shah, J.-Questions requiring consideration in this appeal are :-

(A) Whether over-invoicing of the goods for export would mean attempt to export prohibited goods ? and

(B) Whether, while exporting the goods, exporter has to give value of the goods as provided under Section 14 of the Customs Act, 1962 (hereinafter referred to as the Act ) or the value of goods which he expects to receive on sale of goods in the overseas market?

2. The facts in brief are:-

It is stated that the appellant is engaged in the export of garments. Appellant received an order from an overseas buyer i.e. from Dubai, for supply of ladies skirts, the contracted price for which was said to be approximately $10.25 per piece. Appellant filed 4 shipping bills in 1998 for export of 28000 pieces of ladies skirts @ $10.25 per piece (Rs. 434 per piece) amounting to Rs.1,21,54,447/-. On checking, the actual quantity of the skirts was found to be 21184 pieces. On enquiry, the market price of the skirts was ascertained to be Rs.45/- per piece, according to which total value of the goods comes to Rs.9,53,280/-. The exporters had claimed a draw back of Rs.21,87,800/- on the consignment @ Rs. 78/- per piece. For shortage of goods, vide letter dated 4.2.1999, the exporters pleaded that it was an unintentional mistake which had happened on the part of the fabricators and suppliers. During the course of hearing, on 6-2-1999, for the drawback, it was admitted by the exporters that the market price of Rs. 45/- per piece was acceptable to them and that their claim for drawback be not granted. The Commissioner of Customs noted that this was the second such case belonging to the same exporters and that there was an organized racket to claim fraudulent drawback by deliberately over-invoicing the readymade garments. The Commissioner of Customs imposed a redemption fine of Rs. 10,00,000/- and levied a penalty of Rs.20,00,000/-. It was held that no drawback was admissible even if the party exported the goods in terms of Section 76 of the Act as the market value of the goods was less than the amount of drawback claimed.

3. Being aggrieved by the said order, the appellant filed appeal before the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as the Tribunal ). The Tribunal also dismissed the appeal and held that the over-invoicing of the goods for exportation was an offence under the Act. Hence, this appeal.

4. At the time of hearing of this appeal, learned senior counsel Mr. Adhyaru for the appellant submitted that the appellant is not claiming any drawback and, therefore, that question is not required to be dealt with. However, his contention is - Section 113(d) is not applicable to the facts of the present case as the goods are not prohibited goods. He further stated that exporter is not required to declare the market value of the goods which he would fetch in the market in India. He is required to declare the value of the goods which he is expected to receive from the overseas purchaser and that is the scheme of the Customs Act as well as of the allied Acts.

5. Learned Additional Solicitor General Mr. Raju Ramchandran, on the other hand, contended that over-invoicing is not permitted under the Act as it is in violation of statutory provisions. He further submitted that at the time of export, the exporter has to give correct value of the goods and that correct, value of the goods would be the value of goods which he would fetch in market in India or which he is likely to fetch from overseas purchaser.

6. At the outset, we would state that the learned counsel for the appellant has not pressed for the drawback in view of specific provision of Section 76 which inter alia provides that no drawback shall be allowed "(b) in respect of any goods the market-price of which is less than the amount of drawback due thereon". Therefore, for the purpose of getting drawback, relevant consideration

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2003 Supreme(SC) 595

IMPORTANT POINTIn cases where the export value is not correctly stated, but there is intentional over-invoicing for some other purpose, that is, not mentioning true sale consideration of the goods, then it would amount to violation of the conditions for import/export of the goods.

Cases Referred (2)

IMPORTANT POINT
In cases where the export value is not correctly stated, but there is intentional over-invoicing for some other purpose, that is, not mentioning true sale consideration of the goods, then it would amount to violation of the conditions for import/export of the goods.