Export value misdeclaration alone may not trigger foreign exchange contravention; statutory route and realisation failure remain decisive.

Under-invoicing or misdeclaration of export value, by itself, does not establish contravention of the export-realisation obligations under the Foreign Exchange Regulation Act unless there is also a failure to realise the full export value as declared. The Court treated section 18(1) as requiring a true declaration and due realisation, but held that the notices did not allege non-realisation of the declared value. It further noted that section 67 routes misdeclaration issues into the customs framework, so proceedings under the foreign exchange regime could not be sustained on these facts. The appellate and penalty orders were set aside and quashed, with refund directed.

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Issues: (i) Whether a show-cause notice alleging under-invoicing and misdeclaration of export value disclosed contravention of section 18(2) and section 18(3) of the Foreign Exchange Regulation Act, 1973. (ii) Whether the Enforcement Directorate had jurisdiction to initiate proceedings on the facts alleged, in the light of section 67 of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether a show-cause notice alleging under-invoicing and misdeclaration of export value disclosed contravention of section 18(2) and section 18(3) of the Foreign Exchange Regulation Act, 1973.

Analysis: The obligation under section 18(1) is to furnish a true declaration of the export value and to declare that the full export value will be realised in the prescribed manner within the prescribed period. The material before the Court showed that the grievance in the notices was that the exporter had declared a lesser value in the GRI forms and invoices, but there was no allegation that the exporter had failed to realise the full value declared or that the amounts declared had not been repatriated. The legal effect of the authorities cited was that a false declaration may amount to misdeclaration at the stage of export, but contravention of section 18(2) and section 18(3) depends on failure to realise the full export value as declared and not merely on an allegation of under-invoicing in the export documents.

Conclusion: The allegations did not substantiate contravention of section 18(2) and section 18(3); the finding was in favour of the assessee.

Issue (ii): Whether the Enforcement Directorate had jurisdiction to initiate proceedings on the facts alleged, in the light of section 67 of the Foreign Exchange Regulation Act, 1973.

Analysis: Section 67 provides that the restrictions under section 18(1) are to be deemed to have been imposed under section 11 of the Customs Act, 1962, with the consequence that proceedings for the kind of misdeclaration alleged fall within the customs framework. Since the notices at best disclosed a case of contravention of section 18(1), and the customs authorities had not initiated proceedings on that footing, the proceedings launched by the Enforcement Directorate under the Foreign Exchange Regulation Act, 1973 could not be sustained.

Conclusion: The proceedings were without jurisdiction; the finding was in favour of the assessee.

Final Conclusion: The appellate orders and penalty orders were set aside and quashed, and the penalty amounts were directed to be refunded.

Ratio Decidendi: Where the allegation is only of under-invoicing or misdeclaration of export value, without a proved failure to realise the full export value as declared, contravention of the export-realisation provisions is not made out, and proceedings must follow the statutory route allocated to that species of infraction.

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