Consignment sales and foreign exchange remittance: declared export value is not conclusive, but deductions need prior Reserve Bank permission.

In consignment sales under section 12(2) of the Foreign Exchange Regulation Act, 1947, liability turns on the amount actually payable by the foreign buyer, not the full export value stated in the declaration. The court noted that the declared figure in G.R. 1 forms is only approximate in such transactions, so higher declared value alone does not establish contravention. However, any deduction of consignee's commission or expenses from export proceeds requires prior Reserve Bank permission, because section 12(2)(b) protects the full foreign buyer obligation. On that construction, the exporter avoids liability for the declared excess, but deductions without permission remain impermissible.

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Issues: (i) Whether, in the case of consignment sales, liability under section 12(2) of the Foreign Exchange Regulation Act, 1947 extends to the full export value stated in the declaration or only to the amount actually payable by the foreign buyer; (ii) Whether deduction of consignee's commission and expenses from the export proceeds required prior permission of the Reserve Bank of India under section 12(2).

Issue (i): Whether, in the case of consignment sales, liability under section 12(2) of the Foreign Exchange Regulation Act, 1947 extends to the full export value stated in the declaration or only to the amount actually payable by the foreign buyer.

Analysis: The declarations in the G.R. 1 forms and the surrounding circumstances showed that the shipments were made on consignment basis. In such transactions, the amount mentioned in the declaration is only approximate and cannot be equated with the actual price fetched in the foreign market. The relevant statutory phrase in section 12(2)(b) of the old Act is the amount payable by the foreign buyer, not the full export value. On that construction, the exporter cannot be treated as having contravened the provision merely because the declared export value was higher than the amount actually realised and repatriated.

Conclusion: The liability could not be fastened on the appellant merely on the basis of the declared export value, and the appellant succeeded on this issue.

Issue (ii): Whether deduction of consignee's commission and expenses from the export proceeds required prior permission of the Reserve Bank of India under section 12(2).

Analysis: The Court declined to accept the view that, in consignment sales, commission and expenses could always be deducted without prior permission. It held that what section 12(2)(b) protects is the full amount payable by the foreign buyer, and any deduction from that amount requires Reserve Bank permission. The concern was that otherwise inflated commission and expense claims could diminish foreign exchange inflow. Since no such permission had been obtained, some contravention remained established.

Conclusion: Prior permission of the Reserve Bank of India was required, and the appellant was not entitled to succeed on this issue.

Final Conclusion: The penalty was reduced substantially because the export transactions were consignment sales, but the absence of Reserve Bank permission for the claimed deductions justified a limited penalty.

Ratio Decidendi: In consignment sales under section 12(2) of the Foreign Exchange Regulation Act, 1947, the exporter is not liable for non-repatriation of a declared export value as such, but any deduction from the amount payable by the foreign buyer requires prior Reserve Bank permission.

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