Over-invoicing cannot be inferred from lower comparable imports when commercial terms differ materially in foreign exchange transactions.

Lower prices in other imports do not by themselves prove over-invoicing where the contractual and commercial terms are materially different, including export obligations, brand value, prior market registration and value-addition requirements. The invoice price agreed between the importer and foreign supplier therefore cannot be rejected merely on comparison with unrelated transactions. Where foreign exchange is sanctioned against an advance licence and remitted directly by the authorised dealer to the foreign seller for the disclosed import price, it is treated as having been acquired and utilised for that sanctioned purpose, so no contravention arises under section 8(3) read with section 8(4) of FERA.

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Issues: (i) Whether the invoice value of the imported goods could be rejected as over-invoiced on the basis of lower prices shown in other imports; (ii) whether the foreign exchange released for the imports was acquired and utilised for the purpose for which it was sanctioned, so as to attract contravention under section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether the invoice value of the imported goods could be rejected as over-invoiced on the basis of lower prices shown in other imports

Analysis: The invoice price was the price actually agreed between the importer and the foreign supplier, and the surrounding commercial conditions were materially different from those of the other importers. The import was tied to export obligations, brand-name value, prior registration in the USSR, value-addition requirements, and related commercial advantages which were absent in the other transactions. In the absence of evidence of a secret understanding, a lower price in other invoices by itself could not establish over-invoicing.

Conclusion: The invoice value could not be rejected as over-invoiced, and the finding of over-invoicing was not sustainable.

Issue (ii): Whether the foreign exchange released for the imports was acquired and utilised for the purpose for which it was sanctioned, so as to attract contravention under section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973

Analysis: Foreign exchange was released against an application supported by an advance licence and was remitted directly by the authorised dealer to the foreign seller in accordance with the sanctioned import price. On those facts, the foreign exchange was acquired for payment to the foreign supplier and was utilised for that very purpose. Since the amount was in fact used, the obligation to surrender any unused foreign exchange did not arise, and the presumption under section 8(4) could not be invoked to treat the transaction as non-utilisation.

Conclusion: There was no contravention under section 8(3) read with section 8(4), and the penalty could not stand.

Final Conclusion: The impugned adjudication was set aside in its entirety and the appellants were granted complete relief.

Ratio Decidendi: In a foreign exchange transaction, over-invoicing cannot be inferred merely from lower prices in other comparable imports when the contractual and commercial terms are materially different, and once sanctioned foreign exchange is actually remitted to the foreign seller for the disclosed import price, it is treated as utilised for the sanctioned purpose so that no contravention under section 8(3) arises.

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