Appeal dismissed; export value must be determined under s.2(41)/s.14 of Customs Act; over-invoicing deemed illegal racket

SC dismissed the appeal, upholding authorities' finding of deliberate over-invoicing and organized racket to claim fraudulent drawback on export consignments. The Court held export value must be determined under s.2(41)/s.14 of the Customs Act even if no duty is leviable, and that misstatement of export value amounted to illegal foreign-currency transactions. Because the exporter admitted the market price and produced no evidence that the shipping-bill value reflected true sale consideration, the redemption fine and penalty imposed by the authorities were affirmed.

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Issues Involved:
1. Whether over-invoicing of the goods for export constitutes an attempt to export 'prohibited goods'.
2. Whether the exporter must declare the value of the goods as per Section 14 of the Customs Act, 1962, or the value expected to be received from the overseas market.

Issue-wise Detailed Analysis:

Issue A: Over-invoicing and Prohibited Goods
The primary issue was whether over-invoicing of export goods equates to an attempt to export 'prohibited goods' under the Customs Act, 1962. The appellant, engaged in garment export, had over-invoiced ladies' skirts at $10.25 per piece, while the market price was Rs. 45/- per piece. The Customs Commissioner found this to be a deliberate act to claim fraudulent drawback, noting it was the second such instance by the same exporter. Citing Section 113(d) of the Act, the Commissioner held that the goods were liable for confiscation as they were attempted to be exported contrary to prohibitions imposed by law. The Tribunal upheld this decision, leading to the present appeal.

The Supreme Court referred to Section 2(33) of the Act defining 'prohibited goods' and Section 11 empowering the Central Government to impose conditions on import/export. The Court emphasized that non-compliance with prescribed conditions renders goods 'prohibited'. The Court cited the precedent in Shekih Mohd. Omer v. Collector of Customs, Calcutta, affirming that 'any prohibition' includes all types of restrictions. The Court concluded that over-invoicing, resulting in unauthorized foreign currency transactions, constitutes a violation of export conditions, thus making the goods 'prohibited'.

Issue B: Declaration of Export Value
The second issue was whether the exporter must declare the value as per Section 14 of the Customs Act or the expected overseas market value. The appellant argued that the exporter should declare the value expected from the overseas purchaser, not the market value in India. The Court, however, referred to Section 18 of the Foreign Exchange Regulation Act, 1973, which mandates exporters to declare the full export value or the expected value in the overseas market, affirming that the full value will be received. The Court also referenced Section 14 of the Customs Act, which provides the procedure for determining the value of goods for assessment purposes, emphasizing that the declared value must reflect the true sale consideration in international trade.

The Court stated that even if no duty is leviable, the method for determining the value under Section 14 must be followed to ascertain the true export value. The Court noted that the appellant had admitted the market price of Rs. 45/- per piece and had not provided evidence to support the higher declared value. The Court dismissed the hypothetical argument that higher export value could be genuine, stating it depends on the facts and evidence of each case. The Court concluded that the appellant's over-invoicing was not justified and upheld the penalties imposed by the authorities.

Conclusion:
The Supreme Court dismissed the appeal, affirming that over-invoicing constitutes an attempt to export 'prohibited goods' and that exporters must declare the true export value as per the Customs Act and Foreign Exchange Regulation Act. The Court upheld the penalties imposed for fraudulent drawback claims and deliberate over-invoicing.

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