Bona fide export consignment sales: agreed consignee commission may be deducted without prior Reserve Bank permission.

In a bona fide export consignment sale, the exporter is entitled only to the net sale proceeds after deduction of the consignee's agreed commission and proper expenses. The expression "full amount payable by the foreign buyer" under section 12(2) of the Foreign Exchange Regulation Act, 1947 is therefore to be read as the balance payable under the account sales, not the gross invoice value. Where the deductions are genuine, proved, and commercially reasonable, prior Reserve Bank permission is not required for the agreed commission, and such deduction does not constitute withholding of the amount payable to the exporter.

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Issues: Whether, in a bona fide consignment sale of exported goods, the exporter was required under section 12(2) of the Foreign Exchange Regulation Act, 1947 to obtain prior permission of the Reserve Bank of India before deduction of the agreed commission by the foreign consignee.

Analysis: In a genuine consignment sale, the invoice value is only an estimated or pro forma value and the exporter is entitled to receive only the net sale proceeds remaining after deduction of the consignee's expenses and agreed commission. The statutory expression "full amount payable by the foreign buyer" must therefore be understood as the balance payable under the account sales, not the gross invoice value. Where the deductions are bona fide, factually proved, and commercially reasonable, the repatriated amount represents the full amount payable to the exporter. Prior permission of the Reserve Bank is necessary only where a deduction is sought from the amount otherwise payable to the consignor, and not for the ordinary commission inherent in a genuine consignment arrangement.

Conclusion: Prior Reserve Bank permission was not required for deduction of the agreed 3% commission in the bona fide consignment sales, and the finding of contravention under section 12(2) could not stand.

Ratio Decidendi: In a bona fide export consignment sale, the consignee's agreed commission and proper expenses form part of the net amount payable to the exporter, so deduction of such commission does not amount to withholding the "full amount payable by the foreign buyer" under section 12(2) of the Foreign Exchange Regulation Act, 1947.

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