TaxTMI 
TaxTMI 
2002 (4) TMI 825
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....7-9-1999, allowed the appeals and set aside the orders of the Special Director. The present appeals are preferred before this Court under section 54 of the Act. 3. The appeals were heard in extenso on 19-2-2002, 26-2-2002, 11-3-2002, 12-3-2002, 14-3-2002, 20-3-2002 and 22-3-2002. Mr. V.T. Gopalan, Additional Solicitor General of India initially for the appellant assisted by Mr. K. Kumar, Additional Central Government standing counsel continued their arguments and learned senior counsel Mr. B. Kumar argued on behalf of the respondents. Though at the fag end of the arguments, at the stage of winding up, the learned senior counsel Mr. B. Kumar informed us of the alleged desire of the counsel on record for the respondents to engage some other counsel, it was pointed out that it will not be permissible at this stage and learned senior counsel concluded his arguments and requested this Court to treat as though the arguments on his side having been completed. Mr. K. Kumar completed his further arguments in his reply and orders were reserved in the matter on 22-3-2002. 4. We see from the records that as against the eight memorandum of show-cause notices dated 9-9-1983 issued under se....
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....he period 1981 and 1982 by these firms were issued dated 7-2-1986. After considering their explanation and after hearing the arguments made by their representatives and the counsel, the Special Director, in his common order dated 12-11-1992, imposed a total penalty of Rs. 3,14,40,000. The Special Director, in his order, found that the major part of the notices related to contravention of section 18(2) read with section 18(3), though the notices relate to exports in reference to different groups and units of their group of concerns. Since the buyers and the destination had been the same and that common written submissions were made by the consultant, a common order was passed for both the groups in pursuance to the show-cause notices namely one set of notices issued on 9-9-1982 and another set issued on 7-2-1986. The Special Director, on the preliminary issue as to the liability of the partners, found under section 68(1) that the main person looking after the export business was Shri Ravi Prakash who was managing the affairs of his group of concerns and, therefore, it was held that Ravi Prakash was the person incharge of the business and, thus, responsible for the conduct of the aff....
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.... no credence can be attached to a letter from the Bank of Credit and Commercial Internatio- nal (BCCI), London stating that they have paid the bills to prove that the exports had been realised. The non-release of foreign exchange by the RBI is a ruse and has no connection with the charge. 9. With regard to the exports made to Monrovia, the arguments made before the Special Director were that the Board authorities had given non-delivery certificate and they have lodged a claim with the insurance company and the importers have permitted the firms to adjust these amounts received from the insurance company. The Special Director refused to accept this case in the absence of any records in reference to the non-delivery certificate and the insurance claim preferred and the statements of the alleged claims. The Special Director also found that S.R.C. Exports, in their letter dated 19-5-1984 to the B.C.C.I., the negotiating bank at London, intimated them that no legal action be initiated against Raxshire Ltd. and that Shri K.A. Sekar, an officer of the Punjab National Bank, in his statement dated 28-11-1985, had intimated the Enforcement Authorities that on his visit to Banjul, he had c....
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....mption inspite of the suit filed against the insurance company before the Madras High Court. (c)The burden is on the department under section 18(2) to prove that the goods exported by the party have been cleared by the foreign buyer and that payments, therefore, were not made. (d)If the foreign buyer did not clear the goods, the question of contravention under section 18(2) could not have arisen. (e)The Board also found that the statements made by K.A. Sekar under section 40 are inadmissible in law and ought not have been relied on. (f)The written agreement with H.A. Farag & Sons Ltd., Banjul is not conclusive evidence in support of the guilt against the respondents. 11. The learned Additional Solicitor General submitted that the approach of the Board is perverse and the Board proceeded as though it holds a special brief for the respondents and it is totally opposed to the provisions of the Act and the Rules. According to him, the change of terms of payment of the bills from D.P. to D.A. without permission from the RBI would clearly amount to violation of the provisions of section 18(2). The interpretation that 'all reasonable steps' embodied in sub-section (3) to se....
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.... 1978 followed by looting and arson and therefore, there was difficulty in realisation. (iii)The importer advised the respondents to have patience. (iv)Payments were made in 13 cheques which were subsequently dishonoured. (v)The partner visited London and had discussions with the importer Shri Manmohan Chopra. Stage 2 : The Second stage is in reference to Raxshire Ltd., London from November 1984 onwards :- (i)Shri Manmohan Chopra had an ulterior intention of defalcation and therefore, the respondents obtained legal opinion that suits could be filed, but requested legal fees of œ 40,000 to 60,000?. (ii)Permission was sought-for from RBI on 29-1-1985 to remit œ 15,000 and therefore, failure has resulted in liquidation of Raxshire Ltd., London. Stage 3 : Claims were sought to be preferred with the liquidator, but no assistance was forthcoming from the RBI. Insofar as the exports to Monrovia are concerned, it is submitted that the suits were initiated at Madras for insurance claims and they were permitted to adjust the amounts due. The suits are pending before the High Court of Madras. 13. On these legal submissions and the factual basis, the poin....
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....lue, shipping bill number, country or destination of the goods, description of the goods, name of the steamer, date of actual shipment and the port, the units or quantity of the goods and the value of the export. The exporter undertakes that he will deliver to the bank, the foreign exchange representing the full export value of the goods within six months as prescribed in Rule 9 of the Foreign Exchange Regulation Rules, 1974. The period of six months has been specified in the G.R.1 Forms. A reading of the statements will reveal that exports were made as evidenced by the G.R.1 Forms in the years 1978, 1980, 1981, 1982 and 1983. The two sets of show-cause notices deal with the exports of goods to Toufic Huballa, Freetown, Sierra Leone, to Raxshire Limited, London, to the buyers in Monrovia, to Huballa, Freetown, Sierra Leone and the H.A. Farag & Sons Ltd. 17. Written submissions were made by the representatives of the respondents before the special director and the appellate authority and the authorities below have considered the issues mainly under three heads. Therefore, for the sake of convenience, the issues can be discussed in the light of the legal questions arising under th....
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....the goods in October 1978, April 1980, May 1980, June 1981, July 1981, August 1981 and like this, upto 1983? The view of the Board that there is no rule prohibiting the change of tenor of the bill is incorrect. The further finding of the Appellate Board, that it was a business decision and that RBI was aware of the fact, cannot be accepted. 19. A Division Bench of this Court in Union of India v. S.K. Senjan Chettiar & Sons [1996] (2) [I.L.R. Madras 1569] has taken the view that the change of the terms of payment without the permission of the R.B.I. is illegal and in such a situation, the provisions of section 18(2) get attracted and mens rea is not at all required, and if any act or omission had taken place, there was violation of the concerned section, justifying the penalty. Section 18(2) says that where any export of goods has been made, no person shall do or refrain from doing anything which has the effect of delaying the payment beyond the prescribed period. By the conduct of the exporter in altering the mode of payment, he had, in effect, allowed the goods to be released, resulting in failure to pay for the value of the goods all these years. Rule 9 of the Rules says that ....
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.... are interested. In their registered letter dated 25-12-1981, they say as follows : 'Lastly, we have received your telex stating payments cannot be made since the market is very bad and to stop all the shipments, which we have stopped immediately on receipt of your telex and we have not shipped anything after that.' Toufic Huballa writes to the President of India in his letter dated 17-10-1983 that for the first time, they had problems about the goods which had arrived in Freetown that few mafia type of persons have done some mischief and taken away the goods from the port without any payment or legal process. They also say that they are ready to pay the country's exporters S.R.C. Industries for their total outstanding bills which amount to about US $ 3.4 million and, thus, take delivery of the goods. By this time, the first set of show-cause notices had been issued dated 9-9-1983. There is no mention in the correspondence referred to above by the respondents that the amounts were in the pipeline. It is only long thereafter, i.e., on 23-5-1987 they inform the Joint Controller that the buyer had paid their group concerns the entire pending bills to the tune of rupees 4.5 crore....
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....on the date of the payment was around 1 $ = 43 Leones, which is not in accordance with the normal procedure. The buyer should have made the payment as per the rate prevailing on the date of payment and not as reported by the exporter as per the rate as on the date of bills, which in these cases, is about 4 to 6 months prior to the date of payment. It was further, pointed out by the RBI that enquiries with the Indian Embassy have revealed that there are no official instructions in Sierra Leone that bills have to be paid at the exchange rate prevailing on the date of the bills and if the bills are in US dollars, the importer has to make available to the supplier, the actual amount in foreign exchange. By not protesting against the highly arbitrary and unfavourable terms of payment, the exporter has acted in a manner detrimental to the foreign exchange interests of the country. Ultimately, the RBI refused to grant extension of time, which was confirmed by this court in Writ Petition No. 9295 of 1988 by an order dated 31-7-1997, which has become final. 22. The view of the Board that the alleged payment in local currency would absolve the liability of the exporter is patently illegal....
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.... believe that this application for extension of time to realise the export proceeds has only been filed with a view to protract the proceedings or delay any action that may be taken by the first and second respondents herein with regard to the withdrawal of cash assistance for non-repatriation of exports. Thus, the exporter has clearly contravened the provisions of section 18(2) of the Act." 24. Exports to Raxshire Ltd., London : Two sets of show-cause notices issued in the year 1983 and 1986 also deal with export of goods to Raxshire Ltd., London and the failure to repatriate the value of the goods. From the written arguments of the representative of the exporter as found in Volume I of the typed set of papers, it is seen that the alleged violation in respect of exports to Raxshire Ltd. figure in seven notices and the total invoice value of outstanding is shown at œ 27,38,195.45 and Rs. 10,69,000 and after certain remittance, the balance according to them was œ 25,87,214.28 and Rs. 7,96,500. According to them, Manmohan Chopra floated a company called Raxshire Ltd. with the help of his father S.L. Chopra who was the Chairman of Punjab National Bank in the year 198....
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....l Chopra, the foreign buyer's father, was making false excuses about the matter and they contacted the legal solicitors in London and on their assurance that there is possibility to trace Raxshire funds in the hands of the Director of the company, they sought permission of the RBI for release of foreign exchange of œ 15,000 for initiating legal action. They have enclosed confidential documents to show as to how the assets of Manmohan Chopra are available for taking emergent steps. Inspite of this, the RBI took its own time and refused to release the fund for taking legal action. -The third stage involves their claims to be preferred with the liquidator, but the RBI has not assisted them by releasing the funds. It is true that the RBI, in their communication dated 27-2-1987, have informed the buyer in reference to their request for release of funds for taking legal action that Raxshire Ltd. has been placed under liquidation and Ian Franses Associates have been appointed as the Liquidator. But, the crucial question is that the bills were outstanding for the exports made from 21-6-1979 to 21-3-1983. The letter of S.R.C. Exports for and on behalf of S.R.C. Group of Industri....
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....tage of and argued that but for the rejection by the RBI, they would have realised the funds. We are totally unable to agree with the stand of the exporter. It is their further case that they came to know of the liquidation of Raxshire Ltd. only from the information furnished by the RBI in the year 1987. It is too difficult to accept their case that though they had been corresponding with their solicitors and that they have investigated about the activities of Raxshire Ltd. they were not informed of its liquidation proceedings. 27. Yet another curious aspect is that the exporters have written a letter dated 28-7-1989 to C.G. Adams Associates who is said to be one of the joint liquidators, requesting him to make a trip to India and that they are ready to bear all his expenses such as his to and fro air fair, his stay in India and also arrange for his meeting with all the connected officers of various departments of the Government of India etc., for which C.G. Adams Associates agreed to come, subject to the payment of a fees of œ 5,000. Thereafter, they wrote to the Joint Controller, RBI on 14-10-1989 referring to their earlier failure to sanction œ 15,000 and that the....
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....s and while referring to the letter dated 22-5-1985, they have made a reference to the letters from June to May, 1985. None of the copies of those letters referred were furnished or produced before us. It is admitted by Raxshire Ltd. that problem arose only in the year 1981 for the first time. Their earlier plea that there was a coup in Nigeria in 1978 which is a well known fact and that there were difficulties in getting the sale proceeds and that there is justifiable reason for the delay of these have all fallen to the ground on the exporter's own admission that it was found out that most of the goods have been sold in London itself and only a small fraction of the goods were exported to Nigeria. Therefore, it is a clear case of failure on the part of the exporter, in not realising the proceeds from 1978 to 1983. Their subsequent attempt is only to justify their inaction. 29. Exports to Monrovia : The case of the exporter is that the goods sent to West Coast Enterprises, the main importer in Monrovia did not reach Monrovia and therefore, they refused to pay the amount. They have also claimed to have furnished non-delivery certificate issued by the port authorities and there....
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....re is no reason as to why it cannot be relied upon. Therefore, the case of the exporter that the goods were not cleared and hence they could not repatriate its value is unacceptable. The conclusion of the Board in disregarding this important aspect is illegal. 31. In reference to the show cause notice T-4/69-M/83, it is seen that that an agreement was seized during the raid whereby it is seen that the said agreement was written in the handwriting of Sri Ravi Prakash agreeing to pay a compensation of US$ 3,000 to the buyer H.A. Farag & Sons Ltd. of Africa. The finding of the adjudicating officer is that the charge is clearly proved in the light of the written agreement by Ravi Prakash himself. The Board has accepted the stand of the exporter that this agreement was not intended to be acted upon. The Board has held that since there was a pre-condition for R.B.I's permission, the agreement has to be read as one contingent on the permission of the RBI and, therefore, the exporter cannot be held guilty under section 9(1)(c) of the Act. This agreement has to be read with the statement of Shri K.A. Sekar, former Assistant Zonal Manager, Punjab National Bank, given under section 40, dis....
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....orroborated by independent evidence. 33. Section 68(1) says that where a person committing a contravention of any of the provisions of the Act or the Rules or a direction or order made thereunder is a company, every person who, at the time of the contravention was incharge of and who was responsible for the conduct of the business of the company as well as the company shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. The proviso to the said section says that such person is entitled to prove that the contravention has taken place without his knowledge or that he exercised all due diligence to prevent such contravention. The explanation to the said proviso says that a company includes a firm or other association of individuals. In this case, it is seen that the main person looking after the export business of all the sister concerns was Sri Ravi Prakash. The statement of Sri Rattan Kumar and the documents show that Shri Ravi Prakash, who was the Managing Partner of S.R.C. Export Group of Companies, was responsible for the affairs of the company. Even the written submissions were made as submitted by Sri Ravi Pra....