Holding

Over‑invoicing constitutes a violation of export conditions, making the goods prohibited, and the exporter must declare the true export value as per Section 14, leading to dismissal of the appeal.

Summary

The appellant, O.P. Bhatia, exported ladies' skirts and declared a value far above the domestic market price, subsequently claiming a large drawback. The Customs Commissioner found that the export value was deliberately over‑invoiced, treated the goods as prohibited, confiscated them and imposed a fine and penalty. The appellant argued that over‑invoicing does not make the goods prohibited and that the exporter need only declare the value expected from the overseas buyer. The Court held that over‑invoicing violates the conditions for export, rendering the goods prohibited under Section 113(d), and that the exporter must declare the true export value as defined by Section 14 of the Customs Act, not merely the expected overseas price. Consequently, the authorities' findings were upheld and the appeal dismissed.

Issues considered

Whether over‑invoicing of export goods amounts to an attempt to export prohibited goods under Section 113(d).
Whether the export value to be declared must follow the valuation method of Section 14 of the Customs Act or may be the price expected to be received from the overseas buyer.
Whether Section 76 of the Customs Act permits drawback when the market price is lower than the claimed drawback amount.

Legislation cited

Customs Act, 1962s. 113(d), s. 14, s. 2(23), s. 2(33), s. 2(41), s. 76
Foreign Exchange Regulation Act, 1973s. 18

Subjects

over‑invoicingprohibited goodscustoms valuationSection 14Section 113(d)drawbackcustoms penaltyexport value fraud

Judgment

A MIS. OM PRAKASH BHATIA
v.
COMMISSIONER OF CUSTOMS, DELHI

JULY 7, 2003

B [M.B. SHAH AND ARUN KUMAR, JJ.]

Customs Act, I 962:

Section 2(23)-Export ofgood~-Over invoicing-If an attempt to export
C prohibited goods-Held: Yes, since over invoicing of goods is not mentioning
true sale consideration of goods which amounts to violation of condition for
export of goods.

Section 14-Export of goods-Value of-For purpose of assessment-
D Value as under Section 14 or value of goods exporter expects to receive by
sale of goods in overseas market-Held: Exporter has to declare full export
value of the goods exported as under section 14-Criterion is the price at
which such or like goods are ordinarily sold or offered for sale in the course
of international trade where the seller and buyer have no interest in business
of each other and price is the sole consideration for sale-However, if full
E export value of goods is not ascertainable, the value of goods is which the
exporter expects to receive on the sale of the goods in the overseas market.

Section I I 3(d)-Applicability of-Held: When goods attempted to be
exported is contrary to any prohibition imposed under any law for the th1e
being in force, goods are liable to confiscation.
F
Section 76-Drawback-Claim-Relevant consideration-Held: ls the
market price ofgoods prevailing in the country and not price ofgoods exporter
expects to receive from the overseas purchaser.

Sections 2(23), 2(41), 14, 76 and l/3(d)-Exporter seeking export of
G goods-Over-invoicing ofgoods-Claim for drawback~'lubsequent withdrawal
of claim-However, the exporter not leading any evidence that export value
mentioned in the shipping bill was true sale consideration-Finding of the
department that the exporter had initially claimed drawback by deliberately
over-invoicing the goods-Order for confiscation of goods and imposition of
H redemption fine and levy ofpenalty-Tribunal upholding the order-On appeal,
412
0.1'. 1311/\ Tl/\ 1·. COMMR. OF CUSTOMS 413
held: On facts of the case. the finding arrived al by the authorities below A
reasonable and does not call for interference.

Words and Phrases:

"Value in relation to any goods "-Meaning of in the context of Section
2(41) of the Customs Act, 1962.
B
"Prohibited goods"-Meaning of in the context of Section 2(33) of the
Customs Act, 1962.

Appellant-exporter seeking to export 28000 pieces of ladies skirts@
$10.25 per piece filed shipping bills. The quantity of skirts was found to
be 21184 pieces and the market price of the skirts was ascertained to be C
Rs. 45 per piece, total value of goods coming to Rs. 9,53,280. Exporters
then claimed a draw back of Rs. 21,87,800 on the consignment@ Rs.78
per piece. During enquiry, exporters submitted that the market price of
Rs. 45 per piece was acceptable to them and withdrew their claim for
drawback. Commissioner of Customs found that the exporters had initially D
claimed drawback by deliberately over-invoicing the goods. It then passed
an order for confiscation of goods and imposed redemption fine and levied
penalty. Aggrieved appellant filed an appeal which was dismissed holding
that the over-invoicing of the goods for exportation was an offence under
the Customs Act, 1962. Hence the present appeal.

Appellant contended that Section 113( d) is not applicable to the facts
E
of the instant case as the goods are not prohibited goods; and that exporter
is not required to declare the market value of the goods which he would
fetch in the market in India but the value of the goods which he is expected
to receive from the overseas purchaser.

Respondent contended that over-invoicing is not permitted as it is
F
in violation of the statutory provisions of the Act; and that at the time of
export, the exporter has to give correct value of the goods which is the
value of goods which he would fetch in market in India or from overseas
purchaser.

Intervenor contended that in some cases, exporter may get much
G
higher value of the goods than the market price prevailing in the country
and, therefore, merely because higher export value is mentioned, it cannot
be inferred that it is not the true sale consideration.

Dismissing the appeal, the Court H
414 SUPREME COURT REPORTS [2003) SUPP. 1 S.C.R.

A HELO: I. Section 2(33) of the Customs Act, 1962 defining prohibited
goods states that if there is any prohibition of import or export of goods
under the Act or any other law for the time being in force, it would be
considered to be prohibited goods and also if the conditions prescribed
for import or export of goods are not complied with. Further, Section 11
also empowers the Central Government to prohibit either 'absolutely' or
B 'subject to such conditions' to be fulfilled before or after clearance, the
import or export of the goods of any specified description. Hence,
prohibition :.if importation or exportation could be subject to certain
prescribed conditions to be fulfilled before or after clearance of goods and
if conditions are not fulfilled, it may amount to prohibited goods.
C (418-H; 419-A, B, Cl

Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Ors., (1970(
2 sec 728, referred to.

2. Section l 13(d) of the Act empowers the authority to confiscate any
D goods attempted to be exported contrary to any 'prohibition' imposed by
or under the Act or any other law for the time being in force. Hence, for
application of section 113(d), it is required to be established that attempt
to export the goods was contrary to any prohibition imposed under any
law for the time being in force. (418-E, Fl

E 3. In cases where the export value is not correctly stated, but there
is intentional over-invoicing for some other purpose, that is, not
mentioning true sale consideration of the goods, then it would amount to
violation of the conditions for import/export of the goods. The purpose
may be money laundering or some other purpose, but it would certainly
F amount to illegal/unauthorized money transaction. In any case, over-
invoicing would result in illegal/irregular transactions in foreign currency.
(424-F, G)

4. Section 14 would be applicable for determining the value of goods
for the purposes of tariff or duty of customs chargeable on any goods. In
G addition, by reference it is to be resorted to and applied for determining
the export value of the goods as provided under Section 2(41), which
specifically provides that value in relation to any goods means the value
thereof determined in accordance with the provisions of sub-section (1)
of Section I 4. This is independent of any question of assessability of the
goods sought to be exported to duty. Therefore, if the export value of the
H goods is to be determined, then even if no duty is leviable as in the instant
O.P. BHATIA v. COMMR. OF CUSTOMS 415
case, the method for determining the value of the goods provided under A
Section 14 is required to be followed. Hence, for finding out whether the
export value is truly stated in the shipping bill, even if no duty is leviable,
it can be referred to for determining the true export value of the goods
sought to be exported. 1422-F, G, H; 423-A, C, DI

5. From Section 2(41) read with Section 14 of the Customs Act, 1962 B
and Section 18 of the Foreign Exchange Regulation Act, 1973, it is dear
that exporter has to declare full export value of the goods (sale
consideration for the goods exported). Criterion under Section l 4 of the
Act is the price at which such or other goods are ordinarily sold or offered
for sale in the course of international trade where the seller and buyer C
have no interest in the business of each other and the price is the sole
consideration for sale or offer for sale. Further, the exporter has to affirm
that the full export value of the goods will be received in the prescribed
manner. If the full export value of the goods is not ascertainable, then it
is the value which the exporter expects to receive on the sale of the goods
in the overseas market. 1420-G, H; 421-A, B, El D
6. If the goods are easily available in the market, then it would be
difficult to arrive at the conclusion that a foreign buyer-a prudent
businessman would pay ten times more than the prevailing market price
of readymade clothes, particularly, in the days where information is easily E
available through internet or various other sources. In any case, when
margin of profit appears, on the face of it, unreasonable, it is for the
exporter to establish that it was a true export value stated in the shipping
bill. 1425-A, BJ

7. Section 76 of the Customs Act, 1962 inter alia provides that no p
drawback shall be allowed in respect of any goods the market-price of
which is less than the amount of drawback due thereon. Therefore, for
the purpose of getting drawback, relevant consideration is the market price
of the goods prevailing in the country and not the price of the goods which
the exporter expects to receive from the overseas purchaser. 1418-B, CJ
G
8. In the instant case, during the enquiry exporter admitted that the
market price of Rs. 45 per piece was acceptable to him and the claim for
drawback was withdrawn. Thereafter, the exporter has not led any
evidence that export value mentioned in the shipping bill was the true sale
consideration. Considering the facts of the case and also the fact that this
416 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A was the second case belonging to the same exporter, the authorities arrived
at the conclusion that it was an organized racket to claim fraudulent
drawback or an act of deliberate over-invoicing the readymade garments.
Hence the authority imposed redemption fine as well as levied penalty.
Therefore, the finding arrived at by the authorities below is not
B unreasonable which would call for interference by this Court.
1425-E, F, G, HI

Toolsidass Jewraj v. Additional Collector of Customs and Ors., (19911
2 sec 443, referred to.

CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 4060 of200 I.
c
From the Judgment and Order dated 1.12.2000 of the Custom Excise
and Gold (Control) Appellate Tribunal in Appeal No. C/220/99-A against
order no. 952/2000-A.

D Yashank Parveen Adhyaru, Braj Kishore Mishra, Ms. Aparna Jha and
Ejaz maqbool for the Appellant.

Dushyat A. Dave, Bijoy Kumar Jain, A.K. Jain, Rakesh Jain and R.
Singh for the intervener.

E Raju Ramachandran, Additional Soliciter General, S. Ravindra Bhat,
Ms. Smita Inna, T.A. Khan, S. Grover and B. Krishna Prasad for the
Respondent.

The Judgment of the Court was delivered by

SHAH, J. Questions requiring consideration in this appeal are:-
F
(A) Whether over-invoicing of the goods for export would mean
attempt to export 'prohibited goods'? and
(B) Whether, while exporting the goods, exporter has to give value
of the goods as provided under Section 14 of the Customs Act,
G I962 (hereinafter referred to as 'the Act') or the value of goods
which he expects to receive on sale of· goods in the overseas
market?
The facts in brief are:-

It is stated that the appellant is engaged in the export of garments. •
O.P. BHATIA v. COMMR. OF CUSTOMS [M.B. SHAH. .J.] 417
Appellant received an order from an overseas buyer i.e. from Dubai, for A
supply of ladies' skirts, the contracted price for which was said to be
approximately $10.25 per piece. Appellant filed 4 shipping bills in 1998 for
export of 28000 pieces of ladies skirts @ $I 0.25 per piece (Rs. 434 per piece
amounting to Rs. 1,21,54,447. On checking, the actual quantity of the skirts
was found to be 21184 pieces. On enquiry, the market price of the skirts was B
ascertained to be Rs. 45 per piece, according to which total value of the
goods comes to Rs. 9,53,280. The exporters had claimed a draw back of Rs.
21,87,800 on the consignment @ Rs.78 per piece. For shortage of goods,
vide letter dated 4.2.1999, the exporters pleaded that it was an unintentional
mistake which had happened on the part of the fabricators and suppliers.
During the course of hearing, on 6.2.1999, for the drawback, it was admitted C
by the exporters that the market price of Rs. 45 per piece was acceptable to
them and that their claim for drawback be not granted. The Commissioner of
Customs noted that this was the second such case belonging to the same
exporters and that there was an organized racket to claim fraudulent drawback
by deliberately over-invoicing the readymade garments. The Commissioner D
of Customs imposed a redemption fine of Rs. I 0,00,000 and levied a penalty
of Rs. 20,00,000. It was held that no drawback was admissible even if the
party exported the goods in terms of Section 76 of the Act as the market
value of the goods was less than the amount of drawback claimed.

Being aggrieved by the said order, the appellant filed appeal before the E
Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi
(hereinafter referred to as 'the Tribunal'). The Tribunal also dismissed the
appeal and held that the over-invoicing of the goods for exportation was an
offence under the Act. Hence, this appeal.

At the time of hearing of this appeal, learned senior counsel Mr. Adhyaru F
for the appellant submitted that the appellant is not claiming any drawback
and, therefore, that question is not required to be dealt with. However, his
contention is - Section 113(d) is not applicable to the facts of the present case
as the goods are not prohibited goods. He further stated that exporter is not
required to declare the market value of the goods which he would fetch in
the market in India. He is required to declare the value of the goods which G
he is expected to receive from the overseas purchaser and that is the scheme
of the Customs Act as well as of the allied Acts.

Learned Additional Solicitor General Mr. Raju Ramchandran, on the
other hand, contended that over-invoicing is not permitted under the Act as H
418 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A it is in violation of statutory provisions. He further submitted that at the time
of export, the exporter has to give correct value of th~ goods and that correct
value of the goods would be the value of goods which he would fetch in
market in India or which he is likely to fetch from overseas purchaser.

At the outset, we would state that the learned counsel for the appellant
B has not pressed for the drawback in view of specific provision of Section 76
which inter alia provides that no drawback shall be allowed "(b) in respect
of any goods the market-price of which is less than the amount of drawback
due thereon". Therefore, for the purpose of getting drawback, relevant
consideration is the market price of the goods prevailing in the country and
C not the price of the goods which the exporter expects to receive from the
overseas purchaser.

Next-as the order for confiscation of goods is passed by referring to
Section I 13(d) of the Act, we would refer to the same. It reads as under:-

"113. Confiscation of goods attempted to be improperly exported etc.
D
- The following export goods shall be liable to confiscation:-
(d) any goods attempted to be exported or brought within the
limits of any customs area for the purpose of being exported,
contrary to any prohibition imposed by or under this Act or any
other law for the time being in force. "
E
The aforesaid Section empowers the authority to confiscate any goods
attempted to be exported contrary to any 'prohibition' imposed by or under
the Act or any other law for the time being in force. Hence, for application
of the said provision, it is required to be established that attempt to export the
F goods was contrary to any prohibition imposed under any law for the time
being in force.

Further, Section 2(33) of the Act defines "prohibited goods" as under:-

"prohibited goods" means any goods the import or export of
which is subject to any prohibition under this Act or any other law
G
for the time being in force but does not include any such goods in
respect of which the conditions subject to which the goods are 1w111
permitted to be imported or exported have been complied with."

From the aforesaid definition, it can be stated that (a) if there is any
H prohibition of import or export of goods under the Act or any other law for
O.P. BHATIA v. COMMR. OF CUSTOMS [M.B. SHAil .I.] 419
the time being in force, it would be considered to be prohibited goods; and A
(b) this would not include any such goods in respect of which the conditions,
subject to which the goods are imported or exported, have been complied
with. This would mean that if the conditions prescribed for import or export
of goods are not complied with, it would be considered to be prohibited
goods. This would also be clear from Section 11 which empowers the Central B
Government to prohibit either 'absolutely' or 'subject to such conditions' to
be fulfilled before or after clearance, as may be specified in the notification,
the import or export of the goods of any specified description. The notification
can be issued for the purposes specified in sub-section (2). Hence, prohibition
of importation or exportation could be subject to certain prescribed conditions
to be fulfilled before or after clearance of goods. If conditions are not fulfilled, C
it may amount to prohibited goods. This is also made clear by this Court in
Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Ors., (1970] 2 SCC
728 wherein it was contended that the expression 'prohibition' used in section
111 (d) must be considered as a total prohibition and that the expression does
not bring within its fold the restrictions imposed by clause (3) of the Import
Control Order, 1955. The Court negatived the said contention and held thus:- D

"........ What clause (d) of Section 111 says is that any goods which
are imported or attempted to be imported contrary to "any prohibition
imposed by any law for the time being in force in this country" is
liable to be confiscated. "Any prohibition" referred to in that section E
applies to every type of "prohibition". That prohibition may be
complete or partial. Any restriction on import or export is to an
extent a prohibition. The expression '·any prohibition" in section 111
(d) of the Customs Act, 1962 includes restrictions. Merely because
Section 3 of the Imports and Exports (Control) Act, 1947, uses three
different expressions "prohibiting", "restricting" or "otherwise F
controlling", we cannot cut down the amplitude of the word "any
prohibition" in Section 111 ( d) of the Act. "Any prohibition" means
every prohibition. In other words all types of prohibitions. Restriction
is one type of prohibition. From item (I) of Schedule I, Part IV to
Import Control Order, 1955, it is clear that import of living animals of
all sorts is prohibited. But certain exceptions are provided for. But G
nonetheless the prohibition continues."

The next question is-Is there any prohibition imposed under other law
which is for the time being in force?
H
420 SUPREME cou;n REPORTS [2003] SUPP. I S.C.R.

A For this purpose, reliance is placed upon Section 18 of the Foreign
Exchange Regulation Act, 1973, relevant part of which reads thus:-

18. Payment for exported goods. - (I )(a) The Central Government may,
by notification in the Official Gazette, prohibit the taking or sending
out by land, sea or air (hereafter in this section referred to as export)
B of all goods or of any goods or class of goods specified in the
notification from India directly or indirectly to any place so specified
unless the exporter fiirnishes to the prescribed authori~y a declaration
in the prescribed form supported by such evidence as may be
prescribed or so specified and true in all material particulars which,
C among others, shall include the amount representing:-

(i) the full export value of the goods; or
(ti) 3if the full export value of the goods is not ascertainable at the
time of export the value which the exporter, having regard to the
prevailing market conditions, expects to receive on the sale of the
D goods in the overseas market,

and affirms in the said declaration that the full export value of the
goods (whether ascertainable at the time of export or not) has been,
or will within the prescribed period be, paid in the prescribed
manner.This Section contemplates that exporter is required to furnish
E to the prescribed authority in prescribed form declaration of true
material particulars which include: -
(a) the amount representing the full market export value of the goods;
or in the alternative,
(b) ifthe full export value of the goods is not ascertainable, the value
F which the exporter expects to receive on the sale of the goods
in the overseas market, and
(c) the exporter has to affirm that full export value of goods will be
received.

G These two clauses of Section 18 leave no doubt that exporter is not
concerned with the prevailing market price in India of the goods sought to
be exported, but he is required to disclose true export value of goods. That
is to say, exporter has to disclose full and true sale consideration - export
value of the goods. The notification issued in exercise of the power under
H Section 18 also inter alia provides that Central Government prohibits the
O.P. BHATIA v. COMMR. OF CUSTOMS IM.B. SHAH . .I.] 421
export of all goods unless exporter furnishes to the prescribed authority a A
declaration in the prescribed form of material particulars including the fuli
export value of the goods or in the alternative the value of the· goods which
he expects to receive on their sale in overseas market. Hence, importance is
given to the value of goods which exporter is to receive. It also provides that
the exporter shall affirm in the declaration that full export value of the goods B
has been or will within prescribed period be paid in the prescribed manner.
Further, the learned Additional Solicitor General referred to the notification
issued under the said Section, relevant part of which reads thus:-

"GSR. 78-In exercise of the powers conferred by sub-section (I) of
Section 18 of the Foreign Exchange Regulation Act, 1973 (46of1973), C
and in supersession of the notification of the Government of India in
the Ministry of Finance (Department of Economic Affairs) No.GSR
2641, dated the 14th November, 1969, the Central Government hereby
prohibits the export, otherwise than by post, of all goods, either
directly or indirectly, to any place outside India, other than Nepal and
Bhutan, unless the exporter furnishes to the prescribed authority a D
declaration in the prescribed form supported by such evidence as
may be prescribed or so specified and true in all material particulars
which, among others, shall include the amount representing:-
(i)the full export value of the goods, or
(ii)if the full export value of the goods is not ascertainable at the time
E
of export, the value which the exporter, having regard to the
prevailing market conditions, expects to receive on the sale of the
goods in the overseas market,
and affirms in the said declaration that the full export value of the F
goods (whether ascertainable at the time of export or not) has
been, or will within the prescribed period be, paid in the prescribed
manner."

Apart from the aforesaid provision, for finding out the true export value
of the goods, Section 14 of the Act provides relevant procedure. Section 14 G
is to be read along with Section 2(41 ), which defines the word 'value'. Section
2( 41) reads as under :-

"S. 2 (41) - "value", in relation to any goods, means the value
thereof determined in accordance with the provisions of sub-section
(1) of section 14."
H
422 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A Thereafter, relevant part of Section 14 reads thus:

"14. Valuation of goods for purposes of assessment. - (1) For the
purposes of the Customs Tariff Act, 1975 (51 of 1975) or any other
law for the time being in force whereunder a duty of customs is
chargeable on any goods by reference to their value, the value of
B such goods shall be deemed to be-

the price at which such or like goods are ordinarily sold, or offered
for sale, for delivery at the time and place of importation or exportation,
as the case may be, in the course of international trade, where the
seller and the buyer have no interest in the business of each other
C and price is the sole consideration for the sale or offer for sale:

Provided that such price shall be calculated with reference to the rate
of exchange as in force on the date on which a bill of entry is
presented under section 46, or a shipping bill or bill of export, as the
case may be, is presented under section 50;
D
(I A) Subject to the provisions of sub-section (I), the price referred to
in that sub-section in respect of imported goods shall be determined
in accordance with the rules made in this behalf.

(2)Notwithstanding anything contained in sub-section (I) or sub-
E section (IA) ifthe Central Government is satisfied that it is necessary
or expedient so to do, it may, by notification in the Official Gazette,
fix tariff values for any class of imported goods or export goods,
having regard to the trend of value of such or like goods, and where
any such tariff values are fixed, the duty shall be chargeable with
reference to such tariff value.
F
(3) .........."

The aforesaid Section would be applicable for detennining the value of
goods for the purposes of assessment of tariff under the Act or any other
law for the time being in force whereunder a duty of customs is chargeable
G on any goods by reference to their value. In the present case, on export of
goods in question, no duty was payable under the Act. It was, therefore,
contended that there is no scope of application of Section 14 for determining
the value of goods by applying the criteria laid down in the said Section. In
our view, this submission cannot be accepted. For determining the export
H valiJe of the goods, we have to refer to the meaning of the word 'value' given
O.P. BHATIA v. COMMR. OF CUSTOMS [M.B. SHAii. J.] 423

in Section 2( 41) of the Act, which specifically provides that value in relation A
to any goods means the value thereof determined in accordance with the
provisions of sub-section (I) of Section 14. Therefore, if the export value of
the goods is to be determined, then even if no duty is leviable, the method
(mode) for determining the value of the goods provided under Section 14 is
required to be followed. Section 14 specifically provides that in case of B
assessing the value for the purpose of export, value is to be determined at
the price at which such or like goods are ordinarily sold or offered for sale
at the place of exportation in the course of international trade, where the seller
and the buyer have no interest in the business of each other and the price
is the sole consideration for sale. No doubt, Section 14 would be applicable
for determining the value of the goods for the purpose of tariff or duty of C
customs chargeable on the goods. In addition, by reference it is to be resorted
to and applied for determining the export value of the goods as provided
under sub-section (41) of Section 2. This is independent of any question of
assessability of the goods sought to be exported to duty. Hence, for finding
out whether the export value is truly stated in the shipping bill, even if no
duty is leviable, it can be referred to for determining the true export value of D
the goods sought to be exported.

It is true that Section 50 of the Act inter a/ia provides that before
exporting the goods the exporter shall make entry thereof by presenting to
the proper officer in the case of goods to be exported, a shipping bill and a E
bill of export in prescribed form. The Shipping Bill & Bill of Export (Form)
Regulations, 1991 inter alia prescribes the said form. After that form is
amended w.e.f. 15.6.2001, it is stated that exporter shall state "Value FOB/
PMV where applicable". We are not required to deal with this aspect in this
appeal as the goods were sought to be exported in the year 1998.
F
From the aforesaid provisions, mainly, Section 2(41) read with Section
14 of the Act and Section 18 of the Foreign Exchange Regulation Act, 1973,
it is crystal clear that:-

(a) Exporter has to declare full export value of the goods .(sale
consideration for the goods exported). G
(b) Exporter has to affirm that the full export value of the goods will
be received in the prescribed manner.
(c) If the full export value of the goods is not ascertainable, the
value which the exporter expects to receive on the sale of the ,
goods in the overseas market. . H
424 SUPREME COURT REPORTS (2003) SUPP. I S.C.R.

A (d) Exporter has to declare true or correct export value of the goods,
that is to say, correct sale consideration of the goods. Criterion
under Section 14 of the Act is the price at which such or other
goods are ordinarily sold or offered for sale in the course of
international trade where the seller and buyer have no interest in
the business of each other and the price is the sole consideration
B for sale or offer for sale.

To the same effect, Rule 11 of the Foreign Trade (Development and
Regulation) Rules, 1993 provides. This Rule is to be read along with Section
I !(I) of the Foreign Trade (Development & Regulation) Act, 1992, which inter
C alia provides that no export or import shall be made by any person except in
accordance with the provisions of this act, the rules and the orders made
thereunder and the export and import policy for the time being in force. Rule
11 reads thus :-

"J J. Declaration as to value and quality of imported goods.-On the
importation into, or exportation out of, any customs ports of any
D
goods, whether liable to duty or not, the owner of such goods shall
in the bill of entry or the shipping bill or any other documents
prescribed under the Customs Act, 1962 (52 of 1962), state the value,
quality and description of such goods to the best of his knowledge
and belief and in case of exportation ofgoods, certify that the quality
E and specification of the goods as stated in those documents are in
accordance with the terms of the export contract entered into with
the buyer or consignee in pursuance of which the goods are being
exported and shall subscribe to a declaration of the truth of such
statement at the foot of such bill of entry or shipping bill or any other
documents."
F
Hence, in cases where the export value is not correctly stated, but there
is intentional over-invoicing for some other purpose, that is to say, not
mentioning true sale consideration of the goods, then it would amount to
violation of the conditions for import/export of the goods. The purpose may
G be money laundering or some other purpose, but it would certainly amount
to illegal I unauthorised money transaction. In any case, over-invoicing of the
export goods would result in illegal/irregular transactions in foreign currency.

Learned senior counsel Mr. Dave submitted that in some cases, exporter
may get much higher value of the goods than the market price prevailing in
H the country and, therefore, merely because higher export value is mentioned,
O.P. BHATIAv. COMMR. OF CUSTOMS [M.B. SHAH. J.] 425

it cannot be inferred that it is not the true sale consideration. In some cases, A
this hypothetical contention may be right. However this would depend upon
facts and circumstances as well as evidence on record in each case. If the
goods are easily available in ·the market, then it would be difficult to arrive
at the conclusion that a foreign buyer a prudent businessman would pay ten
times more than the prevailing market price ofreadymade clothes, particularly, B
in the days where information is easily available through internet or various
other sources. In any case, when margin of profit appears, on the face of it,
unreasonable, it is for the exporter to establish that it was 3 true export value
stated in the shipping bill. Section 14 itself contemplates that the price at
which such or like goods are ordinarily sold or offered for sale in the course
of international trade would be the value of the goods. C
In Toolsidass Jewraj v. Additional Collector of Customs and Ors.,
[ 1991) 2 SCC 443, full export value of the goods was not correctly stated in
the shipping bills along with G.R. I forms and it was a case of under-valuation
in respect of full export value of goods. In that set of circumstances, the Court
upheld the order passed by the authorities that there was violation of Section D
12(1) of the Foreign Exchange Regulation Act, 1947.

In the present case, as found by the authorities, 28,000 pieces of ladies
skirts at the rate of $10.25 per piece, export value of which was mentioned as
Rs. 1,21,54,447, were sought to be exported. The market price of such skirts
was ascertained to be Rs.45/- per piece and on that basis total value of the E
goods came to be Rs.9,53,280/-. The exporter claimed a drawback of Rs.
21,87,800 on the consignment on the basis that value of each skirt was Rs.78/
- per piece. No doubt, during the enquiry exporter admitted that the market
price of Rs. 45 per piece was acceptable to him and the claim for drawback
was withdrawn. Thereafter, the exporter has not led any evidence that export F
value mentioned in the shipping bill was the true sale consideration for the
goods sought to be exported.

Considering the aforesaid facts and also the fact that this was the
second case belonging to the same exporter, the authorities arrived at the
conclusion that it was an organized racket to claim fraudulent drawback or an G
act of deliberate over-invoicing the readymade garments. Hence, the authority
imposed redemption fine as well as levied penalty. In our view, this finding
arrived at by the authorities below cannot be said to be, in any way,
unreasonable which would call for interference by this Court in this appeal.
H
426 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A In the result, the appeal is dismissed. There shall be no order as to
costs.

I.A. No.3 OF 2002

We had heard learned counsel for the intervenor on the question of law
B involved in this appeal. I. A. stands disposed of accordingly.
N.J. Appeal dismissed.