Judgment:
David Annoussamy, J.
1. This is a batch of nine appeals under section 54 of the Foreign Exchange Regulation Act, 1973 hereinafter referred to as the Act. At the outset, we may indicate the particular nature of the proceedings out of which these appeals arise and the limited scope of these appeals as well. Whenever a penalty is to be levied under section 50, the Adjudicating Officer shall hold an enquiry in the prescribed manner after giving a reasonable opportunity for making a representation in the matter. As per section 52, the Appellate Board appointed by the Government on receipt of appeal may, after making such enquiry as they deem fit, affirm or modify the order appealed against. As per section 54, an appeal which would lie before this court should only be on questions of law. It is seen from these provisions that the first proceedings is in the nature of departmental enquiry and in the second proceedings, the department is one of the parties and the dealer is another party.
2. The facts of the case are summarily as follows:
The appellant is a dealer in goat hair. He has obtained necessary permission from the official authorities to send various consignments of that commodity to several places in the East European countries, namely Czechoslovakia and Hungary. This happened in the year 1969.
3. On November 5, 1970, the business premises of the appellant were searched and certain incriminating documents were found and seized. These documents disclosed that goat hair purported to be sent ostensibly to soft currency areas were actually unloaded in and meant for West European countries and hard currency areas. It was also found that in every case the appellant received export proceeds in rupees. Originally, a show cause notice under section 12(1) was issued to the appellant. Thereupon, the appellant filed a writ petition in the Madras High Court seeking to quash the show cause notice which related to contravention of the provision of the Sea Customs Act also. The writ petition was allowed by the High Court and the order therein was confirmed on appeal. Thereafter, the Department issued another show cause notice under section 12(2)(b) and under section 10(1)(b) of the 'Act on September 17, 1983. The appellant denied the charges and contended that the goods were actually sent by him to East European countries and the export proceeds were receivable in rupees only. In support of his contention, the appellant stated that the consignments were shipped to parties in East European countries and that shipping and other documents showed that such was the actual happening. It was stated that in order to reach Eat European countries, the goods have necessarily to pass through West European sea ports and that the parties at those ports were acting only as agents, collaborators or partners of the consigness. As there were nine consignments, nine show cause notices were served and there were nine adjudication proceedings before the Deputy Director of Enforcement, Madras. In nine separate orders all dated December 31, 1979, the Deputy Director of Enforcement found, on the basis of the documents seized and found in the possession of the appellant and which the appellant has been allowed to peruse, that the irresistible conclusion to be arrived at was that the commodities apparently sent to East European countries were effectively meant and sent to West European countries. Accordingly, he imposed penalties separately under sections 10(1)(b) and 12(2)(b) of the Act. The relevant details in respect of those nine proceedings are in the following table:
_________________________________________________________________________Appeal Qty. Consignee Actual Amount PenaltyNo. supp as per consig involvlied shipping nee ac eddocuments cordingto Dept._________________________________________________________________________(1) (2) (3) (4) (5) (6)_________________________________________________________________________107/80 58 bales Centrotex Melches Rs.2,000Prague & Co. Section 12(2)Bremen 21497/07 Rs.1,000W. Germ- Section 10(1)any (b)108/80 58 bales Hungrotex Friedrick 22578 Rs.2,000Hungary Marx Section 12(2)Hamburg Rs.1,000Section 10(1)(b)109/80 56 bales Centrotex Tentlar 20850 Rs.2,000Prague Amster- Section 12(2)dam (b)Rs.1,000Section 10(1)(b)110/80 20 M.T. Centrotex Mayfield 35075/82 Rs.3,500Prague Export- Section 12(2)Ltd. (b)Oxford Rs.1,500Section 10(1)(b)111/80 58 bales Centrotex Tentler 19864/25 Rs.2,000Prague Amster- Section 12(2)(b)dam Rs.1,000Section 10(1)(b)112/80 75 bales Hungrotex Turnasky 22161/98 Rs.2,000Budapest Brussels Section 12(2)(b)Rs.1,000Section 10(1)(b)113/80 140 bal- Hungrotex Mayfield 40681/18 Rs.4,000es Budapest Oxford Section 12(2)(b)Rs.2,000Section 10(1)(b)114/80 118 bal- Hungrotex -do- 15665/97 Rs.3,000es Budapest Arthur 23650/28 Section 12(2)(b)Rs.1,500Section 10(1)(b)115/80 i) 87 ba- Centrotex Rs.4,000les Prague Jabalw Section 12(2)(b)ii) 88 ba- Germany 23186/17 Rs.2,000les Section 10(1)(b)
4. The dealer preferred appeals before the Foreign Exchange Regulation Appellate Board, Southern Zone, Madras. The Board, after hearing the parties, the dealer being represented by an advocate and the Department being represented by an officer, came to the conclusion that there were contraventions of both the provisions of the Act, but however, taking into account the circumstances, of the case found that the penalty was excessive and accordingly, reduced the penalties as follows:
Appeal No. 107/80 From Rs.2,000 Reduced to Rs.1,000and Rs.1,000 and Rs.500 respectivelyAppeal No. 108/80 From Rs.2,000 Reduced to Rs.1,000and Rs.1,000 and Rs.500 respectively.Appeal No. 109/80 From Rs.2,000 Reduced to Rs.1,000and Rs.1,000 and Rs.500 respectively.Appeal No. 110/80 From Rs.3,500 Reduced to Rs.1,750and Rs.1,500 and Rs.750 respectively.Appeal No. 111/80 From Rs.2,000 Reduced to Rs.1,000and Rs.1,000 and Rs.500 respectively.Appeal No. 112/80 From Rs.2,000 Reduced to Rs.1,000and Rs.1,000 and Rs.500 respectively.Appeal No. 113/80 From Rs.4,000 Reduced to Rs.2,000and Rs.2,000 and Rs.1,000 respectively.Appeal No. 114/80 From Rs.3,000 Reduced to Rs.1,500 andand Rs.1,500 Rs.750 respectively.Appeal No. 115/80 From Rs.4000 Reduced to Rs.2,000and Rs.2,000 and Rs.1,000 respectively.
5. In these appeals, learned counsel for the appellant contended that there was failure of the principles of natural justice inasmuch as he was not given copies of the documents seized from him so that he could effectively put forth his defence. He stated that he was handicapped by the fact that his written explanation was given in the year 1973 exactly on November 15, 1973, and that the adjudication proceedings took place on November 9, 1979, that is to say, 6 years after his explanation. He also contended that the adjudicating authority as well as the Appellate Board have based their decision no assumptions and that there was no sufficient material to come to the conclusion that he has contravened both the provisions of the Act indicated in the show cause notices, namely sections 10(1)(b) and 12(2)(b).
6. As far as failure of justice is concerned, we find in the order of the adjudicating authority that the dealer/appellant inspected all the documents. No doubt, the documents were not returned to him as applied for, since it was not possible for the Department to part with the documents and no application appears to have been made for copies of the documents. Again in the order of the Appellate Board, we find that the appellant has been given sufficient opportunity to peruse the document before the adjudicating authority had that even during appeal proceedings such an opportunity has been afforded to him. As far as the delay in the proceedings is concerned, no explanation was given by learned counsel for the respondent for the period of six years between the receipt of the explanation by the dealer and the adjudication proceedings. But from the mere fact of delay, one cannot come to the conclusion that there was denial of natural justice and no special circumstances were pleaded circumstances were pleaded by the appellant to show that there was really a denial of natural justice on this court. Though it is a matter of regret that the adjudicating authority has taken so much of time, we find it impossible to interfere with the order only on account of this delay.
7. Turning now to the other aspect of the appeals, namely that the decision of the authorities below are based on assumptions, we find that as far as the contravention of section 10(1)(b) is concerned, there is a clear finding by the adjudicating authority that there was an understanding between the appellant and the dealers in the West European countries. The documents also reveal that the dealer had full knowledge that the goods were being sent to the buyers in the West European countries. As far as contravention of section 12(2)(b) is concerned, there is only a cursory sentence in the order of the adjudicating authority to the extent of saying that the dealer had failed to repatriate the export proceeds in the prescribed manner as shown in Schedule A of the notification referred to above. The Appellate Board has concentrated its reasoning only on the question whether the goods actually reached West European countries or East European countries. It has not given any finding whatsoever as to how the contravention under section 12(2)(b) was perpetrated.
8. In these proceedings, the case of the Department is that the appellant got permission for exporting certain commodities such as goat hair to East European countries, that he has received payment for exported goods in rupees and that actually the commodities landed in West European countries from which the appellant was entitled to receive hard currencies. As far as section 10(1)(b) is concerned, as pointed out earlier, there is a clear finding supported by evidence that the dealer has done a thing which had the effect of securing that the foreign exchange due ceased to be receivable by him. As far as contravention under section 12(2)(b) is concerned, the question of law which arises is whether the course of action of the dealer amounts really to contravention of section 12(2)(b) of the Act. Section 12(2)(b) runs as follows:
'12. Payment for exported goods:-
(2) Where any export of goods has been made to which a notification under sub-section (1) applies, no person entitled to sell, or procure the sale, of, the said goods shall, except with the permission of the Reserve Bank, do or refrain from doing anything or take or refrain from taking any action which has the effect of securing that-
(b) payment for the goods is made otherwise than in the prescribed manner or does not represent the full amount payable by the foreign buyer in respect of the goods, subject to such deductions, if any, as may be allowed by the Reserve Bank, or is delayed to such extent as aforesaid: Provided that no proceedings in respect of any contravention of this sub- section shall be instituted unless the prescribed period has expired and payment for the goods representing the full amount as aforesaid has been made in the prescribed manner.'
9. This section regulates payment for exported goods. It is meant to deal with a specific set of circumstances, in contrast to s. 10 which deals broadly with the duty of persons entitled to receive foreign exchange. For a contravention under section 12(2)(b) to be made out, and essential ingredient is that payment is made otherwise than in the prescribed manner. The term 'prescribed' is defined in the Act (section 2(1)) as meaning prescribed by rules made under the Act. As far as the present transaction is concerned, it is the admitted case of the Department that the goods were intended to be shipped to rupee currency areas and that the corresponding amount has been received. It has not been shown what really the contravention under section 12(2)(b) amounted to. The order of the adjudicating authority refers to the failure of repatriation of export proceeds in the prescribed manner as shown in Schedule A of the notification. That Schedule A is not available in the record, nor has learned counsel for the respondent been able to place it before us, in order to enable us to find out whether any manner of payment has been prescribed by the Rules and whether payment in this case has been made otherwise than in such prescribed manner. As per the case of the Department, the transaction was authorised on condition that the corresponding value of the goods exported should be repatriated in rupees and it is admitted that that condition has been fulfilled. Because the goods actually landed in hard currency areas, hard currencies became recoverable by the dealer and by not receiving it, he committed a contravention of section 10(1)(b). But no contravention of section 12(2)(b) has been made out.
10. Looking at the matter from a different angle, we are now concerned with the penalty to be levied. A Division Bench of this court in Union of India v. Messrs. Marcel Navens [1978] II MLJ 122 while dealing with Foreign Exchange Regulation Act as well as the Customs Act, held as follows:
'Speculations certainly should be avoided, particularly when orders of confiscation and imposition of penalty are to be made. The provision is of a penal nature. The degree of proof that is required for the penalty to be imposed is that which is required in a criminal case. We would expect some material on the basis of which a reasonable conclusion is possible. In fact, the conclusion must not only be a possible conclusion but must be the only conclusion that could be reached on the material before the authorities.'
11. Such being the degree of proof for a contravention to be visited with penalty, we find it extremely difficult to uphold the order of the Appellate Board where there is not even a single line showing how the contravention under section 12(2)(b) has occurred. If we see the order of the adjudicating authority, we do not find anything except a cursory sentence which we have already referred to above. In the absence of materials to show that a contravention under section 12(2)(b) actually happened, we are necessarily led to the conclusion of setting aside the order of the Appellate Board as far as the penalty for contravention under section 12(2)(b) is concerned.
12. Before parting with this case, we want to observe that the order of the adjudicating authority does not contain the list of documents relied on by the authority. Since the order is subject to appeal before the Appellate Board and a further appeal before this court, it will be necessary for a proper scrutiny of the order passed that all the documents perused and relied upon by the authority are listed with adequate description and referred to as far as possible in the order itself with indication of their serial number. We do hope that in future this requirement will be kept in mind by the concerned officers.
13. In the result, the penalty levied by the adjudicating authority as reduced by the Appellate Board, is set aside as far as the penalty for contravention under section 12(2)(b) is concerned. The penalty levied under section 10(1)(b) as modified by the Appellate Board, is confirmed, No costs. Time for payment-one month.