S KUMAR Vs. ADDITIONAL DIRECTOR OF ENFORCEMENT

JUDGEMENT

(1.) This is an appeal moved under section 54 of he Foreign Exchange Regulation Act, XLVII of 1973 against an order dated 26.7.1979 of Shri V.V. Vaze, Member, Foreign Exchange Regulation Appellate Board.

(2.) The background of the facts is that Pearl Cycle Industries Ltd., obtained two import licences for the import of cycle chain plant of the value of Rs. 7,00,000.00 equivalent to about Deutsche Marks 605227. This was said to be the outer limit of the imports. However, the actual total price of the equipment came to DM 5,20,280. The Technical Manager of the company then wrote to the supplier in Germany, asking for modifications in the proforma invoice in order to make up the amount of Rs. 7,00,000. Having obtained that, the equipment worth Rs. 7,00,000.00 was thus stated to have been imported by this process. It was alleged that the company indulged in over-invoicing of the bills and in this way contravened section 4(3) of the Foreign Exchange Regulation Act, 1947.

(3.) Penal proceedings were, therefore, commenced against the Pearl Cycle Industries Ltd. and the present appellant, namely, S. Kumar, who was stated to be its Managing Director., by the Additional Director of Enforcement. He later by an elaborate order dated 31.3.1977, imposed a penalty of Rs.l0,000.00 on the company and Rs.l5,000.00 on Mr. S. Kumar. Reference was made to the letter of the Technical Director which had been written to the supplier in Germany in which in continuance of an earlier letter, "certain modification in the proforma invoice for the chain plant as well as for certain spares, totally to make an amount of Rs.7,00,000.00 " was sought. The stamping dies to be provided for, were required to be identical to the sample sent. The dispatch of proforma invoice was, therefore, required to be expedited to enable i he opening of a letter of credit for the balance amount. The Directorate of Enforcement, therefore, alleged that in this way final bills were obtained by the company to cover the entire amount of Rs. 7,00,000.00 , and thus more foreign exchange was remitted than was necessary for the purpose. S. Kumar who appeared for the company before the Additional Director of Enforcement, contended that no inflation of prices was done. Rather more tools were obtained which were connetced with same machine as the licence was not only for cycle chain manufacturing machine but for tools as well. In this manner, more material permissible under the licence was added in order to fully utilise the same.