EASTERN AGENCIES Vs. UNION OF INDIA

JUDGEMENT

(1.) This petition seeks to quash on order passed by the Foreign Exchange Regulation Appellate Board. The decision of the petition depends upon the interpretation placed on the phrase own or holds" in s. 9 of the Foreign Exchange Regulation Act, 1947. Section 23EE thereof provides that an appeal shall lie to the High Court only on questions of law from any decision or order of the Appellate Board. This is a matter in which an appeal ought to have been filed. I am, however, unable to uphold the preliminary objection upon this ground because the petition has been entertained and heard and there is some doubt as to whether the appeal would now be entertained : Hirday Narain v. ITO [1970] 78 ITR 26 at p. 31 (SC).

(2.) The first petitioners carry on business as indenting agents of foreign manufacturers of drugs and chemicals. They place orders with foreign manufacturers for the supply of drugs and chemicals to Indian purchasers. The first petitioners are paid commission by the foreign manufacturers. The rate of commission varies and differs from foreign manufacturer to foreign manufacturer. After the drugs and chemicals have been despatched by the foreign manufacturers, invoices are sent to the Indian purchasers. The foreign manufacturers, make credit entries in their books of account of the amount of the commission payable to the first petitioners in respect of the transactions and issue credit notes to them. It is the petitioners' case that, thereafter, the foreign manufacturers may issue statements relating to the credit notes sent mentioning the amounts repatriated to the petitioners. It is their case that if there is a dispute between a foreign manufacturer and an Indian purchaser and the Indian purchaser does not make payments as invoiced, the foreign manufacturer is entitled to deduct the balance due to him from the commission payable to the first petitioners or to decline to pay the commission at all, in which case it is not possible for the first petitioners to dispute such deductions or refusal. It is their case that in relation to transactions which had taken place in past years, it is not possible for them to correlate particular credit notes against receipts of foreign exchange.

(3.) On November 26, 1968, a raid was carried out on the premises of the first petitioners by officers of the Enforcement Directorate and files and documents were seized. On July 28, 1975, four show-cause notices were issued to the first petitioners and their partners (including the second petitioner) alleging that they had contravened ss. 9, 10 and 5 of the FERA. On November 4, 1976, the petitioners filed a reply setting out their case as aforesaid. On November 30, 1976, the Additional Director of Enforcement found the petitioners guilty of the charges and imposed upon the first petitioner a penalty in the aggregate sum of Rs. 51,500 and a penalty of Rs. 4,200 on each of the partners. The petitioners preferred an appeal to the Appellate Board on January 17, 1977. On November 29, 1980, the penalty levied upon the petitioners was confirmed by the impugned order.