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Judgment
THE short question involved in this complaint is: Whether the Opposite Party - Bank was bound to forward the invoices for collection from the overseas buyer, even though the C&F value was not declared at the time of customs clearance of the goods? Admittedly, before the Customs authorities FOB value of the goods was only mentioned without disclosing the C&F value, or, to say that, the value mentioned in the invoice was double than the FOB value.
IN our view, in such set of circumstances, because of the Foreign Exchange Regulation Act, 1973, the Opposite Party Bank cannot be held to be deficient in service for not forwarding the invoices to the foreign buyer without certification by the customs clearance office or without the permission of the RBI. Facts: It is the say of the complainant that he was engaged in import-export trading business since 1995; he was exporting packing machines, packing material and other commodities including pharmaceuticals to Europe, the U.S.A., Africa and the Gulf countries; the Shaik Eid Bin Mohammed Al Thani Organisation, a Charity Organisation, being run by the Royal Family of Qatar, floated a tender for supply of medicines and blankets to be distributed amongst the refugees of the Kosovo war; the complainant was awarded the tender which was worth about US $ 7 lakhs; the complainant, thereafter, sent samples of blankets and required medicines to the said charity organization for testing and approval and on approval, the buyers sent two separate letters dated 25.4.1999 and 26.4.1999 of confirmation.
THE Complainant contends that as per the terms and conditions of the agreement entered into between the complainant and the buyer, the entire shipment of medicines was to be executed by the midst of May 1999 and blankets by June 1999. It is further contended that to expedite the relief work, the buyer requested that the entire shipment of medicines be executed by 10.5.1999. In view of the urgency involved, it was agreed that the first consignment would be sent by air and the remaining consignment by sea.
IT is further averred that the complainant was required to purchase the said medicines and blankets from the manufacturer. The duty drawback for the manufacturer was required to be calculated on the FOB value only and if the manufacturer includes the profits of the exporter, it would attract penal action. It is contended that for the purpose of negotiating with the buyer"s banker, the actual exporter (the complainant) will submit his invoice with the cost and freight suffered by the exporter as well as its profit and substitute in the place of manufacturer"s invoice because the exporter"s invoice will only include the Free on Board value of the goods as declared by the manufacturer. It is the duty of the bank to send those documents to the buyer"s bank and collect from the foreign buyer on the basis of the invoices prepared by the exporter. It is pointed out that the first consignment, which was airlifted on 3.5.1999, was valued by the manufacturer at US $ 13,454.89 which includes cost, freight, transportation and commission and this sum was stated in the G.R. Form at the time of customs clearance. The consignment was cleared by the customs and the complainant substituted his invoice which was for US $ 36,025.83 and submitted the same to the Opposite Party - Canara Bank on 30.5.1999 for collection. The buyer"s banker, Qatar Islamic Bank, Doha, discharged the documents by remitting US $ 36,025.83 through the Opposite Party.
THE dispute in the present case pertains to the second consignment of medicines and blankets dispatched by sea. It is the say of the complainant that the same procedure was adopted for getting customs clearance but the Foreign Exchange Department of Canara Bank raised an objection that there was difference in the declared amount in the G.R.Form which is on FOB and in the amount declared in the invoice calculated on C&F basis and hence the documents could not be forwarded to the buyer"s banker at Qatar for collection without RBI permission. In the said documents, FOB value was mentioned at US $ 30,069.27. C&F value was mentioned at US $ 63,275.72. As there was wide difference, the office of Canara Bank wrote a letter on 12.5.1999 to Reserve Bank of India (RBI) for permission. It is also pointed out that the complainant also made complaint to RBI on 12.5.1999.
IT is also to be stated that Canara Bank informed the complainant that the documents would be accepted only if the second set of invoice for US $ 63,275.72 and the G.R. Form are certified by the Customs Department. It is the contention of the complainant that on 18.5.1999, he received a letter from the buyer that the documents had not reached them. Thereafter, on 1.6.1999, he received a letter from the buyer cancelling the order. Hence, on 2.6.1999, the complainant wrote a letter to the bank for returning the documents. To that, the bank replied by letter dated 7.6.1999 to await return of documents till the RBI, Mumbai passes an appropriate order. Finally on 10.6.1999, the RBI wrote letter to accept the documents as one time case. Re: Banking Ombudsman: Aggrieved by the aforesaid delay on the part of the Opposite Party, the complainant approached the Banking Ombudsman, which passed the order on 12.8.1999. It is pointed out that the Banking Ombudsman has also found deficiency in service by the Bank.
IN our view, the said contention is not justified, because the Banking Ombudsman had not found any deficiency in service by the Canara Bank. For this purpose, it would be relevant to refer to the relevant discussion in the said order, which is as under: "A Conciliation Meeting was called on 30.7.99 at 12 noon. Both the parties attended the meeting.
THE complainant maintained that on many occasions previously since 1995, the Bank had negotiated the documents in similar circumstances without any demur. In respect of the first consignment under the present order, the Bank had negotiated the documents just 3 days earlier without any objections. The complainant substantiated these as per evidence already produced and copies of some documents produced with their letter dated 31.7.99 as directed by this Forum. The documents produced show the following: - (a) Export made to Kosavo Refugees (GR No.AR 295193) Value declared in GR Form : USD 13,454.89 Invoice value under Bill of Exchange: USD 36,025.83 (b) Export of Tea (GR No.AH 812326) Value as per GR Form : USD 21,644.00 Invoice value in Bill of Exchange : USD 25,779.80 (c) Export of Laminated plastic film (GR No.AJ 081542) Value as per GR Form : USD 12,490.00 Value as per invoice : USD 15,376.60 (d) Export of Laminated plastic film (GR No.AJ 081550) Value as per GR Form : USD 13,067.00 Value as per invoice : USD 22,852.00 In all these cases, the invoice value differed from the FOB value by similar percentages and the Bank had not raised any objection. If they had raised any such objection, the complainant stated, he would have taken the necessary precautions or given clarifications then and there and would have taken such precautions for the future as well. But he was surprised why at all a reference was made to RBI. Even as late as 7.6.99, the complainant stated that a FAX message was received from the Asst. General Manager of Respondent Bank to wait till a decision is taken by the RBI, Mumbai. But the foreign buyer would not wait and cancelled the order. During the discussion, Banking Ombudsman pointed out that the Exchange Control Manual is clear on the subject. "6C.3(iv) Authorised dealers should ensure that the documents submitted do not reveal any material inter se discrepancies in regard to description of goods exported, export value or country of destination."
Notes : A. The export realizable value may be more than what was originally declared to/accepted by Customs on the GR Form in certain circumstances such as where in c.i.f. OR c&f, contracts, part or whole of any freight increase taking place after the contract was concluded is agreed to be borne by buyers or where as a result of subsequent devaluation of the currency of the contract, buyers have agreed to an increase in price. B. In certain lines of export trade, final settlement of price may be dependent on the result of quality analysis of samples drawn at the time of shipment; but the results of quality analysis will become available only after the shipment has been made. Sometimes, contracts may provide for payment of penalty for late shipment of goods in conformity with trade practice concerning the commodity. In these cases, while exporters declare to Customs the full export value based on the contract price, invoices submitted along with shipping documents for negotiation/collection may reflect a different value arrived at after taking into account the results of analysis of samples or late shipment penalty, as the case may be.
AS such variations stem from the terms of contract, authorized dealers may accept them on production of documentary evidence after verifying that the arithmetical calculations showing the variations are correct and are based on the terms of underlying contracts. "6C.9(i) Authorised dealer should dispatch shipping documents to their overseas branches/correspondents as expeditiously as possible. Authorised dealers should ensure, particularly in case of exports to neighbouring countries, that shipping documents are dispatched to their overseas branches/correspondents expeditiously so that documents reach the buyer before the carrying steamer discharges the cargo at the port of destination."
KEEPING the urgency in view, the Bank could have resorted to expeditious means to get RBI advice on the issue. However, this Forum cannot finally decide the matter in view of the fact that the Reserve Bank of India, Mumbai having gone in to the matter had finally said in their letter dated 10th June 1999 that they are agreeable as a special case the negotiation of Bills by Canara Bank. As such we allow the matter to rest at this stage at our end." Findings: Hence, the question which requires consideration is whether the reference made by the Canara Bank to the RBI for seeking permission to forward the bill to the foreign buyer for collecting the bill on the basis of the invoices prepared by the Complainant even though different amounts were mentioned for getting the customs clearance. For deciding the aforesaid question, we would mention the relevant dates which arep as under: 10-5-1999: 2nd shipment of medicines and blankets, documents were submitted to the Bank for collection. FOB Value US $ 30,069.27- Custom Clearance C&F Value US 63,275.72 " not stated before customs authorities. 12-5-1999 Bank addressed letter to RBI for permission to accept the bill for collection and also to continue such bills in future.
On the same day the Complainant also wrote letter to the RBI. Bank informed Complainant that documents will be accepted only if the second set of invoices for US $ 63,275.72 are certified by Customs. 18-5-1999 letter from the buyer that the documents have not reached them. 1-6-1999 Letter from the buyer canceling the order. 2-6-1999 Letter from the Complainant to the Bank to return the documents. 7-6-1999 Letter from the Bank to await return of documents till RBI, Mumbai passes order. 10-6-1999 RBI letter to accept the documents as one time case and that RBI was agreeable as a special case for the negotiation of bills by the Canara Bank. From the aforesaid facts it is apparent that the difference between the FOB value and the C&F value, which was sought to be recovered through the bank, is very wide. Despite this, in response to the letter written by the Bank, the Complainant has specifically stated by his letter dated 18.5.1999 that : "It is well accepted practice that the FOB value is given in the GR Form not the CNF (C&F) value as otherwise the manufacturer exporters will become entitled to claim duty drawback on C&F value resulting in financial loss to the country. Further, once the goods are shipped after custom clearance there is no question of amending the GR Form and get it certified by the Customs. If persisted, it will only lead to result verging an absurdity".
THIS letter reveals total ignorance on the part of the Complainant with regard to Foreign Exchange Regulations.
IN case where goods are exported customs clearance is must. Correct value of the goods which is sought to be recovered from the foreign buyer is required to be disclosed. If this not done, then it is likely open flood gates for illegal transactions. This also would be the violation of the provisions contained in the Foreign Exchange Regulation Act, 1973 because under Section 18 full export value of the goods is required to be disclosed. Similarly, as per the Exchange Control Manual, as quoted by the Banking Ombudsman, authorized dealer was required to ensure that documents submitted do not reveal any material inter se discrepancies in regard to description of goods exported, export value or country of destination. Further, against the GR Form, in the column for "Full Export value which exporter expects to receive on the sale of goods" it is mentioned as US $ 30,069.27, and the Complainant has given a declaration to this effect on the GR Form. As soon as the documents were produced, the bank wrote a letter to the RBI on 12th May, itself. Even the Complainant also sought permission from the RBI. Thereafter, the RBI, Exchange Control Department, Chennai, vide its letter dated 17.5.1999 informed the Senior Manager of the Canara Bank that the Bank may negotiate the documents only after getting the second set of invoice with C & F value for US $ 63,275.72 as well as the GR Form duly certified by the Customs. On the same date the Bank informed accordingly to the Complainant that the documents could be negotiated only after getting the second set of invoice with C&F value for US $ 63,275.72 as well as the GR Form duly certified by the Customs. It is pertinent to mention here that the Complainant had ample time and opportunity to get the second set of invoice with C&F value for US $ 63,275.72 as well as GR Form duly certified by the Customs, but he has not chosen to do so for the reasons best known to him. Hence, in our view, there is no justifiable reason for the Complainant not to produce the invoice with C & F value before the Customs Authorities. May be, for the purpose of drawback facilities actual sale consideration to the Complainant could be stated by the manufacturer, but, if the Complainant was to get profit, then, invoices disclosing the sale price should have been cleared through the Customs and that was not done. Therefore, the bank rightly informed the Complainant that the document would be accepted only if the second set of invoices for US $ 63,275.72 is certified by the Customs Authorities. Even the RBI has granted permission as an exception and the Bank was required to obtain permission because of the Foreign Exchange In such set of circumstances, if the buyer has cancelled the order, the fault does not lie with the bank. It is the fault of the Complainant. Therefore, there is no deficiency in service on the part of the Bank. In the result, this Original Petition is dismissed. There shall be no order as to costs.