Obtaining of Decree in India by Exporter-Co. Against a Foreign Importer for Un-paid Goods was Reasonable | HC

Case Details: Hooghly Mills Co. Ltd. v. Union of India - [2023] 154 taxmann.com 509 (HC - Calcutta)

Judiciary and Counsel Details

• Debangsu Basak & MD. Shabbar Rashidi, JJ.
• Sudhir Mehta, Ms Sreyashee Biswas, Ms Puja Goswami & Saswati Chatterjee, Advs. for the Appellant. 
• Vipul Kundalia, Anurag Roy, Ms Aditi Singhania & Ms Uneaza Ali, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant company exported materials but did not receive the entirety of the price of goods sold and delivered from the importer within the prescribed period under section 18 of the Foreign Exchange Regulation Act, 1973. The appellant filed a suit before the High Court seeking recovery of the balance price of goods sold and delivered. The Enforcement Directorate (ED) issued a show cause notice (SCN) against the appellant for their failure to take action to secure receipt for export of total invoice value. The SCN resulted in an adjudication order where the Adjudicating Authority rejected the appellant’s contention that they had taken reasonable steps within the meaning of section 18.

The appellant submitted that they had filed a suit before the High Court for the balance price of goods sold and delivered and obtained a decree thereon, and such steps should have been construed as reasonable steps. It was noted that the appellant as an exporter seeking to recover the balance of the price of goods sold and delivered was entitled to file a suit in a court of competent jurisdiction of its choice.

High Court Held

The High Court held that since the execution of the decree in a foreign country where the importer was situated was not cost-effective and feasible, the appellant’s conduct in obtaining the decree in India was plausible. Thus, the steps taken by the appellant to receive and recover payment of goods exported were reasonable.

List of Cases Reviewed

• Order dated 28-8-2003. (para 22) set aside.
• Order dated 2-3-2009. (para 22) set aside.