2024 (4) TMI 379 - AT - Customs

Smuggling - Absolute confiscation of foreign currency seized from the Appellant u/s 113(d), (e) (h) of the Customs Act - levy of penalty u/s 114 and equal amount under Section 13(1) of the Foreign Exchange Management Act (FEMA) 1999 - HELD THAT - Admittedly Appellant was intercepted by the CISF officials outside the customs area. The Appellant had admittedly not approached the Airlines counter. This fact is supported by the no-show status of the ticket of the Appellant on the website of the airline. In the circumstances the Appellant had not entered the customs area nor there is any failure on the part of the Appellant to make appropriate declaration as required under Section 77 of the Customs Act. Under these circumstances it is found that the provisions of Section 113(e) and (h) are not attracted. At best there is only a case of intention or attempt to export as the Appellant was approaching the airport with intention to travel outside India he was also having a valid ticket. The conclusion of the Adjudicating Authority agreed upon that foreign exchange or currency is prohibited goods and therefore liable for confiscation. However it is not agreed that it is correct to deny redemption of the same under Section 125 of Customs Act as the discretion is to be exercised having regards to all relevant facts and cannot be arbitrary. Considering the whole factual nature of seizure and mitigatory facts this confiscation should not have been absolute. An intention to smuggle prohibited goods cannot be equated with attempt to export prohibited goods. There is only venial breach of the provisions of Section 113(d) of the Act. In this view of the matter the Order of absolute confiscation under Section 113(e) and (h) of the Act is set aside. However it is held that the foreign currency in question is liable for confiscation under Section 113(d) of the Act though the Order of absolute confiscation is set aside - it was further held that the seized foreign currency can be redeemed by the Appellant from whose possession it was recovered on payment of redemption fine of Rs. 10 lakhs. Further the penalty imposed under Section 114 of the Act is also reduced to Rs. 1 lakh and penalty under Section 13(1) of FEM Act is set aside. The appeal is allowed in part.

Summary

Issues Involved:
1. Justification of absolute confiscation of foreign currency u/s 113(d), (e), and (h) of the Customs Act.
2. Imposition of penalty u/s 114 of the Customs Act and Section 13(1) of FEMA 1999.

Summary:

Issue 1: Justification of Absolute Confiscation of Foreign Currency u/s 113(d), (e), and (h) of the Customs Act

The Appellant was intercepted at Rajeev Gandhi International Airport, Hyderabad, carrying foreign currency without authorization from the Reserve Bank of India. The Customs Officers seized the currency on the belief that it was attempted to be smuggled out of India, thus violating the Customs Act and FEMA regulations. The Appellant admitted to receiving the currency from a friend of his brother-in-law to be handed over in UAE.

The show cause notice alleged that the foreign currency, equivalent to Rs. 1,13,28,795/-, concealed in sweet packets, was liable for confiscation u/s 113(d), (e), and (h) of the Customs Act, read with FEMA regulations. The adjudication resulted in the absolute confiscation of the currency and penalties under Section 114 of the Customs Act and Section 13(1) of FEMA.

The Appellant argued that the Customs Officers had no jurisdiction as he was intercepted outside the customs area and had not obtained a boarding pass, thus no declaration was required u/s 77 of the Customs Act. The Tribunal found that the Appellant had not entered the customs area, and there was no failure to make a declaration u/s 77. Thus, Sections 113(e) and (h) were not applicable. The Tribunal held that while the foreign currency was liable for confiscation u/s 113(d), the absolute confiscation was not justified.

Issue 2: Imposition of Penalty u/s 114 of the Customs Act and Section 13(1) of FEMA 1999

The Tribunal noted that the foreign currency was prohibited goods and liable for confiscation. However, it disagreed with the absolute confiscation and held that the currency could be redeemed on payment of a redemption fine of Rs. 10 lakhs. The penalty u/s 114 of the Customs Act was reduced to Rs. 1 lakh, and the penalty u/s 13(1) of FEMA was set aside.

Conclusion:

The appeal was allowed in part. The order of absolute confiscation was set aside, and the foreign currency could be redeemed on payment of Rs. 10 lakhs. The penalty u/s 114 of the Customs Act was reduced to Rs. 1 lakh, and the penalty u/s 13(1) of FEMA was set aside.