By TIOL News Service

MUMBAI, JUNE 30, 2014: ON an intelligence, the appellant, a native of Malapuram District, Kerala, was intercepted at the Sahar Airport, Mumbai on 08.12.2004 and during search, Indian currency of Rs.24,17,500/- was found with the appellant which was not declared or permitted by RBI for export.

Therefore, proceedings were initiated and the Commissioner of Customs (Airport) vide order dated 24.10.2007 ordered absolute confiscation of Indian currency and also imposed a penalty of Rs.2 lakhs.

Aggrieved by the said order, the appellant filed an appeal before the CESTAT in the year 2008.

The appeal was heard in February, 2014.

Relying on the decision in the case of AmanulahAbul Hassan - (2009-TIOL-1084-CESTAT-MAD), the appellant submitted that the violation is to be considered procedural in nature and, therefore, the order of absolute confiscation is to be set aside and the Indian currency is allowed to be redeemed on payment of fine and penalty.

The Revenue representative opposed the said submission by adverting to the CESTAT, WZB decision in Harish Muljimal Gandhi - ( 2012-TIOL-2050-CESTAT-MUM ) wherein the Bench had held that the absolute confiscation of currency is correct. Inasmuch as since there is no infirmity in the order passed by the CC(Customs) the same is required to be upheld, submitted the A.R.

The Single Member Bench of Member (Judicial) observed that in view of the two contrary decisions, it would be in the interest of justice to refer the matter to the Larger Bench.

And so, the following reference was made -

"In case a person attempted to export Indian currency outside India without permission of RBI more than Rs.5,000/-, in that case whether absolute confiscation is correct or Indian currency can be redeemed by imposition of redemption fine and penalty."

We reported this as 2014-TIOL-488-CESTAT-MUM.

The matter was heard by the Larger Bench recently.

This Bench comprised of the Vice President and the Member(J) [who passed the referral order] as well as a Member (Technical), who incidentally, sitting along with the same Member (J) had written the order for the Division Bench in the referred case of Harish Muljimal Gandhi (supra).

Be that as it may, the appellant adverted to the provisions of section 125 of the Customs Act, 1962, Foreign Exchange Management Act, 1999, Regulation 3 of the Foreign Exchange Management Act (Export and Import of Currency) Regulations, 2000 and submitted that the RBI has power to regulate the importation and exportation of the Indian currency and this Regulation does not mean that there is prohibition or restriction in view of the Apex Court decision in the case of Asian Food Industries [2006-TIOL-147-SC-CUS]. Inasmuch as Indian currency is freely importable or exportable and the adjudicating authority has wrongly confiscated absolutely the Indian currency found in person with the appellant at the time of interception.

The Revenue representative submitted that when the Foreign Exchange Management (Export and Import of Currency) Regulations restricts a person from carrying more than Rs.10,000/- of Indian currency outside India this restriction is prohibition and if it is restricted there is a complete prohibition. Therefore, the adjudicating authority has rightly confiscated the impugned currency. The A.R. also referred to the apex court decision in Sheikh Mohd. Omer vs. Collector of Customs, Calcutta and Others -1983(13)ELT1439(SC) where it is held that the provisions of import and export includes restricting or otherwise controlling all imports and exports.

The Larger Bench, Member (J) writing for the Bench, at the outset, observed -

++ Admittedly, in this case the appellant was carrying Indian currency of more than Rs.10,000/-. Exportation of Indian currency is being dealt with by Foreign Exchange Management Act, 1999 and clause (g) of sub-section 3 of section 6, sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 confers the power to RBI to make Regulations for Import or Export of the Indian currency. As per the Regulation 3 of the said Regulations, a person may take Indian currency outside India not exceeding Rs.10,000/- per person. If the said person is willing to carry Indian currency more than Rs.10,000/- outside India is required to seek permission from the RBI and the RBI being satisfied may grant permission to carry the Indian currency more than Rs.10,000/- on certain terms and conditions. Therefore, as these Regulations are governed by Foreign Exchange Management Act, 1999, which puts restrictions on the person not to carry Indian currency more than Rs.10,000/- without permission of the RBI. In this term, the Indian currency more than Rs.10,000/- to take outside India is restricted goods.

After distinguishing the apex court decision in Asian Food Industries (supra) referred by the appellant, the Bench further observed -

++ the Hon'ble Apex Court itself in the case of ShaikhMohd. Omer (supra) has clarified that every and all types of prohibition, whether complete or partial in includes restriction which is one type of provision. We further observed that in this case the Regulation are made under Foreign Exchange Management Act, 1999, for providing how much currency can be taken outside India without any restrictions. In this terms, we hold that the currency of more than Rs.10,000/- sought to be taken outside India is prohibited goods. Therefore, the adjudicating authority has rightly confiscated the Indian currency of Rs.24,17,500/-. The argument of the learned Advocate that the appellant may be allowed to redeem the said currency on redemption fine is not the subject matter before this Tribunal therefore, the same is left for consideration of the Referral Bench.

And so, the Larger Bench answered the reference thus -

"In case a person attempted to export Indian currency outside India without permission of RBI more than Rs.5,000/- or Rs.10,000/- (as the case may be) in that case the Indian currency can be absolutely confiscated and it is discretion of the proper officer in the facts and circumstances of the case be allowed to redeem on payment of redemption fine and imposition of penalty."

More 'absolute' questions in passing :

SECTION 125 - Option to pay fine in lieu of confiscation. - (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods  [or, where such owner is not known, the person from whose possession or custody such goods have been seized,] an option to pay in lieu of confiscation such fine as the said officer thinks fit :

Also see Achiever International 2012-TIOL-428-HC-DEL.

Perhaps, this is not the end of the matter…

(See 2014-TIOL-1156-CESTAT-MUM-LB)