2013 (12) TMI 1459 - AT - Customs

Seizure of foreign currency and coins - Smuggling of currency - Confiscation - Commissioner set aside confiscation order - Held that - In the matter of illegal import of the currency the only evidence relied upon by Revenue is the statement of the appellant. This statement does not state that the goods were smuggled into India by the appellant. The statement is about the action of persons who were brought to him by brokers and hence not known to him. Such statements about acts of persons not known to the person making the statement cannot be admitted as evidence. The seizure is not anywhere near a customs barrier. So there is no circumstantial evidence of smuggling of currency into India. - So the initial burden to prove that the goods were smuggled was on Revenue having regard to provisions under regulation 6 in Foreign Exchange Management (Export and Import of Currency) Regulations, 2000. So the finding of the Commissioner (Appeals) that illegal import of the goods in question is not proved cannot be faulted. - So the confiscation of the goods under Section 111(d) and 113(d) of the Customs Act is not maintainable in such circumstances as ordered by the Calcutta High Court in the case of Amit Kumar Saha (2003 (10) TMI 67 - HIGH COURT AT CALCUTTA). An officer empowered to investigate a matter can definitely take assistance of subordinate officers but substantive power of seizure and recording of statement cannot be delegated in the guise of taking help. Such actions cannot have legal validity. So a seizure made by a Superintendent for enforcing prohibitions of FEMA cannot be valid. So is the case with statements recorded. Further there is a procedure laid down in Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. Such procedure was not followed for adjudication proceeding either. - Decided against Revenue.

Issues Involved:
1. Legality of possession and seizure of foreign currency under FEMA and Customs Act.
2. Admissibility and evidentiary value of the respondent's statement.
3. Jurisdiction and authority of customs officers to investigate and adjudicate under FEMA.
4. Applicability of Sections 111(d) and 113(d) of the Customs Act for confiscation.
5. Validity of the procedure followed in investigation and adjudication.

Detailed Analysis:

1. Legality of Possession and Seizure of Foreign Currency:
The case involved the seizure of foreign currencies equivalent to Rs. 10,03,922/- from the respondent. Under FEMA and its Rules, an individual is not authorized to possess such high-value foreign currency without necessary RBI permission. The customs officers suspected the currency was smuggled into and intended for smuggling out of India, leading to further investigation and proceedings.

2. Admissibility and Evidentiary Value of the Respondent's Statement:
The respondent's statement dated 23-12-2003 admitted purchasing the foreign currencies through brokers and acknowledged that the currencies were illicitly imported and intended for smuggling to Singapore. However, the Commissioner (Appeals) noted that the lower authority solely relied on this uncorroborated statement. The respondent denied the illicit import and claimed the currency was collected through local brokers. The Commissioner (Appeals) found no corroborative evidence and ruled that mere possession of currency at Trichy Cauvery Bridge did not constitute an attempt to export.

3. Jurisdiction and Authority of Customs Officers:
The Revenue argued that Sections 3 & 4 of FEMA restrict dealing, holding, or transferring foreign currency without RBI permission. The customs officers, empowered by Notification No. 1156(E), dated 26-12-2000, had jurisdiction to investigate such matters. However, the respondent argued that the investigation and adjudication were not conducted as per FEMA's prescribed procedure. The customs officers below the rank of Deputy Commissioner conducted the seizure and recorded statements, which the respondent contended was unauthorized.

4. Applicability of Sections 111(d) and 113(d) of the Customs Act:
The Revenue contended that the foreign currency was liable for confiscation under Sections 111(d) and 113(d) of the Customs Act due to contraventions of import and export prohibitions. The Commissioner (Appeals) found no evidence of smuggling into India or an attempt to export, as the seizure did not occur near a customs barrier, and the goods were not notified under Section 123 of the Customs Act. The explanation in Section 3 of FEMA only presumed unauthorized acquisition, not smuggling. Hence, the confiscation under Sections 111(d) and 113(d) was deemed unsustainable.

5. Validity of the Procedure Followed:
The respondent argued that the investigation and adjudication did not follow the proper procedure under FEMA. The customs officers below the rank of Deputy Commissioner conducted the seizure and recorded statements, which was invalid. The Revenue's argument that the Joint Commissioner issued the SCN and thus validated the investigation was rejected. The substantive powers of seizure and recording statements could not be delegated. The procedure laid down in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, was not followed.

Conclusion:
The appeal filed by Revenue was dismissed. The Commissioner (Appeals) correctly held that the illegal import and attempted export were not proved, and the confiscation under Sections 111(d) and 113(d) of the Customs Act was not maintainable. The customs officers' actions were invalid due to procedural lapses and lack of proper jurisdiction. The Indian currency equivalent to the seized foreign currency had already been released to the respondent, ensuring no unauthorized possession of foreign currency.

← Previous Next →