1983 (3) TMI 304 - HC - Customs

Summary

Issues Involved:
1. Possession of foreign exchange without authorization.
2. Adjudication and penalties imposed by the Enforcement Director.
3. Appeal against the adjudication order by the respondent.
4. Interpretation of Section 8(1) of the Foreign Exchange Regulation Act, 1973.
5. Condonation of delay in filing the appeal by the State.
6. Burden of proof under Section 71 of the Act.

Detailed Analysis:

1. Possession of Foreign Exchange Without Authorization:
The respondent, a medical practitioner settled in the United States, was found in possession of 3501 U.S. Dollars at Bombay Airport. The respondent claimed that the foreign exchange was entrusted to him by his sister-in-law, Smt. Mehta, to be handed over to her husband. The Customs Officer seized the foreign exchange due to the lack of proper authorization or permission from the Reserve Bank of India.

2. Adjudication and Penalties Imposed by the Enforcement Director:
Adjudication proceedings were initiated, resulting in a personal penalty of Rs. 10,000/- on the respondent and Rs. 5,000/- on Smt. Mehta. Additionally, the foreign exchange was confiscated, and the respondent was fined Rs. 8,000/- by the Customs Department, later scaled down to Rs. 1,000/- by the appellate authority. The respondent also faced prosecution under Section 135(1)(b) of the Customs Act, where he pleaded guilty and was fined Rs. 10,000/-.

3. Appeal Against the Adjudication Order by the Respondent:
The respondent appealed against the adjudication order, and the Foreign Exchange Appellate Board exonerated him, holding that mere possession does not constitute a contravention of Section 8(1) of the Act. The Board found that the respondent was merely a carrier of the foreign exchange, entrusted by Smt. Mehta, and had no mens rea or intent to contravene the law.

4. Interpretation of Section 8(1) of the Foreign Exchange Regulation Act, 1973:
The key issue revolved around whether mere possession of foreign exchange without authorization constitutes a contravention under Section 8(1). The appellate board held that possession alone does not equate to acquiring foreign exchange. The court analyzed the terms "purchase," "borrow," "lend," "exchange," and "otherwise acquire" in Section 8(1), concluding that mere physical possession without control or interest does not constitute "acquiring" foreign exchange.

5. Condonation of Delay in Filing the Appeal by the State:
The State's appeal was delayed, and the court considered the application for condonation of delay. The court found the delay satisfactorily explained, citing procedural channels, consultation with the Law Ministry, and the movement of files between offices. The delay was condoned in the interest of justice.

6. Burden of Proof Under Section 71 of the Act:
Section 71(3) shifts the burden of proof to the person found in possession of foreign exchange to prove its lawful acquisition. The court noted that possession alone does not automatically imply contravention unless the person fails to prove lawful possession. The respondent successfully demonstrated that he was merely a carrier, thus not liable under Section 8(1).

Conclusion:
The court upheld the appellate board's decision to exonerate the respondent, emphasizing that mere possession without control or interest does not constitute acquiring foreign exchange under Section 8(1). The State's appeal was dismissed, and the penalty imposed on the respondent was ordered to be refunded. The court's analysis highlighted the distinction between possession and acquisition, ensuring that lawful possession is not penalized without sufficient evidence of contravention.