2010 (10) TMI 459 - HC - FEMA

Confiscation of the foreign currency - Legal import - Jatin Jhaveri has produced before the Commissioner copies of the two currency declaration forms one dated 25-6-1994 for US 2,54,000/- and other dated 28-6-93 for US 35,250/ - The Commissioner in his order does not deny that these two forms had been issued. On the contrary, he refers to these documents produced before him at the hearing and mentions what seems to be changes in the dated from 26-6-93 to 25-6-93 and some discrepancy in the passport number - He emphasizes the suspicions behaviour of Jatin Jhaveri and his flight from the investigation, his disowning the currency in his statement of 12-10-1993 and the fact that the currency in any case is liable to confiscation for being attempted to be exported in contravention of the provisions of the Foreign Exchange Regulation Act -Held that the submission of the learned Counsel for the Respondents that in the light of the two authorities under the Customs Act and Income Tax Act, having found the amount of 2,89,250 US to be legally brought into India and in the instant proceedings also the Tribunal having concurred with the view of the CEGAT, this Court should not interfere in the above Appeals - Decided in favour of assessee. Appeals - The objection of the Respondents to the maintainability of the Appeals would have to be sustained on the application of Mohte Sham s Case and resultantly, the Appeals would have to be dismissed on the ground that the Director of Enforcement who was the adjudicating authority had no authority to file the Appeals - The Appeals, therefore, to stand dismissed on the said ground also. Relief - Interest - The principal relief sought is that of the release of the currency amount of US 2,89,250 along with interest thereon @ 18% from date of seizure until release thereof to the Petitioner - However, the Petitioner would have to deal with the said amount in terms of the order of the CEGAT as also the Order impugned in the above Appeals i.e. re-export the said amount with the permission of the RBI - Since, the Respondents have retained the amount on account of the pending proceedings, we are of the view that the Petitioner i.e. Jatin Jhaveri in Appeal No. 64 of 2006 would not be entitled to any interest - Thus , the Petitioner would not be entitled to interest on the said amount of 2,89,250 US .

Summary

Issues Involved:
1. Confiscation of foreign currency.
2. Imposition of penalties under FERA.
3. Legality of substitution of the Directorate of Enforcement by the Union of India.
4. Maintainability of the appeals filed by the Director of Enforcement.
5. Consistency and credibility of statements and evidence.
6. Binding nature of findings from CEGAT and ITAT on FERA proceedings.
7. Interest on seized foreign currency.

Detailed Analysis:

1. Confiscation of Foreign Currency:
The foreign currency amounting to $403,550 was seized from Ajit Dodia at the airport. The customs authorities confiscated the currency under Section 113(d), (e), and (i) of the Customs Act, 1962, read with Section 13(2) of FERA. The CEGAT allowed the re-export of $289,250, which was declared upon arrival, but confirmed the confiscation of $114,300, which was not declared. The Tribunal concurred with the CEGAT's findings that $289,250 was legally imported.

2. Imposition of Penalties under FERA:
The Special Director of Enforcement imposed penalties of Rs. 30 lakhs each on Jatin Jhaveri and Ajit Dodia, and Rs. 7.5 lakhs on Jitendra Dodia for contravening Section 8(1) read with Section 64(2) of FERA. The Tribunal set aside the penalties on Jatin Jhaveri and Jitendra Dodia, and reduced Ajit Dodia's penalty to Rs. 1 lakh.

3. Legality of Substitution of the Directorate of Enforcement by the Union of India:
The Directorate of Enforcement sought to amend the cause title to substitute itself with the Union of India, which was objected to by the respondents based on the Supreme Court's judgment in Mohtesham Mohd. Ismail v. Spl. Director, Enforcement Directorate. The High Court allowed the amendment without prejudice to the rights and contentions of the parties.

4. Maintainability of Appeals Filed by the Director of Enforcement:
The appeals were contested on the grounds that they were filed by the Director of Enforcement without authority from the Union of India. The High Court, referencing the Supreme Court's judgment in Mohtesham Mohd. Ismail, held that the Director of Enforcement did not have the authority to file the appeals, and thus, the appeals were not maintainable.

5. Consistency and Credibility of Statements and Evidence:
The Tribunal found that Jatin Jhaveri's initial statement dated 12-10-1993, which did not mention the foreign currency, was adequately explained in his subsequent statement dated 7-10-1996. The Tribunal accepted the currency declaration forms and affidavits as credible evidence supporting Jhaveri's claim of legal importation of $289,250.

6. Binding Nature of Findings from CEGAT and ITAT on FERA Proceedings:
The Tribunal and the High Court considered the findings of the CEGAT and ITAT, which had accepted the legal importation of $289,250 by Jatin Jhaveri. Although the proceedings under the Customs Act and FERA are different, the High Court acknowledged that the findings from CEGAT and ITAT had evidentiary value in the FERA proceedings.

7. Interest on Seized Foreign Currency:
Jatin Jhaveri sought the release of $289,250 along with interest. The High Court allowed the release of the amount but denied the request for interest, noting that the respondents had retained the amount due to pending proceedings.

Conclusion:
The High Court dismissed the appeals filed by the Director of Enforcement on the grounds of lack of authority and upheld the Tribunal's order setting aside the penalties on Jatin Jhaveri and Jitendra Dodia, and reducing Ajit Dodia's penalty. The court also allowed the release of $289,250 to Jatin Jhaveri without interest, subject to RBI's permission for re-export. The findings of the CEGAT and ITAT were considered significant in determining the legality of the foreign currency importation.