2013 (2) TMI 230 - HC - FEMA

Repatriation of Money Appellant acquired the foreign currency by selling his property in Iran - Gave a declaration in CDF when he brought major chunk of foreign currency in January and October, 1999 His vendor sent the money through nineteen persons each getting 5000 Further contention of appellant is that he has 180 days to keep the money before en-cashing through an authorized person Held that - Section 3(c) of the FEMA prohibits any person from receiving foreign currency otherwise than through an authorized person The law requires remittances to be made only through an authorized person as defined in Section 2(c), which means money changer, off-shore banking unit or any person authorized under Section 10(1) to deal in foreign currency or foreign securities. Regulation 5 of the Repatriation Regulations which obliges any person to sell the realized foreign exchange to an authorized person within seven days from the date of its receipt - Appellant un authorizely acquired foreign currencies and retained the currency in contravention of relevant Regulations. Appellant got the foreign currency towards consideration of sale of his immovable property in Iran. Even if such a transaction is assumed to be true, he could not have got or received the money the way he got - No agreement was produced and the affidavit filed by the buyer did not give the details of the amount sent through nineteen (19) persons Appeal fails and is accordingly dismissed Against the assessee.

Summary

Issues Involved:
1. Validity of the confiscation of foreign currency.
2. Compliance with the Foreign Exchange Management Act (FEMA) and related regulations.
3. Legitimacy of the appellant's claims regarding the source and transfer of foreign currency.
4. Applicability of specific FEMA regulations and amendments.

Detailed Analysis:

1. Validity of the confiscation of foreign currency:
The appellant, an Iranian national, had foreign currency confiscated by the Deputy Director of Income Tax, which was later confirmed by the Special Director and the Appellate Tribunal for Foreign Exchange. The confiscation was based on the violation of Sections 3(a) and 4 of FEMA. The authorities found that the appellant could not substantiate his claims regarding the legitimate acquisition and transfer of the foreign currency, leading to the confiscation and imposition of a penalty of Rs. 5,00,000.

2. Compliance with the Foreign Exchange Management Act (FEMA) and related regulations:
The appellant argued that his actions were in compliance with FEMA regulations, specifically citing Regulation 6 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, and Regulation 3 of the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000. However, the court noted that the appellant failed to comply with the requirement to declare foreign currency exceeding $5,000 and to sell realized foreign exchange within the stipulated period as per Regulation 5 of the Repatriation Regulations.

3. Legitimacy of the appellant's claims regarding the source and transfer of foreign currency:
The appellant claimed that the foreign currency was acquired from the sale of ancestral property in Iran and was transferred through multiple individuals, each bringing less than $5,000. The court found these claims unsubstantiated due to the lack of supporting documents such as a sale agreement and detailed affidavits from the individuals involved. The authorities concluded that the appellant's version was improbable and that the foreign currency was acquired and retained in contravention of FEMA regulations.

4. Applicability of specific FEMA regulations and amendments:
The appellant contended that Regulation 6A of the Repatriation Regulations allowed him to retain foreign currency for 180 days. However, the court clarified that this regulation was inserted by an amendment effective from 18-5-2007 and was not applicable to the appellant's case, which occurred in 2003. The relevant regulation at the time required the foreign exchange to be sold within seven days of receipt, which the appellant failed to do.

Conclusion:
The court upheld the confiscation of the foreign currency and the penalty imposed on the appellant. It concluded that the appellant had violated Sections 3 and 4 of FEMA by acquiring and retaining foreign currency without proper authorization and failing to comply with the relevant regulations. The appeal was dismissed with costs, affirming the findings of the lower authorities and the Appellate Tribunal.