2014 (1) TMI 1222 - AT - Customs

Confiscation under section 111(d) and under section 113(d) - Penalty u/s 112 and 114 - Illicit import and export of currency - Proceedings under Custom Act or FEMA - Held that - Section 111(d)makes it amply clear that the goods are liable to confiscation under Customs Act if the goods are imported or attempted to be imported contrary to any prohibition under Customs Act or under any other law for the time being in force. So the prohibition imposed under Customs Act or any other law for the time being in force referred therein has to be a prohibition on import prohibition on export in the case of section 113 (d) . The prohibition in FEMA on trading and possession of foreign currency will not come within the scope of section 111(d) because this section deals with import and prohibitions on import and no other prohibition. Customs does have jurisdiction to seize the currency because there is clearly an attempt to import or export foreign exchange illegally and there is a prohibition on such import or export as per Regulation 5 of Foreign Exchange Management (Export and Import of Currency) Regulation 2000, issued in exercise of powers under section 6 (3) (g) of FEMA. But the situation in this case is quite different in as much as seizure was not when the attempt to illegally import or export was taking place. The proof of illegal import or export in this case is not reliable as already explained. Then it is only a case of contravening prohibition on dealing in foreign currency and holding such currencies which can be dealt with only under FEMA and not under Customs Act - Indian Currency equivalent of seized and confiscated currency is already released to the respondent and there is no chance a release of foreign currency to a person not authorized to hold foreign currency taking place as a result of this order - Decided against Revenue.

Issues Involved:
1. Legality of the seizure of foreign currency.
2. Confiscation of the foreign currency under sections 111(d) and 113(d) of the Customs Act, 1962.
3. Jurisdiction and authority of customs officers under FEMA.
4. Admissibility and evidentiary value of the respondent's statement.
5. Procedural compliance under FEMA for adjudication.

Detailed Analysis:

1. Legality of the Seizure of Foreign Currency:
The customs officers seized assorted foreign currencies equivalent to Rs.10,03,922/- from the respondent, suspecting them to be illicitly imported and intended for smuggling out of India. The seizure was based on the respondent's statement admitting to buying the currencies through brokers and intending to hand them over to traders in Burma Bazaar, Chennai, for smuggling to Singapore. The Commissioner (Appeals) found that the lower authority solely relied on the respondent's statement without corroborative evidence, leading to the conclusion that the foreign currencies were illicitly imported and intended for export.

2. Confiscation of Foreign Currency Under Sections 111(d) and 113(d) of the Customs Act, 1962:
The Revenue argued that the respondent violated sections 111(d) and 113(d) of the Customs Act, which deal with the confiscation of goods imported or attempted to be exported contrary to any prohibition. The Commissioner (Appeals) held that the respondent's statement did not establish that the goods were smuggled into India or that there was an attempt to export them. The Tribunal agreed, noting that the seizure was not near a customs barrier, and there was no circumstantial evidence of smuggling. The goods were not notified under section 123 of the Customs Act, and the explanation in section 3 of FEMA did not create a presumption of smuggling but rather a presumption of acquisition other than through an authorized person. Therefore, the initial burden to prove smuggling was on the Revenue, which was not met.

3. Jurisdiction and Authority of Customs Officers Under FEMA:
The Revenue argued that section 3 and 4 of FEMA restrict dealing in foreign exchange without RBI's permission and that customs officers had jurisdiction to investigate and adjudicate such matters under Notification No.1156 (E) dated 26.12.2000. The respondent contended that the investigation and adjudication should follow the procedure prescribed under FEMA, which was not done. The Tribunal noted that the notification empowered officers not below the rank of Deputy Commissioner to investigate, but in this case, the seizure and statements were made by a Superintendent, rendering the actions invalid.

4. Admissibility and Evidentiary Value of the Respondent's Statement:
The respondent's statement admitted to buying foreign currencies from brokers and intending to hand them over to traders for smuggling. However, the Commissioner (Appeals) and the Tribunal found that the statement did not provide direct evidence of smuggling or attempt to export, as it referred to actions of unknown persons. The Tribunal held that statements about acts of unknown persons could not be admitted as evidence, and the initial burden of proof was on the Revenue.

5. Procedural Compliance Under FEMA for Adjudication:
The respondent argued that the procedure under section 16 of FEMA, which requires a complaint in writing by an authorized officer for adjudication, was not followed. The Tribunal agreed, noting that the adjudication should follow the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, which was not done in this case. The Tribunal also noted that the Indian currency equivalent to the seized foreign currency had already been released to the respondent, ensuring no unauthorized possession of foreign currency.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s order, finding that the Revenue failed to prove illegal import or attempt to export the foreign currency. The customs officers did not have the jurisdiction to investigate under FEMA, and the procedural requirements for adjudication were not followed. The appeal filed by the Revenue was dismissed.

← Previous Next →