2019 (12) TMI 1384 - CGOVT - Customs

Penalty - Smuggling - Foreign Currency - It is observed that Tushar Kumar in his statement tendered under Section 108 of the Customs Act, 1962 has contended that he was carrying the impugned forex on behalf of Virender Verma for a consideration - Government is of the view that Sh. Virender Verma and Tushar Kumar are part of a Hawala racket and have attempted to illegally smuggle a huge quantity of forex out of the country which was concealed in the inner lining of the bag - HELD THAT - The lower authorities have failed to appreciate the facts of the case in the correct perspective and ordered the release of the impugned currency on payment of redemption fine to the noticee which should have been confiscated under Section 113 of Customs Act, 1962 without giving an option of redemption. Shri Virender Verma in his statement tendered under Section 108 of Customs Act, 1962 before the customs officers has stated that the impugned goods belonged to him and were kept in cash in India and he had requested for delivery of the same in Hong Kong - This observation of Commissioner (Appeals) is fallacious and is completely devoid of merit - The role of Virender Verma cannot be undermined in this Hawala racket. Government observes that Virender Verma has abetted smuggling of impugned forex and is liable for penalty under Section 114 of Customs Act, 1962. A lesser amount of penalty has been imposed on Tushar Kumar by the adjudicating authority since he is the carrier of the impugned currency. Government holds that keeping in view gravity of the offence and the fact that the respondent is a habitual offender, a higher quantum of penalty merits to be imposed on Tushar Kumar. Government modifies the orders passed by the lower authorities as follows - Impugned currency is confiscated under Section 113(d), (e), (h) and (i) of the Customs Act, 1962 - The option of redemption under Section 125 of the Customs Act, 1962 is denied - A penalty of ₹ 5 lacs (Rupees Five Lacs) is imposed on Tushar Kumar under Section 114(i) of the Customs Act, 1962 read with Regulation 13 of Foreign Exchange Management (Export and Import of Currency) Regulation, 2000 - Penalty of ₹ 7 lacs (Rupees Seven lacs) imposed on Virender Verma by the adjudicating authority under Section 114(i) of the Customs Act, 1962 read with Regulation 13 of Foreign Exchange Management (Export and Import of Currency) Regulation, 2000 is upheld. Application allowed in part.

Summary

Issues Involved:
1. Legality of the reduction in redemption fine.
2. Waiver of penalty on Shri Virender Verma.
3. Upheld penalty on Shri Tushar Kumar.
4. Compliance with Customs and FEMA regulations.
5. Determination of ownership and intent behind the foreign currency.

Detailed Analysis:

1. Legality of the Reduction in Redemption Fine:
The revision application contends that the appellate authority arbitrarily reduced the redemption fine from ?9 lacs to ?5 lacs without providing cogent reasons. The huge amount of seized foreign currency, which are prohibited goods, warranted a higher fine. The government noted that the lower authorities failed to appreciate the facts correctly and ordered the release of the currency on payment of redemption fine, which should have been confiscated absolutely under Section 113 of the Customs Act, 1962.

2. Waiver of Penalty on Shri Virender Verma:
The appellate authority had waived the penalty on Shri Virender Verma, which the revision application challenged. The government observed that Virender Verma's role in the smuggling attempt could not be undermined. His statement under Section 108 of the Customs Act, 1962, claimed that the forex was his business proceeds. However, there was no corroborative evidence to support this claim. The government held that Virender Verma abetted the smuggling and was liable for a penalty under Section 114 of the Customs Act, 1962.

3. Upheld Penalty on Shri Tushar Kumar:
The penalty of ?1.5 lacs on Shri Tushar Kumar was upheld by the appellate authority. The government noted that Tushar Kumar acted as a carrier for Virender Verma and had previously carried forex for a consideration. The financial condition of Tushar Kumar indicated that he could not have acquired such a huge amount of forex on his own. The government decided to impose a higher penalty of ?5 lacs on Tushar Kumar, considering the gravity of the offense and his habitual nature.

4. Compliance with Customs and FEMA Regulations:
The seized foreign currency was concealed and not declared to Customs officers, violating Section 77 of the Customs Act, 1962. Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, prohibits sending foreign currency out of India without RBI permission. The impugned currency exceeded the permissible limit of US$2000. The government held that the currency was 'prohibited goods' and liable for absolute confiscation under Sections 113(d), (e), (h), and (i) of the Customs Act, 1962.

5. Determination of Ownership and Intent Behind the Foreign Currency:
The statements of Tushar Kumar and Virender Verma indicated that the currency belonged to Virender Verma and was intended to be delivered in Hong Kong. The government found that the lower authorities failed to appreciate the facts and ordered the release of the currency on payment of redemption fine. The government observed that Tushar Kumar was a mere carrier, and the impugned currency was part of a Hawala racket. The government upheld the penalty on Virender Verma and imposed a higher penalty on Tushar Kumar.

Conclusion:
The government modified the orders passed by the lower authorities as follows:
1. The impugned currency is confiscated under Section 113(d), (e), (h), and (i) of the Customs Act, 1962.
2. The option of redemption under Section 125 of the Customs Act, 1962 is denied.
3. A penalty of ?5 lacs is imposed on Tushar Kumar under Section 114(i) of the Customs Act, 1962.
4. The penalty of ?7 lacs imposed on Virender Verma by the adjudicating authority is upheld.
5. The application filed by the applicant is allowed to this extent.