2016 (6) TMI 628 - HC - Customs

Smuggling of foreign currency - levy of penalty - applicability of section 111 and section 113 of the Customs Act, 1962 - Held that - The foreign currency in this case was attempted to be improperly exported. It is one thing to say that the currency may have been taken without complying with FEMA and the Rules thereunder, but on reaching the foreign country, these persons were deported. On deportation, they boarded a flight to return to India, but with the currency with them. It is these goods which were taken away without the above compliance. The Tribunal found that once this is an admitted case of illegal export of foreign currency from India by concealing the same in baggage and considering the substantial quantum of currency seized, the discretion ought not be exercised so as to allow release of the same by paying redemption fine, then, this is not a case of any perversity or an error of law apparent on the face of the record. Rather, this is a case where the prohibited act was rightly dealt with. This is not a case where any other provision but section 113 could be applied. In the facts peculiar to this case, the invocation and application of section 113 also was permissible. - Decided against the appellant.

Summary

Issues:
1. Application of section 113 of the Customs Act, 1962 in a case of alleged smuggling of foreign currency.
2. Consideration of discretionary power for fine in lieu of confiscation.
3. Interpretation of the term "prohibited goods" under the Customs Act, 1962.
4. Imposition of penalties for complicity in illegal acts.

Analysis:

1. Application of Section 113 of the Customs Act, 1962:
The judgment addressed the issue of whether section 113 of the Customs Act, 1962 was correctly applied in a case involving alleged smuggling of foreign currency. The court noted that the act of smuggling foreign currency was complete upon the individuals reaching Hong Kong and returning to India with the currency. It was argued that section 111 should have been applied instead of section 113. However, the court found that the act fell within the purview of section 113 as the currency was attempted to be improperly exported. The Tribunal had discretion to decide between absolute confiscation and redemption based on the circumstances, and in this case, the application of section 113 was deemed appropriate.

2. Discretionary Power for Fine in Lieu of Confiscation:
The judgment discussed the discretionary power available under section 125 of the Customs Act, 1962 regarding the option to pay a fine in lieu of confiscation. The appellants contended that the option should have been exercised in their favor. However, the court found that the Tribunal had duly considered this aspect and concluded that in a case involving illegal export of foreign currency, with a substantial amount seized, the discretion should not be exercised to allow release by paying a redemption fine. The court upheld the Tribunal's decision in this regard.

3. Interpretation of "Prohibited Goods" under the Customs Act, 1962:
The court analyzed the definition of "prohibited goods" under the Customs Act, 1962 and its application in the case. It was established that the act of smuggling foreign currency out of India required compliance with the Foreign Exchange Management Act, 1999. The court emphasized that the discretionary power of the Adjudicating Authority was correctly exercised based on the specific circumstances of the case, leading to the confiscation of the currency. The court clarified that the application of section 113 was appropriate given the nature of the offense.

4. Imposition of Penalties for Complicity in Illegal Acts:
Regarding the imposition of penalties for complicity in illegal acts, the court found that the penalties imposed on the appellants were justified. The individuals were involved in smuggling foreign currency, and their complicity in the illegal act was established. The court dismissed the appeal challenging the imposition of penalties, affirming that there was no error of law apparent on the face of the record. The judgment concluded that the penalties were rightly imposed based on the established facts.

In summary, the High Court upheld the application of section 113 of the Customs Act, 1962 in a case of alleged smuggling of foreign currency, affirmed the discretionary power for confiscation, interpreted the term "prohibited goods" in the context of the offense, and justified the imposition of penalties for complicity in illegal acts, ultimately dismissing the appeals for not raising substantial questions of law.