2009 (3) TMI 112 - HC - Customs

Confiscation of Foreign currency currency seized form the residence of petitioner The petitioner claimed ownership of the seized currency. He contended that the currency was legally acquired from certain overseas visiting buyers as advance payments against their export orders, which was permissible in law. According to him, all relevant information and documents including Currency Declaration forms issued by the Customs Department to the buyers upon their arrival, along with authority letters in his favour, evidencing payments were also shown to the customs authorities - The revisional authority by its impugned order on the one hand accepted Ajay Gulati s contentions and quashed confiscation on the other side it upheld the confiscation, therefore contradictory order Held that customs authorities exercised there power without jurisdiction and quested the order.

Issues Involved:
1. Quashing of the Central Government's order dated 30-1-2006 under the Customs Act.
2. Confiscation of foreign currency seized from the petitioner.
3. Applicability of the Customs Act provisions to foreign exchange seized from residential premises.
4. Legitimacy of the foreign currency acquisition and its intended export.
5. Inconsistency in the Central Government's reasoning regarding different individuals involved in the case.

Detailed Analysis:

1. Quashing of the Central Government's Order:

The petitioner sought the quashing of an order dated 30-1-2006 issued by the Central Government under its revisional powers, which affirmed the findings of the adjudicating authority and confiscated various foreign currencies. The petitioner contended that the currency was legally acquired from overseas buyers as advance payments against export orders, which was permissible under the law.

2. Confiscation of Foreign Currency:

The customs authorities alleged that the foreign currency was illegally acquired and attempted to be exported. They issued show cause notices proposing confiscation under Section 113(d), (e), and (i) of the Customs Act and penalties under Section 114(i). The adjudicating authority ordered absolute confiscation and imposed a penalty of Rs. 7 Lakh on the petitioner. The revisional authority upheld the confiscation of foreign currency seized from the petitioner's residence, reasoning that the legal source of the currency was found to be false.

3. Applicability of the Customs Act Provisions:

The petitioner argued that the Customs Act was inapplicable to the foreign exchange seized from residential premises and that any alleged violations should be dealt with under FEMA, 1999. The revisional authority accepted this contention for Ajay Gulati but upheld the confiscation for the petitioner, creating an inconsistency.

4. Legitimacy of the Foreign Currency Acquisition:

The petitioner claimed that the foreign currency was legally acquired from overseas buyers as advance payments. However, investigations revealed that the claims were false, leading to the conclusion that the currency was illegitimately obtained. The revisional authority upheld the confiscation on this basis, stating that the foreign currency was acquired through illegitimate channels and was therefore "prohibited" under Section 113 of the Customs Act.

5. Inconsistency in the Central Government's Reasoning:

The revisional authority quashed the confiscation for Ajay Gulati, reasoning that the prohibition under Section 113 read with 2(33) of the Customs Act operated only when the alleged infractions were substantiated by an appropriate authority under FEMA. However, the same reasoning was not applied to the petitioner, leading to an inconsistent and illogical approach. The court found this discrepancy to be a fatal error of law and quashed the impugned order, allowing the writ petition.

Conclusion:

The High Court allowed the writ petition, quashing the Central Government's order dated 30-1-2006 regarding the petitioner. The court noted the inconsistency in the Central Government's reasoning and held that the Customs authorities lacked jurisdiction in the absence of a proper determination under FEMA. The respondents were granted liberty to refer the matter to the appropriate authorities under FEMA for suitable adjudication.

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