2021 (2) TMI 659 - HC - Customs

Confiscation - Levy of Redemption Fine - Foreign currencies - Travellers Cheques - HELD THAT - There are no hesitation to hold that the Tribunal has committed an error in permitting redemption of the offending goods - appeal allowed.

Summary

Issues:
1. Interpretation of Customs Act regarding redemption of confiscated goods.
2. Compliance with Foreign Exchange Management Regulations.
3. Justification of absolute confiscation of foreign currency.
4. Misinterpretation of Foreign Exchange Management Rules by the Tribunal.

Interpretation of Customs Act regarding redemption of confiscated goods:
The appeal under Section 130 of the Customs Act, 1962, challenged the order of the Customs Excise Service Tax Appellate Tribunal (CESTAT) allowing redemption of confiscated travelers' cheques. The Tribunal's decision was based on a previous case, which was later reversed by the High Court in Commissioner of Customs vs Savier Poonolly. The High Court held that the Tribunal erred in permitting redemption of the confiscated goods, as the goods were found to be offending and liable for confiscation under the Customs Act.

Compliance with Foreign Exchange Management Regulations:
The case involved the attempted export of foreign currency without the required permission, violating Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000. The High Court emphasized that the passenger concealed currency and travelers' cheques totaling 55,500 US dollars, procured from unauthorized sources, leading to absolute confiscation. The Court highlighted the prohibition on export of foreign currency without Reserve Bank of India's permission, as per Section 113 of the Customs Act.

Justification of absolute confiscation of foreign currency:
The High Court justified the absolute confiscation of the foreign currency, emphasizing the violation of regulations and the absence of proper permissions for export. The Court held that the passenger's actions clearly contravened the Foreign Exchange Management Regulations, justifying the confiscation under Section 113 of the Customs Act.

Misinterpretation of Foreign Exchange Management Rules by the Tribunal:
The Tribunal's error in misinterpreting the Foreign Exchange Management Rules was highlighted by the High Court. The Tribunal incorrectly believed that passengers could freely carry up to 25,000 US dollars abroad, without considering the need for proper approvals and authorized sources for currency transactions. The High Court corrected this misinterpretation, emphasizing the importance of adhering to the regulations and permissions outlined in the Foreign Exchange Management Rules.

In conclusion, the High Court allowed the Civil Miscellaneous Appeal filed by the Department, setting aside the Tribunal's order permitting redemption of the confiscated goods. The Court ruled in favor of the Department, emphasizing the importance of compliance with Customs Act and Foreign Exchange Management Regulations in cases involving the attempted export of currency without proper permissions.