2009 (9) TMI 1086 - AT - FEMA

Summary

Issues:
1. Reduction of penalty imposed under FEM Act, 1999.
2. Interpretation of Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000.
3. Claim of ownership and possession of seized foreign currency.
4. Residency status of the appellant under FEM Act, 1999.
5. Contravention of section 4 of FEM Act, 1999.
6. Quantum of penalty imposed and its justification.

Analysis:

1. The appeal was against the reduction of penalty from Rs. 15,000 to Rs. 5,000 under the FEM Act, 1999. The tribunal directed the appellant to deposit 40% of the reduced penalty amount within 45 days, which was complied with. The appeal was taken up for final disposal on merit.

2. The appellant argued that the seized foreign currency was within the permissible limit as per the Foreign Exchange Management Regulations, 2000, allowing residents of India to retain foreign currency worth not exceeding USD 2000. The appellant claimed joint ownership with his wife, citing his work history abroad and the absence of a currency declaration form during entry to India.

3. The respondent contended that the appellant's statements indicated sole ownership of the seized foreign currency, acquired abroad and declared as his hard-earned money, despite initial claims of joint ownership with family members. This established contravention of the FEM Act, 1999, leading to justified confiscation.

4. The appellant's residency status was confirmed under the FEM Act, 1999, as a resident of India based on the duration of stay prior to the search date. The regulations allowed possession of foreign currency not exceeding USD 2000, with no evidence presented to prove ownership by family members.

5. The possession of foreign currency beyond the statutory limit of USD 2000 was deemed a contravention of the FEM Act, 1999, as confirmed by the appellant's admission of ownership of the seized currency. The confiscation of the foreign currency was upheld by both adjudicating authorities.

6. The quantum of penalty imposed was reduced to Rs. 5000 by the first appellate authority, considered reasonable compared to the contravention involved. The tribunal dismissed the appeal, directing the appellant to deposit the balance penalty amount within 7 days, failing which the Enforcement Directorate would realize it in accordance with the law.