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TMI Blog2018 (6) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the currency was issued without following the due diligence and knowingly violating the provisions for the purpose of obtaining business with full knowledge of both buyer and seller of currency. An offence under FEMA does not automatically result in invocation of provisions of customs Act. Thus the Act of buying and selling of foreign exchange in violation of FEMA, 1999, rules, regulation and guidelines issued under FEMA is not by itself sufficient to invoke charges under Customs Act. For charges under Customs Act to survive there has to be shown an active part or abetting in movement across Customs borders in terms of Section 114 of the Customs Act. The rate of the M/s Sohil Maklai Entertainment Pvt. Ltd. and the three carriers who had admittedly carried the currency out of India - defence of M/s Sohil Maklai Entertainment Pvt. Ltd. is that it was merely a procedural violation - Held that:- It is apparent that there was no reason to smuggle the currency out as they were even otherwise legally entitled to purchase the said amount and take out of India for the purpose of shooting abroad - I is apparent that while M/s Sohil Maklai Entertainment Pvt. Ltd. could have legally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ques worth US $ 1,00,000/-. On asking about the contents of her off-white hand bag, she took out one white envelope from her hand bag. The said envelope was found having printing 7even Entertainment Limited, Flat No. 504, Pluto, Saibaba Galaxy, New Link Road, Goregaon (W), Mumbai-400 104, Tel: +91.22.56993875, Fax: +91.22.56993978 , on it. The examination of the said envelope by the Officers resulted in the recovery of 106 numbers of American Express blank travellers cheques, each of US $ 1,000/- denomination, totally worth US $ 1,06,000/- and US $ 1,642/- in cash. On being asked about the possession of the recovered travellers cheques, Ms. Farahjaan Sheikh produced four voucher copies of American Express Travellers Cheques issued to the purchaser showing issuance of US $ T.Cs. worth US $ 98,000/-. The said purchaser s copies were found having no mention about the name (s)/address (es) of the purchaser. 2.2 In the statement dated 19.10.2006, recorded under Section 108 of the Customs Act, 1962, Ms. Farahjaan Sheikh had interalia stated that she had been employed with M/s ASP White in the capacity of an Executive Producer since 2006; that on 19.10.2006 she was travelling to Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passenger and also on the Sales Receipt prepared to this effect; that the Sales Receipts were duly filled by them (M/s T.T. Forex) and travellers cheques numbers also mentioned therein. 2.4 Shri Anand Kulkarni, inter-alia, replied that the said 106 travellers cheques were indeed issued by their company M/s TT Forex and in support of the same he had submitted the copies of Requisition Letters, all dated 18.10.2006, received from M/s Sohil Maklai Entertainment Pvt. Ltd. for release of foreign exchange to Ms. Farahjaan Sheikh, Mr. Dey Gopal, Mr. Rahul Vilkins, Mr. Ajay Saxena and Mr. Syed Idris Niyamat Ali. He had also submitted Cash Memos/Sales Receipts indicating the following details: Sr. No. Cash Memo No. Date Sales Receipt No. Date T.C. Nos. Quant ity Denomi nation Amount in US $ Issued in the name of as per Sales Receipt/ Cash Memo 1 1203199 18.10.06 18.10.06 GB 315 062 700 to GB 315 062 724 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Kulkarni stated that as the passengers had left for home and since Mr. Iyer was a known person and in good faith the travellers cheques were handed over to him as it would have not been possible to have delivered the travellers cheques to each person personally. 3. It was noticed that traveller cheque being carried by Ms. Farahjaan Sheikh were issued in the following names: Wilkins Rahul (Employee), Syed Idrees Niyamat Ali (Employee), Ajay Saxena (Employee), Dey Gopal (Employee) and Sheikh Farahjaan (Employee). In the statement of Shri Gopal Dey, he stated that he was not aware of issuance of any travellers cheques in his name. When it was shown requisition letter dated 18.08.2006 on the letterhead of M/s Sohail Maklai Entertainment Pvt. Ltd. for released of US $ 25,000/- in his name and this corresponding and which showed the sale of US $ 25,000/- in traveller s cheque to him. He denied any knowledge about the said cheque, he also denied that he was an Executive Producer in M/s Sohail Maklai Entertainment Pvt. Ltd. as was mentioned in the said documentation. He denied that he was present in India on the dated 18.10.2006 when the application was made. 3.1 Shri Rahul W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) Rules, 2000. He argued that the transaction is a nature of serial number 8 of Schedule III of the said Regulation which reads as under:- 8. Release of foreign exchange, exceeding US $ 25,000 to a person, irrespective of period of stay, for business travel, or attending a Conference or specialised training or for maintenance expenses of a patient going abroad for medical treatment or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up. He argued that there is no prohibition in respect of such transactions. The prohibitions are listed in Schedule I. He pointed out that no prior permission is required in terms of Rule 4 of the said Rules, as the transaction in the instant case are not in the nature of the transaction listed in Schedule II. He argued that this is a normal transaction of serial number 8 of Schedule III and there is no restriction as long as the value of transaction is less than US $ 25,000/-. He pointed out by virtue of being full-fledged money changers M/s T.T. Forex was authorised person in terms of Section 2(c) of the Foreign Exchange Management Act, 1999 and the nature of the instant transaction was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only procedural lapse and no violation of law has been committed. In this regard she submitted that to understand the violation of law, provisions of the Customs Act has to be read with FEMA Act and FEMA regulations and RBI circulars. She pointed out to the following provisions. 9.1 Section 2(22)(d) of the Customs Act, 1962 which defines the goods to include currency and negotiable instruments. 9.2 Section 2(33) of the Customs Act, 1962 which defines Prohibited goods to mean any goods the import or export of which is subjected to any prohibition under this act or any other law for the time being in force. 9.3 Section 113(d) of the Customs Act which stipulate that any goods attempted to be exported or brought within the limits of any Customs area for the purpose of being exported, contrary to any prohibition imposed by or under this act or any other law for the time being in force shall be liable to confiscation. 9.4 Section 2(h) and 2(n) of the Foreign Exchange Management Act, 1999 which define currency and foreign currency to include traveller s cheques. 9.5 Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, framed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uing company should be scrupulously observed and acknowledgement for receipt of travellers cheque duty obtained. 9.11 In the circular A.P. (DIR Series) Circular no. 25 dated 6.3.2006, RBI had categorised Authorised Persons as defined under Section 10(1) of the Foreign Exchange Management Act, 1999. In the circular, the RBI has specifically classified Authorised persons into Authorised Dealer (AD) and Full Fledged Money Changers (FFMC). Further Authorised Dealers have been further classified as AD category I, AD category II and AD Category III. And as per the circular releasing foreign exchange for film shooting comes under the enhanced activities permitted to ADs- Category II. 9.12 She argued that the combined effect of above provisions is that import and export of Foreign Exchange is prohibited but for the general or special permission of RBI. Foreign exchange can be issued only by Authorised Persons appointed by RBI. The Authorised Persons are classified by RBI as Authorised Dealer, category I, II, III and Full Fledged Money Changer (FFMC). Only an Authorised Dealer can issue foreign exchange for shooting of films abroad while a FFMC cannot issue foreign exchange for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of FEMA, 1999 and Foreign Exchange Management (Export and Import of Currency) Regulations, 2000. 9.14 Reliance was placed on the judgement of V. S. Ubhayakar vs. Special Director, Directorate of Enforcement reported in 2012 (282) ELT. 209 (Bom.), wherein the Hon ble Bombay High Court had held in a case involving similar situation that issuing travellers cheque without verifying documents, passport and ticket amounts to violation of provisions of FERA and held the employee and the FFMC liable to penalty. 9.15 Reliance was also placed on the judgement of Hon ble High Court of Calcutta in the case of Euresian Equipment and Chemicals Ltd. and Others vs. Collector of Customs and Others reported in 1980 (6) ELT. 38 (Cal) wherein, it was held that any untrue declaration in all material particulars will amount to violation of FERA and will result in contravention of the provisions of the Customs Act. 9.16 She argued that M/s TT and Anand Kulkarni had contended that they could have issued foreign Currency without limit for current account transactions in terms of circular 11 of 16.5.2000 which reads as follows: Remittances for all other transactions which are not speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot relevant for liability to confiscation under Section 113. Once the goods are liable for confiscation under section 113, penalty under Section 114 is attracted. 9.22 She submitted that Currency obtained in similar manner and exported by Jayesh Vyas and Shemsher Mehmood Khan is also liable for confiscation because admittedly these blank travellers cheque were also issued and obtained in similar manner as explained above. The Hon ble High Court of Calcutta in its judgement in the case of Euresian Equipment and Chemicals Ltd. and Others vs. Collector of Customs and Others reported in 1980 (6) ELT. 38 (Cal) had held that the attempt to export necessarily precedes actual export and even if the goods are not available for confiscation, penalty can be imposed under section 114 of the Customs Act, 1962. Reliance is also placed on the judgement of Hon ble High Court of Madras in the case of Commissioner of Customs, Tuticorin vs. Kamalabhai reported in 2015 (324) ELT. 70. (Mad.). 9.23 She argued that Ms Farahjaan Sheikh, Shri Shemsher Mehmood Khan and Shri Jayesh Vyas have all rendered themselves liable to penalty under section 114 of the Customs Act, 1962 by carrying blank traveller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is highly impossible that M/s TT would not have known what was happening. If M/s TT were not consciously involved in issuing foreign exchange in a manner not allowed by law, it certainly would have put an end to such affairs in the beginning itself by cautioning or taking drastic actions against its employees and initiating instantaneous damage control exercise. None of such measures apparently were resorted to and the facts involved gives rise to belief that the firm itself has landed support to issuance of foreign exchange in this illegal manner. The Travellers Cheque were issued knowing fully well that they are being taken out of the country through representatives of M/s SMEPL therefore, M/s TT have aided in the act of export of Travellers Cheque obtained through illegal way, hence liable for penalty under section 114 of the customs Act. 10. We have gone through rival submissions, we find that there are two aspects of the case- (i) if the foreign exchange was legally issued/drawn or exported by the noticees under FEMA. (ii) if the carrier of foreign exchange violated the provisions of Customs Act. It is apparent that the foreign exchange was obtained on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions with the appellants who issued foreign exchange to several passengers travelling abroad at the instance of Travel Club. Smt. Laxmi Reddy, Front Office Executive of the appellants released the Traveller Cheques to five passengers going abroad at the instance of Travel Club and sent the same through her attendant Shri Rajesh to the office of Travel Club wherein they were received by Srinivas of Travel Club. The Traveller cheques were found in the possession of Shri Ravindranath who was intercepted when he was to board the Air India flight from Mumbai to Hong Kong. As regards the appellants, there is no evidence to show that they were aware that the foreign exchange released by them would form part of an attempt of unauthorized export. The Commissioner has held that if the appellants had functioned with due care and diligence, the issue of Traveller Cheques without observing the RBI guidelines would not have taken place and therefore, Smt. Laxmi Reddy and M/s. Trade Wings have indirectly abetted in the acquisition and attempt to illegally export the foreign exchange by Shri Ravindranath. However, lack of care and diligence by the appellants is not sufficient to pin them with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he and Shri Anand Kulkarni were fully aware that the currency being issued is in violation of FEMA norms and also intended for exports. The Order-in-Original in para 46 records as follows:- Shri Feroz Khan stated that when the representative of M/s T.T. Forex came with all the Travellers Cheques he waited for Mr. Sohail Maklai in the office to take his signature; that after waiting for couple of hours the representative told him to talk to Mr. Kulkarni because he had to leave; that the representative made a call to Mr. Kulkarni and made him speak to Mr. Kulkarni; that Mr. Kulkarni told him to sign all the papers on behalf of Mr. Sohail Maklai after going through all the papers; that he again called Mr. Kulkarni and asked him why he had sent the Travellers Cheques in different names when only Mr. Sohail was travelling; that Mr. Kulkarni told him that now the RBI Rules were changed and they could not issue Travellers Cheques in one person s name for more than US $ 25,000/-; that he (Shri Anand Kulkarni ) also knew the money which they were taking with them was for film shooting in South Africa; that Mr. Kulkarni told him to sign the papers and get the Travellers Cheques sig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation has been made out against them by FEMA authorities. The only offence by them was that instead of drawing the said amount in one go from authorised dealer II by following due procedure they have drawn the same in piece meal from M/s T.T. Forex. Thus it is apparent that while M/s Sohil Maklai Entertainment Pvt. Ltd. could have legally obtained the foreign exchange and also exported the same for stated purpose it followed shortcuts as advised by Shri Anand Kulkarni resulting in FEMA offence as well as Customs offence. 10.10 It is apparent that the rate in illegal export with full knowledge is established in case of all appellants. However in these circumstances it is apparent that though they violated the law but they only saved themselves the procedural hassles. They were even otherwise entitled to carry the currency abroad legally by following due procedures. In these circumstances, we find that the penalties imposed on appeals are relatively harsh. Penalties on Ms. Farahjaan Sheikh, Shri Shamsher Mehmood Khan, and Shri Jayesh Vyas are therefore reduced to Rs. one lakh each. The penalties on M/s Sohil Maklai Entertainment Pvt. Ltd. and M/s T.T. Forex is reduced to Rs. two l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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