2003 (5) TMI 236 - Commissioner - Customs

Court upholds confiscation of foreign currency under Customs Act, emphasizing strict compliance with currency declaration rules

The court upheld the absolute confiscation of foreign currency amounting to US$ 30,060 and Naira 12,300 under the Customs Act, 1962. The appellant's ... Confiscation of currency - Absolute confiscation of foreign currency Issues Involved:1. Legality of the absolute confiscation of foreign currency.2. Obligation to declare foreign currency upon arrival.3. Applicability of RBI's Foreign Exchange Manual provisions.4. Consideration of appellant's intent and circumstances.5. Applicability of Section 125 of the Customs Act, 1962 for redemption of confiscated goods.Detailed Analysis:1. Legality of the Absolute Confiscation of Foreign Currency:The Adjudicating Authority ordered the absolute confiscation of US$ 30,060 and Naira 12,300 under Sections 111(d) and 111(l) of the Customs Act, 1962. The appellant argued that non-declaration of currency was a technical irregularity and that import of foreign currency is not prohibited. However, the judgment upheld the confiscation, emphasizing that the declaration of foreign currency is a statutory requirement under Regulation 6(3) of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, and failure to declare renders the currency liable for confiscation.2. Obligation to Declare Foreign Currency Upon Arrival:The appellant failed to declare the foreign currency at the Currency Declaration Counter, which is mandatory for amounts exceeding US$ 10,000 (US$ 5,000 in cash and US$ 5,000 in Travelers' Cheques). The judgment highlighted that Section 77 of the Customs Act mandates a true declaration of baggage contents to the Proper Officer of Customs, and non-compliance leads to confiscation under Section 111(m) of the Customs Act. The court found that the appellant's explanation for non-declaration due to fear of fellow Nigerians was unconvincing.3. Applicability of RBI's Foreign Exchange Manual Provisions:The appellant cited Para 3E2 and Para 3E3 of the RBI's Foreign Exchange Manual, arguing that production of a Currency Declaration Form (CDF) and passport are not mandatory for encashment of foreign currency. The judgment clarified that these provisions are meant to facilitate travelers who have declared their currency and do not apply to undeclared foreign currency brought into India unlawfully. The court concluded that the appellant's reliance on these provisions did not support his case.4. Consideration of Appellant's Intent and Circumstances:The appellant claimed that he brought the currency to purchase bicycle parts and had no intention to mis-declare. The court, however, found no merit in this argument, noting that the appellant was aware of the declaration requirement and had no justification for not using normal banking channels for the transfer of funds. The court emphasized the importance of strict compliance with foreign currency regulations to prevent money laundering and related crimes.5. Applicability of Section 125 of the Customs Act, 1962 for Redemption of Confiscated Goods:The appellant requested the option to redeem the confiscated currency under Section 125 of the Customs Act. The court acknowledged that while the Adjudicating Authority generally has the discretion to offer redemption on payment of a fine, it is not obligatory. Given the circumstances and the appellant's failure to declare the currency, the court found no infirmity in the decision of absolute confiscation. The judgment underscored the need for deterrent punishment in cases of potential illegal transfer of funds to curb money laundering and related activities.Conclusion:The appeal was dismissed, and the absolute confiscation of the foreign currency was upheld. The court emphasized the mandatory nature of currency declaration, the insufficiency of the appellant's explanations, and the broader implications of non-compliance with foreign exchange regulations. The judgment reinforced the importance of stringent enforcement to prevent misuse of the liberal foreign exchange management system.