2013 (10) TMI 363 - HC - FEMA

High Court upholds currency declaration requirement under FEMA, justifies Customs Act confiscation

The High Court found that the first respondent was required to declare foreign currency when leaving India as per FEMA and its Regulations. The absolute ... Prohibition on export and import of foreign currency - Confiscation of foreign currency - Foreign brought to India without declaration - First adjudication authority ordered complete confiscation - Tribunal ordered release of confiscation stating no confiscation necessary at the time of leaving India and that the currency in possession of the first respondent was also within the limit permitted by Reserve Bank of India - Held that:- the first respondent, as a matter of right, is not entitled to import or export in the manner as he wishes without complying with the provisions of the Regulations. Whether foreign currency is goods for the purpose of confiscation - Held that:- Reading of the definition of 'goods' as stated in Section 2(22) along with the definition of 'currency' stated in Section 2(h) of FEMA, make it clear that export of currency contrary to prohibition imposed under any other law is liable for confiscation. Therefore, the contention of the learned counsel for the first respondent that there is no power to confiscate the currency under Section 113(d) of the Customs Act, is liable to be rejected. The order of the Tribunal holding that there is no provision to declare the foreign currency in hand, cannot be sustainable. The currency possessed by the first respondent, was contrary to the Regulation, particularly Regulation No.5 which clearly states that as per Regulation, no person shall, without the general or special permission of the Reserve Bank, export or send out of India or bring into India, any foreign currency. The goods attempted to be exported being foreign exchange, as defined under the FEMA. - Decided in favour of Revenue. Issues Involved:1. Requirement of declaration of foreign currency at the time of leaving India.2. Legality of absolute confiscation under Section 113(d) & (h) of the Customs Act.3. Applicability of FEMA and related Regulations on the export and import of foreign currency.Issue-wise Detailed Analysis:1. Requirement of Declaration of Foreign Currency at the Time of Leaving India:The Tribunal had observed that there was no requirement to make a declaration at the time of leaving India about the possession of currency. However, the High Court found this conclusion unsustainable. The Court emphasized that FEMA and its Regulations impose stringent conditions on the export and import of foreign currency. Specifically, Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, prohibits the export or import of foreign currency without the general or special permission of the Reserve Bank. Therefore, the first respondent was required to declare the foreign currency, and failing to do so was a violation of the law.2. Legality of Absolute Confiscation under Section 113(d) & (h) of the Customs Act:The adjudicating authority had ordered the absolute confiscation of the foreign currency under Section 113(d) and (h) of the Customs Act, 1962. The first respondent contended that there was no power for the Customs authorities to invoke these sections for absolute confiscation. However, the High Court rejected this contention, stating that Section 113 of the Customs Act deals with the confiscation of goods attempted to be improperly exported or imported. Clause (d) specifically includes goods attempted to be exported contrary to any prohibition imposed by the Customs Act or any other law, which includes the FEMA Regulations. Thus, the confiscation was justified under the Customs Act.3. Applicability of FEMA and Related Regulations on the Export and Import of Foreign Currency:The High Court extensively discussed the applicability of FEMA and its Regulations. Section 6(3) of FEMA allows the Reserve Bank to prohibit, restrict, or regulate the export, import, or holding of currency or currency notes. Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, explicitly prohibits the export or import of foreign currency without the Reserve Bank's permission. Regulation 6 requires a declaration to the Customs authorities when bringing foreign exchange into India, subject to certain limits. The first respondent's failure to comply with these provisions rendered his actions illegal, and the confiscation of the currency was warranted.Conclusion:The High Court concluded that the Tribunal's order was unsustainable as it failed to consider the effect of FEMA and its Regulations. The first respondent's actions violated the stringent conditions imposed on the export and import of foreign currency. The confiscation of the currency under Section 113(d) of the Customs Act was justified. The order of the Tribunal was set aside, and the order of the adjudicating authority was confirmed. The first respondent was granted liberty to seek remedies under FEMA.