High Court Upholds Foreign Currency Confiscation Decision

The High Court upheld the Original Authority's decision of absolute confiscation of foreign currency attempted to be exported in violation of the law, overturning the Tribunal's ruling allowing redemption upon payment of a fine. The Court found the passenger violated FEMA regulations by attempting to export currency without RBI permission. The penalty imposed by the Original Authority was reduced by the Tribunal from Rs. 5 lakhs to Rs. 1 lakh, a decision upheld by the High Court considering mitigating circumstances.

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Issues Involved:
1. Justification of the Tribunal in allowing the redemption of the foreign currency attempted to be exported in violation of the provisions of law.
2. Justification of the Tribunal in reducing the quantum of penalty.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal in allowing the redemption of the foreign currency attempted to be exported in violation of the provisions of law:

The Revenue challenged the Tribunal's decision, which allowed redemption of confiscated currency upon payment of a fine and reduced the penalty. The passenger was intercepted carrying undeclared foreign currency, which he attempted to export without valid documents. The Commissioner of Customs confiscated the currency and imposed a penalty, citing violations under Section 113 (d), (e), and (h) of the Customs Act, 1962, read with FEMA regulations.

The Tribunal set aside the order of absolute confiscation, allowing redemption on payment of a fine of Rs. 2 lakhs, and reduced the penalty to Rs. 1 lakh. The Tribunal's rationale was that a passenger could legally carry up to US $25,000, although this was contested by the Revenue, which argued that such an amount required prior approval from the Reserve Bank of India (RBI). The Tribunal's interpretation was based on a misreading of Clause 8 of Schedule III of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, which requires prior RBI approval for amounts exceeding US $25,000.

The High Court found that the passenger violated Regulation 5 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, which prohibits exporting foreign currency without RBI's permission. The passenger did not obtain the currency from an authorized person, thus violating FEMA regulations. The High Court concluded that the Tribunal erred in allowing redemption and that the Original Authority's order of absolute confiscation was justified.

2. Justification of the Tribunal in reducing the quantum of penalty:

The Original Authority imposed a penalty of Rs. 5 lakhs under Section 114(i) of the Customs Act, which allows for penalties up to three times the value of the goods for prohibited exports. The Tribunal reduced this penalty to Rs. 1 lakh, considering the circumstances.

The High Court acknowledged the death of the passenger and the appeal being pursued by his widow. While restoring the order of absolute confiscation, the High Court did not interfere with the Tribunal's decision to reduce the penalty, taking into account the plea made by the respondent's counsel.

Conclusion:

The High Court answered the first substantial question of law in favor of the Revenue, restoring the Original Authority's order of absolute confiscation. The second substantial question of law was answered in favor of the respondent, confirming the Tribunal's reduction of the penalty. The Civil Miscellaneous Appeal was disposed of accordingly, with no costs.

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