Foreign currency export without RBI permission may be confiscable, but redemption and reduced penalty can follow in suitable cases.

Foreign currency attempted to be exported from India without Reserve Bank permission was treated as goods for customs purposes, so the Tribunal found the appeals maintainable. Applying Rule 5 of the Foreign Exchange Management (Export & Import of Currency) Regulations, 2000, it held the seized currency liable to confiscation because authorised procurement of the entire amount was not proved and RBI permission had not been obtained. However, it also applied the Customs Act's redemption mechanism and found absolute confiscation unnecessary on the facts, where the currency was said to be for business use and no clear mala fides were shown. Redemption fine was allowed and the penalties were substantially reduced.

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Issues: (i) Whether the appeal was maintainable before the Tribunal where the dispute concerned confiscation of foreign currency at the airport; (ii) whether the foreign currency taken out of India was liable to confiscation; (iii) whether, if liable to confiscation, the currency should be absolutely confiscated or released on payment of fine, and what penalty was appropriate.

Issue (i): Whether the appeal was maintainable before the Tribunal where the dispute concerned confiscation of foreign currency at the airport

Analysis: The dispute concerned export of foreign currency, which was treated as goods for the purpose of customs adjudication. On that basis, the Tribunal held that it had jurisdiction to entertain the appeals and rejected the objection as to maintainability.

Conclusion: The appeal was maintainable before the Tribunal.

Issue (ii): Whether the foreign currency taken out of India was liable to confiscation

Analysis: Export of foreign currency was governed by Rule 5 of the Foreign Exchange Management (Export & Import of Currency) Regulations, 2000, under which export without Reserve Bank permission was not permitted. Since the appellants had not proved authorised procurement of the entire foreign currency and no RBI permission had been obtained, the seized currency was held liable to confiscation under the Customs Act.

Conclusion: The foreign currency was liable to confiscation.

Issue (iii): Whether, if liable to confiscation, the currency should be absolutely confiscated or released on payment of fine, and what penalty was appropriate

Analysis: Confiscation under Section 113(d) and Section 113(e) of the Customs Act, 1962 attracted the discretionary power under Section 125 of the Customs Act, 1962 to allow redemption fine in appropriate cases. The Tribunal noted that the currency was intended for business use, the appellants had some declared cash balance, and the case did not warrant absolute confiscation. The penalty was also considered excessive in the circumstances and was reduced substantially.

Conclusion: Absolute confiscation was set aside, redemption on payment of fine was allowed, and the penalties were reduced.

Final Conclusion: The appeals succeeded in part by converting absolute confiscation into redeemable confiscation and by reducing the penalties imposed on both appellants.

Ratio Decidendi: Foreign currency attempted to be exported without RBI permission may be liable to confiscation, but absolute confiscation is not mandatory; where the facts show no clear mala fide and the statute confers discretion, redemption on payment of fine and proportionate penalty may be ordered.

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