FEMA compounding not maintainable where notice was issued under Customs Act and no FEMA proceedings had begun.

An application for compounding under FEMA was held not maintainable where the show-cause notice was issued under the Customs Act and no proceedings had been initiated under FEMA. The court treated the areas of operation of FEMA and the Customs Act as distinct and held that the compounding power under Section 15 of FEMA could not be invoked merely because the seized currency had foreign-exchange implications or because the notice arose from a broader factual setting. The challenge to the impugned order therefore failed.

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Issues: Whether an application for compounding under the Foreign Exchange Management Act, 1999 was maintainable when the show-cause notice was issued under the Customs Act, 1962 and no proceedings had been initiated under FEMA.

Analysis: The notice was held to be under the Customs Act, 1962, and the areas of operation of FEMA and the Customs Act were treated as distinct. In the absence of any registered case or initiated proceedings under FEMA, the compounding authority's power under Section 15 of the Foreign Exchange Management Act, 1999 could not be invoked merely because the seized currency had foreign-exchange implications or because the notice referred to violations in a broader factual setting.

Conclusion: The compounding application was not maintainable, and the challenge to the impugned order failed.

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