Penalty assessment under Foreign Exchange law reduced as pre-deposit deemed sufficient to satisfy imposed penalty.

Penalty for contravention of Sections 3(a) and 4 of the Foreign Exchange Management Act, 1999 was reassessed on balance of evidence and equitable grounds; the Tribunal accepted that recovered foreign currency and prior customs adjudication supported enforcement but, weighing the appellant's factual and financial circumstances and earlier penalty proceedings, held that the appellant's fixed deposit pre-deposit is just and sufficient to satisfy the penalty and modified the impugned order accordingly, disposing of the appeal to that extent.

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Issues: Whether the penalty imposed under Sections 3(a) and 4 of the Foreign Exchange Management Act, 1999 on the appellant is sustainable and whether the penalty should be reduced in view of prior adjudication and the appellant's pecuniary condition.

Analysis: The Tribunal examined the material supporting recovery of large quantities of foreign currency from the appellant's checked luggage and hotel room and considered the plausibility of the defence that the currency was planted. The Tribunal noted prior adjudication by the Customs authorities where a penalty had been imposed and subsequently reduced on appeal, and that the appellant had deposited an amount by way of fixed deposit (pre-deposit) before adjudication of the present appeal. The Tribunal balanced the evidence of recovery and the respondent's finding against the appellant's factual and financial circumstances and the existence of earlier penalty proceedings in reaching an equitable outcome.

Conclusion: The Tribunal modified the impugned order by holding that the amount of Rs. 1.5 lakhs deposited by the appellant by way of FDR is just, sufficient and reasonable to satisfy the penalty for contravention of Sections 3(a) and 4 of the Foreign Exchange Management Act, 1999, and disposed of the appeal accordingly in favour of the appellant to that extent.

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