2026 (1) TMI 1362 - AT - Customs

Jurisdiction over cross-border currency and travel card confiscation Customs lacked statutory empowerment, confiscation and penalties set aside

The text examines whether Customs Act powers could be invoked to confiscate foreign currency embedded in travel cards, concluding that statutory ... Jurisdiction of customs over export and carriage of foreign currency - cross-border movement of currency, export of goods without prescribed declaration of value to be repatriated and cross-border movement of securities - scope of baggage exception - confiscation of ‘foreign currency’ embedded in ‘travel cards’ by recourse to section 113(d) - penalties u/s 114 and fine in lieu u/s 125 - appellate jurisdiction of the Appellate Tribunal / CESTAT and section 129A - deeming/prohibitory provisions under foreign exchange law and effect of omission in FEMA, 1999 - delegation/authorization - HELD THAT:- As ‘currency’ finds definition only in statutes regulating ‘foreign exchange’, it is in that direction that our minds must traverse. By renumbering the existing section 19A and 19B and with further incorporation [section 15 of FERA (Amendment) Act, 1964 of those, and alongside, 19A to section 19J, the proposed Enforcement Directorate acquired teeth. Taking note of enactment of Customs Act, 1962 and repeal of Sea Customs Act, 1878, the erstwhile arrangement for deeming prohibition [section 18 of FERA (Amendment) Act, 1964 of certain ‘foreign exchange transactions’ save for compliance with conditions prescribed was continued by suitable substitutions in section 23A of Foreign Exchange Regulation Act, 1947. The Appellate Board was subordinated to jurisdictional High Court by incorporating section 23EE [section 20 of FERA (Amendment) Act, 1964 in Foreign Exchange Regulation Act (FERA), 1947. As far as the dual jurisdiction of customs officers and enforcement officials are concerned, it is the thus revised Foreign Exchange Regulation Act (FERA), 1947 that, by and large, was transposed in the corresponding sections of Foreign Exchange Regulation Act (FERA), 1973 and which came up for judicial resolution before the Tribunal in re Meghraj Gordhandas Gehi [1984 (5) TMI 252 - CEGAT BOMBAY]. That decision, as well as that in re Agrawal Trading Corporation [1972 (1) TMI 45 - SUPREME COURT] of the Hon’ble Supreme Court on the applicability under Foreign Exchange Regulation Act (FERA), 1973 are at one, setting out the legal position that it is only by the deeming prohibition in the Foreign Exchange Regulation Act (FERA) [section 67 of FERA, 1947] 1973 and Foreign Exchange Regulation Act (FERA) [section 23A of FERA, 1947] 1947 respectively that customs authorities may invoke their powers under Customs Act, 1962 for contravention of the specified provisions in those statutes for any consequence whatsoever. It is clear that the empowerment flowed, and floated, only upon such cross-statute prohibition and, thereby, rendering ‘prohibition’ in ‘other law for the time being in force’ acknowledged for the purpose of section 113(d) of Customs Act, 1962; conversely, without it, there was no provision or prohibition in Customs Act, 1962 that afforded primary empowerment to proceed in the three circumstances of regulation by the Reserve Bank of India, viz., cross-border movement of currency, export of goods without prescribed declaration of value to be repatriated and cross-border movement of securities. That further explains the reference to prosecution by recourse to Foreign Exchange Regulation Act (FERA), 1947 in re Agrawal Trading Corporation and, in accordance with procedure set out in Foreign Exchange Regulation Act (FERA), 1947 and without being empowered as Director of Enforcement, by issue of notice for adjudication that could, instead of conclusion thereto, be substituted as complaint to initiate criminal prosecution. Thus, without exception, any action against contravention leading to confiscation and penalty or offence leading to conviction and imprisonment, provisioned in Customs Act, 1962 in relation to prohibitions under Foreign Exchange Regulation Act (FERA) of either vintage rested, wholly and solely, on the deeming provision therein; in its absence, such authority ceases. It is anything but clear that not one of the prohibitions in Foreign Exchange Management Act (FEMA), 1999, such as they are, have been deemed to have been prohibited under section 11 of Customs Act, 1962. The empowerment, and not taken refuge under by the lower authorities expressly, is delegation by subordinate legislation and prompted, by all appearances, from administrative conveniencing; it was to be taken recourse to for invoking provisions of Foreign Exchange Management Act (FEMA), 1999 and, in the strictest sense, independent of Customs Act, 1962 in its entirety, whether it be for procedure or substantive consequences – under section 111, section 112, section 113, section 114 or section 135 of Customs Act, 1962. There is no competence under Customs Act, 1962 to consider any of the instructions, circulars or orders of the Reserve Bank of India for ascertainment of compliance thereto by the travelling public. That lack of competence extends throughout the several silos within with which lie administrative, enforcing and appellate authorities created and empowered by Customs Act, 1962. We, too, are not competent to test the facts; no more competent were the lower authorities unless in exercise as a delegate by competent authority under Foreign Exchange Management Act, 1999. The impugned proceedings, leading to confiscation of foreign currency and liability to confiscation of amounts embedded in ‘travel cards’ with attendant penalties under section 114 of Customs Act, 1962, commenced and concluded with recourse to which is vastly at variance with empowerment under section 113 (d) of Customs Act, 1962 to only confiscate and it is incontrovertibly clear from the proposals in the notice, and findings in the order, that carriage of ‘foreign currency’ or ‘travel card’ is not subject to any prohibition imposed by or under Customs Act, 1962; ‘read with’ is to be invoked when such prohibition in ‘any other law for the time being in force’ is deemed as ‘prohibition imposed by or under Customs Act, 1962’ which is not in conformity with the present factual matrix. No significance attaches to the continued retention of ‘currency’ as ‘deemed goods’ in section 2 of Customs Act, 1962 in the absence of overt or deemed reference to that expression in the provisions of Customs Act, 1962. The deliberate discard of delegated authority to exercise empowerment under Foreign Exchange Management Act (FEMA), 1999 is perverse defiance of law by the lower authorities. The present proceedings, by relying on provisions of Customs Act, 1962 that do not proffer valid empowerment to do so are not proceedings under Foreign Exchange Management Act (FEMA), 1991. The confiscation of ‘foreign currency’ and liability to confiscation of ‘foreign currency’ embedded in ‘travel cards’ by recourse to section 113(d) of Customs Act, 1962 and imposition of consequential penalty under section 114 of Customs Act, 1962 is extra-legal and egregious exercise of power. The confiscation and penalties affirmed in the impugned order are set aside to allow the appeals. Issues: Whether the Customs Act, 1962 empowered customs authorities to confiscate foreign currency and impose penalties under section 113(d) and section 114 in respect of cross-border currency dealings governed by the Foreign Exchange Management Act, 1999 (FEMA), or whether such proceedings were beyond the competence of customs authorities absent statutory deeming or valid delegation under FEMA.Analysis: The Tribunal analysed the historical and statutory evolution of foreign exchange regulation and customs law, including prior deeming provisions in earlier foreign exchange statutes that had enabled customs enforcement. The Court examined the text and scheme of Customs Act, 1962 (including section 2(22) and section 113(d)), the repeal of earlier deeming provisions when FEMA, 1999 was enacted, and the absence of any provision in the Customs Act that now deems prohibitions under FEMA to be prohibitions under the Customs Act. The Tribunal considered administrative instruments and standing orders purporting to delegate FEMA powers to customs officers, the government's archival correspondence about authorising customs officers under FEMA, and precedents relied upon by the parties. Applying principles of statutory interpretation on the relationship between later special legislation (FEMA) and earlier general legislation (Customs Act), the Tribunal concluded that in the absence of express statutory deeming or proper delegation under FEMA, customs authorities lack competence to invoke Customs Act confiscatory and penalty provisions based on RBI/FEMA prohibitions; proceedings purporting to do so amount to extra-legal exercise beyond the Customs Act's empowerment.Conclusion: The confiscation of foreign currency and the imposition of penalties under the Customs Act, 1962 insofar as they rested on prohibitions or instructions under FEMA, 1999 were beyond the competence of the customs authorities. The confiscation and penalties affirmed in the impugned order were set aside and the appeals were allowed in favour of the appellants.Ratio Decidendi: Absent an express deeming provision in the Customs Act or valid statutory delegation under FEMA, customs authorities cannot invoke confiscation or penalty provisions of the Customs Act on the basis of prohibitions created by FEMA; the later, special statutory scheme (FEMA) governs foreign-exchange regulation and displaces the earlier general enforcement route through customs for such prohibitions.