Whether there is discretion to give option of redemption fine in case of confiscation of Indian Currency?

PJ/Case Study/2012-13/71

Prepared by:- CA Neetu Sukhwani &

Prayushi Jain

CASE STUDY

Introduction:- Mr. Allah Warayo S/o Shri Abdul Karim, resident of Pakistan had come to India along with 6 family persons. He was returning back to Pakistan after having stay of 30 days in Jodhpur. He was asked by custom officer about possession of Indian and Pakistani Currency at the counter but he declared only 17000/-. On personal search it was known that he had Rs 183500/- in denominations of Rs 1000/-(151 notes) and Rs.500/-(65 notes). His currency was confiscated on grounds that it was wrong to carry Indian currency to Pakistan and he had mis-declared Indian currency in his possession. Hence it appeared that appellant had attempted to export Indian currency illegally to Pakistan. Accordingly, a show cause notice was issued to appellant confiscating the amount he was carrying and imposing a penalty according to section 114 of the custom act, 1962 read with section 13 of Foreign Exchange Management Act, 1999. Thereafter, reply was filed submitting the bonafides of the appellant and about his unawareness of the legal provisions. However, the submissions made by him were not considered by the adjudicating authority and the impugned order in original was passed for absolute confiscation of the Indian Currency Notes along with imposition of penalty of Rs. 7,000/- under section 114 of the Customs Act, 1962. Aggrieved by the impugned order in original, the appellant preferred the appeal to the Commissioner Appeals.

M/s Allah Warayo [OIA NO. 06(OPD) CUS/JPR-II/2013] Dated 30.08.2013

Relevant Legal Provisions:

§ Notification no. FEMA 195/2009-RB Dated 7.7.2009
§ Section 113(d) of the Custom Act, 1962
§ Section 114 of The Custom act, 1962
§ Section 13 of Foreign Exchange Management act, 1999
§ Foreign Exchange Management (Export and Import of Currency) Regulations, 2000
§ Foreign Trade Policies
§ Rule 7 of Baggage Rules, 1998
§ Section 11 of Custom act, 1962
§ Section 111 of Custom act, 1962
§ Section 125 of Custom act, 1962

Issue Involved:

The following issue was made before the Commissioner Appeals:-
Whether there is discretion to give option of redemption fine in case of confiscation of Indian Currency?

Brief Facts:- The issue relates to seizure of Indian Currency Notes amounting to Rs. 1,83,500/- in denominations of Rs. 1000/- (151 Notes) and Rs. 500/- (65 Notes) from Shri Allah Warayo S/o Shri Abdul Karim (Pak National) at Land Customs Station, Munabao on 03.03.2012 while he was travelling from Jodhpur to Pakistan via Thar Express along with 6 family members. Custom officer being suspicious of appellant asked about the possession of Indian currency at the counter but he declared that he had only Rs 17000/- whereas on personal search, Rs. 183500/- were found.

According to Foreign Exchange Management Act, 1999 and Foreign Exchange Management (Import and Export of currency) Regulation, 2000 made by the RBI vide notification no. FEMA 06/RB-2000 Dated 3.5.2000 as amended vide notification no. FEMA 195/2009-RB dated 7.7.2009 read with baggage rules, no Pak nationalist can take outside India currency notes of Govt. of India and it was alleged that the export of Indian Currency by foreign nationals is prohibited.
It was submitted by the assessee that the said amount was received on account of attending the marriage of their relative and there was no intention to contravene any provisions of the Customs Act, 1962 or of the FEMA Act,1999. The said contravention occurred only due to the fact that Shri Allah Warayo is not a very literate person and was not aware of the provisions of the said Act and there was no malafide intention on his part. But, the above submissions were not been considered by the learned Additional Commissioner and the impugned order has been passed confirming confiscation of the seized Indian Currency Notes and imposing the penalty of Rs. 7000/-.

Aggrieved with the impugned order, the appellant filed appeal to the Commissioner Appeals.

Appellant’s Contention:-The appellant made following submissions before the Commissioner Appeals

It was submitted that the appellant was visiting India to attend wedding of his relative and during said wedding, he had received Indian currency as a gift by various relatives attending the wedding function.

It was further submitted that the appellant is not a very literate person and did not know about the limit of Indian currency prescribed under the Foreign Exchange Management Act, 1999 and Rules thereunder. Therefore it cannot be alleged that he intentionally attempted to export the said currency to Pakistan.
Further, as per provisions, the appellant was entitled to carry upto US$ 10,000 while traveling back to Pakistan from India, Therefore, he could have easily converted the Indian Currency into US$ and the converted currency would have been much less than US$ 10,000. Therefore, it is clear that the appellant being unaware of the provisions of the Foreign Exchange Management Act, 1999 and would have taken this legitimate and correct way of transferring the currency and would have completely avoided litigation initiated by the impugned show cause notice. It was also submitted that it is clear that the Appellant did not know the law and therefore, did not have any intention to commit any default. Thus, there was no illegal export; they were simply carrying the money received as a gift from their various Indian relatives during their stay in India.

It was submitted that the Appellant is an agriculturist and not a very literate person. He was unaware that there taking out of Indian Currency from India is prohibited. Since the currency was received as a gift from the relatives by him and his family members, they had genuine belief that they can take the gift with them. Further, under Notification No. FEMA 6/2000-RB, dated 3rd May 2000, the Reserve Bank has prescribed certain regulations for export from and import into India of Indian currency or foreign currency notes. As per sub rule 2 of rule 3 of these rules, though the export of Indian Currency is not allowed, yet if an application is being made to the Reserve bank of India, it may allow the taking out of Indian currency. This rule is reproduced as follows:-

“(2) Without prejudice to the provisions of sub-regulation (1), Reserve Bank may, on application made to it and on being satisfied that it is necessary to do so, allow a person to take or send out of India or bring into India currency notes of Government of India and/or of Reserve Bank of India subject to such terms and conditions as the Bank may stipulate.”
The above sub-regulation No. (2) has been inserted vide Notification No.38/2001-RB, dated 27/02/2001. Thus, we can say that w.e.f. 27.2.2001; in certain special cases, the RBI may allow a person to carry the Indian Currency notes to outside India. Thus, if the appellant was aware of the fact that they cannot take the Indian currency generally with them, they had applied to RBI for taking the same with them as the said currency was received as a gift from their relatives. Thus, there was genuine reason for having the permission of RBI since it was a bonafide receipt without any contravention to any provision. This would have been allowed by RBI proving the bonafides of the appellant. However, the appellant was not aware and had even not thought of the fact that taking out the currency is a crime punishable under Indian law. It was simply because the appellant and his family members were ignorant about the law. As such, the ignorance of law in the cases where the act was otherwise permissible on fulfillment of certain conditions, it cannot be said there was malafide intention. The malafide intention should be there to impose the penalty under the provisions of Customs Act, 1962 which is absent in this case as if the appellant was aware of the fact that the taking out of Indian currency is prohibited; they had the option of applying to RBI.

In continuation to above, it was submitted that for imposing the penalty under the provisions of Customs Act, 1962; the presence of guilty mind is the prime condition. The mere ignorance or carelessness of a person is not sufficient to constitute an offence under the provisions of Customs Act, 1962. It should be proven by the adjudicating authority that the person did so with guilty mind. Reliance was placed on the decision of M/s IDBI Bank Ltd Vs CC, New Delhi [2012-TIOL-20-CESTAT-DEL]. In this decision it was held that for imposing the penalty under the provisions of Customs Act, 1962; the situation should indicate that the person had done “an offence” rather than mere ignorance or negligence on his part. In the instant case, the appellant and his family members are very low educated people from Pakistan. They had carried simply the currency gifted by their relatives during their stay in India for attending the marriage. If they were aware about the fact that they cannot take the Currency with them, they would have sought permission of RBI in this regard. Thus, the circumstances and the low educational background of the appellant/his family members prove that they were ignorant about law, as such, there was no malafide intention. Therefore, relying on the above decision, the penalty cannot be imposed upon them.

In continuation to above it is submitted that where the bonafides are established, the confiscation should be set aside as held in the case of Mrs Nitu Bhojwani Vs CC, Ahmedabad [2009-TIOL-1355-CESTAT-AHM.]. In this case it was held that when bonafides are established, Indian currency seized should be allowed to be redeemed on payment of fine. In the case of appellant also, he was carrying the Indian currency that was gifted to him and his family members by their relatives. Thus, there is no doubt that the currency was received by them in a lawful manner as law doesn’t prohibit the gifts. However, it was their ignorance that they took the same with them under impression that they are allowed to take the same to their home town. Thus, the circumstances indicate that there was no ulterior motive rather there was only ignorance of law. As such, the impugned proceedings are not sustainable in the eyes of law.
Further, Customs, Excise and Gold Tribunal in the case of Mumbai Moiz Tayebali Lokhandwala vs Commissioner Of Customs on 20 September, 2005; has decided that the absolute confiscation is not sustainable in absence of malafide intention. In this case it was observed that the appellant had no intention to smuggle out the Indian currency; thus, in absence of malafide intention, the Indian currency so seized was released on payment of redemption fine and the personal penalty was also reduced. A para from this decision was reproduced to submit that the hon’ble Tribunal has taken a lenient view when the ulterior motive was absent.

Without prejudice to above, the appellant would also like to submit the relevant provisions of Baggage Rules, 1998 as amended. Section 2(iii) of these rules defines the word tourist as follows:-

(iii) "tourist" means a person not normally resident in India, who enters India for a stay of not more than six months in the course of any twelve months period for legitimate non-immigrant purposes, such as touring, recreation, sports, health, family reasons, study, religious pilgrimage or business;
The appellant and his family members had visited India for attending the marriage of their relative and their stay in India was for less six month; therefore, they will be considered as tourist in terms of Baggage Rules, 1998. Rule 7 of these rules provides the provisions relating to tourist which reads as follows:-
“7. Tourists
A tourist arriving in India shall be allowed clearance free of duty articles in his bona fide baggage to the extent mentioned in column (2) of Appendix E.”
Thus, the tourists arriving in India is allowed the duty free clearance of certain items listed in Appendix E to these rules. The Appendix E is reproduced as follows:-

(1)	Articles allowed duty free
d. Tourists (i) of Pakistani origin coming from Pakistan other than by land routes; (ii) of Pakistani origin or foreign tourists coming by land routes as specified in Annexure IV; (iii) of Indian origin coming by land routes as specified in Annexure IV.	i. used personal effects and travel souvenirs, if a. these goods are for personal use of the tourist, and b. these goods, other than those consumed during the stay in India, are re-exported when the tourist leaves India for a foreign destination. ii. articles upto a value of Rs. 6000 for making gifts.

The analysis of above rules and table makes it clear that the law permits the duty free clearance of the articles upto a value of Rs. 6000/- for making the gifts at the time of their entry in India. The intention behind framing this law is that where the tourists are arriving Indian for the purpose of maintaining their relations, it should be appreciated. Thus, when the gifts are allowed to be brought into India, there should also be no prohibition in taking out the same even if it is in form of currency notes provided the circumstances of the case proves this fact. In this case, the appellant and his family members came in India for the purpose of attending the marriage of their relative. While leaving, they were gifted money as a general tradition of Indian culture. Thus, there is no doubt that the said money was lawfully availed as a gift and as such, they were entitled to carry the same with them. Hence the proceedings initiated to confiscate the same, is not viable.
But the submissions of the appellant were not considered by the learned Additional Commissioner and the impugned order confirming confiscation of Indian Currency Notes along with imposition of penalty of Rs. 7000/- under section 114 of the Customs Act, 1962 was passed.

It is submitted that it has been held in the impugned order that according to the sub-regulation 1 (a) of regulation 3 of the Foreign Exchange Management (Export and Import of Currency) Regulations, any person resident of India may take outside India (other than Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes upto an amount not exceeding Rs. 7,500/- per person. It is alleged that since the appellant is a foreign national, he is not permitted to take the Indian Currency notes outside India and thereby they have contravened the provisions of Notification no. FEMA 06/RB-2000 dated 03.05.2000 as amended and therefore, the Indian Currency seized is liable for confiscation. In this regard, it is submitted that as the above mentioned provision is applicable for person who is resident of India and does not contain any provision regarding foreign national passenger, the said provision cannot be invoked for proving contravention in the instant case. Further, merely because there is not any specific provision to take out Indian Currency by foreign national; this cannot be a sole ground for confiscation, without proving the malafide intentions. On the other hand, the appellant had not illicitly obtained that money, rather it was gifted to all him and his family members during their visit to India. There is no specific provision neither in the Customs Act, 1962 nor in the FEMA, 1999 which prohibit the carrying of gifts in return journey. Therefore, the contention of impugned order holding that there is provision of taking out Indian currency by Indian Resident only, not by foreign national, is not sustainable and is liable to be set aside.

It is further submitted that the appellant had submitted in their written submissions about the provisions of sub-regulation 2 of Regulation 3 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 inserted vide Notification No. 38/ 2001- RB, dated 27.02.2001 which stipulates that:

“Without prejudice to the provisions of sub-regulation (1), Reserve Bank may, on application made to it and on being satisfied that it is necessary to do so, allow a person to take or send out of India or bring into India, currency notes of Government of India and/or of Reserve Bank of India subject to such terms and conditions as the bank may stipulate.”

While discussing the above submission, it is held in the impugned order that as the appellant had neither obtained nor produced any permission from the Reserve Bank of India to take Indian Currency, outside the India, and they have contravened the provisions of FEMA notification. In this respect, the appellant submit that the said permission could not be taken due to the fact that the appellant was unaware of the said provision of the law. This provision was incorporated in the written submissions during the personal hearing to prove the bonafide belief of the appellant and to justify that it could not be said that there was any illicit exportation of Indian Currency as RBI has the power to allow a person to carry Indian Currency Notes outside India subject to such terms and conditions as it may stipulate. As such, in the instant case, permission would have been granted by RBI if the appellant would have applied for the same as the appellant was merely carrying such Indian Currency in lieu of gifts received by him for attending marriage of his relative which is a well known tradition. But, the submission of the appellant was taken the other way round and impugned order has been passed confirming the confiscation of seized Indian Currency notes on account of non submission of said permission from RBI. Therefore, such an act is not justifiable and the impugned order should be set aside.

It is further submitted that the impugned order has imposed penalty under section 114 of the Customs Act, 1962 read with section 13 of the FEMA, on the grounds that the appellant have accepted his mistake of being unaware of Indian law. It was stated that it is well settled principal that ignorance of law is no excuse and contravention has been committed by the appellant. It was further held that even if the appellant was unaware of the law till he came to LCS Munabao, it is difficult to believe that he failed to notice all the relevant provisions of Baggage Rules, Foreign Trade Policy and FEMA displayed prominently on the Notice Board at Munabao Station in several languages. In this regard, it is submitted that the appellant is an illiterate farmer from Pakistan. He cannot even write his name, so the question of reading the notices affixed on the notice board does not arise at all. The fact that the appellant is illiterate is confirmed by the panchnama dated 3.3.2012 which was explained to him and in token of being aware of its content, he has put on his thumb impression on the same. Thus, whether or not the legal provisions were affixed on the notice board was one and the same thing for the appellant. Therefore, merely by saying that the law is put on the notice board in an easy language is not sufficient to impose the penalty. The bonafides of the case are to be seen before imposition of the penalty. This has not been done here and the illiteracy of the appellant has been taken as an offence and penalty has been imposed on him.

It is further submitted that the impugned order has imposed the penalty on the grounds that the appellant has mis-declared the amount of Indian Currency and by whatsoever the reasons, they have attempted to take the Indian Currency outside India which is in contravention to provisions of FEMA, 1999. It is alleged that possession of Indian Currency would constitute an attempt of illicit exportation of Indian Currency, which would render the same liable to confiscation under the provisions of section 113(d) of the Customs Act, 1962 and there could be no scope for any relaxation in regard to absolute confiscability of the Indian Currency. In this regard, it is submitted that this allegation has been made without considering the series of judicial pronouncements which says that where the default in following the legal provisions is due to ignorance of law without malafide intention, the penalty is not imposable. But the learned adjudicating authority has set aside the cases cited by the appellant by simply stating that their facts are not similar to the instant case. Simply saying that the cases cited by the appellant are not applicable; is not sufficient. It has been held by the highest court of India that the reasons should be given as to why the decisions cited by the appellant have not been accepted, else the order is not sustainable. This is held by hon’ble Apex Court in the case of State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS]. The analysis of this decision makes it clear that the order passed without giving reasons of decision is not justified in the eyes of law. In the case of appellant also, no reasons has not also been assigned why the case laws cited by them are not applicable. As such, the impugned order passed without assigning the reasons is not justified and is liable to be quashed. The appeal should therefore be allowed.

It is further submitted that the appellant has contended in their written submissions that in view of the provision of Rule 7 of the Baggage Rules, 1998, when the gifts are allowed to be brought into India, there should also be no prohibition in taking out the same. This contention has been rejected on the grounds that the said rule does not permit to take Indian Currency, outside India by the passenger of Pakistan out going from India. In this regard, the appellant submit that they had referred the above rule to justify their contention that the intention of the government is to increase the harmony and relations and this rule proves the same. Thus, when the intention of the government is to strengthen the personal relations by exchange of gifts; the impugned order confiscating the bonafide gifts of the appellant by rigidly interpreting the legal provisions, is not sustainable and is liable to be set aside. Such an order going beyond the intention of the government is not justified and is liable to be set aside.

It is also submitted that for imposing the penalty under the provisions of Customs Act, 1962; the presence of guilty mind is the prime condition. The mere ignorance or carelessness of a person is not sufficient to constitute an offence under the provisions of Customs Act, 1962. It should be proven by the adjudicating authority that the person did so with guilty mind. On the other hand, the appellant had no malafide intention to contravene the provisions of Customs Act and FEMA. This fact is proven by the following:-

·         The appellant was not carrying the Indian Currency in hidden form. They had simply carried the money as such and there was no ill-intention to hide the same at some place which could not be traced by a layman.

·         Further, when the enquiry took place, the appellant had not left the Indian territories. Thus, if they were guided properly by the concerned officers, they would have got converted the same from the bank counters at customs station.

·         Also, even if they would have taken away the Indian Currency to Pakistan, it would have been of no use as the currency was Indian Rupee which cannot be used at Pakistan.

All the above facts are clear evident that this is the genuine case where the contravention of Customs Act and FEMA was not intentionally. It was simply because they were not aware of the same. Thus, the malafide intention is not proved and therefore the penalty is not imposable as it was simple unawareness on their part as they were illiterate and unawareness cannot constitute an offence punishable under Customs Act, 1962. Reliance placed on the following decision:-

M/s IDBI Bank Ltd Vs CC, New Delhi [2012-TIOL-20-CESTAT-DEL]
Customs– Penalty under Section 114 of the Customs Act, 1962 imposed on Bank and the employee of the Bank for carelessness in accepting the currency declaration form (CDF), in connection with the case of claiming export benefits fraudulently using fake CDFs – The finding against the employee is one of carelessness and failure to perform his duties - These might constitute facts to institute departmental proceedings against him, but these facts are not adequate to constitute an offence under section 114of the CustomsAct – Penalties on Bank and the employee set aside. - Appeals allowed :DELHI CESTAT
In the light of above decision, for imposing the penalty under the provisions of Customs Act, 1962; the situation should indicate that the person had done “an offence” rather than mere ignorance or negligence on his part. In the instant case, the appellant and his family members are very low educated people from Pakistan. They had carried simply the currency gifted by their relatives during their stay in India for attending the marriage. If they were aware about the fact that they cannot take the Currency with them, they would have sought permission of RBI in this regard. Thus, the circumstances and the low educational background of the appellant/his family members prove that they were ignorant about law, as such, there was no malafide intention. Therefore, relying on the above decision, the penalty cannot be imposed upon them. The impugned order is therefore liable to be quashed.
In continuation to above it is submitted that where the bonafides are established, the confiscation should be set aside as held in the following case:-
Mrs Nitu Bhojwani Vs CC, Ahmedabad [2009-TIOL-1355-CESTAT-AHM.]

Customs - When bonafides are established Indian currency seized should be allowed to be redeemed on payment of fine - Confiscation modified from absolute to redeemable on payment of fine - Redemption fine imposed and penalty reduced: AHMEDABAD CESTAT;
In the case of appellant also, he was carrying the Indian currency that was gifted to him and his family members by their relatives. Thus, there is no doubt that the currency was received by them in a lawful manner as law doesn’t prohibit the gifts. However, it was their ignorance that they took the same with them under impression that they are allowed to take the same to their home town. Thus, the circumstances indicate that there was no ulterior motive rather there was only ignorance of law. As such, the impugned order is not sustainable in the eyes of law.

Further, Customs, Excise and Gold Tribunal in the case of Mumbai Moiz Tayebali Lokhandwala vs Commissioner Of Customs on 20 September, 2005; has decided that the absolute confiscation is not sustainable in absence of malafide intention. In this case it was observed that the appellant had no intention to smuggle out the Indian currency; thus, in absence of malafide intention, the Indian currency so seized was released on payment of redemption fine and the personal penalty was also reduced. The following para from this decision will substantiate the claim of appellant:-

“…….In case of Amalendu Bhattarcharjee v. Commissioner of Customs reported as , it was held that "absolute confiscation not proper in case of absence of mala-fide appellant being a bonafide passenger and a retired officer of State Govt under taking, having no mala fide intention to export Indian currency absolute confiscation of currency not warranted. Option to be given to appellant to redeem currency on payment of fine…..”
“….Further in case of Rajeev Johari v. Commissioner of Customs, Calcutta reported as 2001 (135) ELT 102 (Tri-Kolkata), redemption of Indian currency of Rs. 2 lakhs was allowed on payment of fine of Rs. 25000/- Similarly, Jt. Secretary to Govt. of India in order no 1638/98 against the order in appeal no 621/98 AP B dtd 28/8/98 where the Indian currency amounting to Rs. 7 lakhs confiscated was allowed to be released on payment of redemption fine of Rs. 70,000/-. In order in appeal no 188/99 AP B dtd 26/3/99 where Indian currency worth of Rs. 7 lakhs was allowed to be released on redemption fine of Rs. one lakh, and in order no 535/99 dtd 29/4/99 where Indian currency worth Rs. 2,50,000/- confiscated was allowed to be released on payment of redemption fine of Rs. 50000/- In order no 67/01 where assorted foreign currency worth of Rs. 396245/- and Indian currency worth of Rs. 1365000/- confiscated were allowed to be released on redemption fine of Rs. 5.28 lakhs. In order in appeal no 570/01 AP B dtd 13/9/01 where Indian currency worth of Rs. 5 lakhs was allowed to be released on redemption fine of Rs. one lakh and in order no 368/03 against order in appeal no 217/03 AP B dtd 3/7/03, Jt. Secretary to Govt of India allowed the release of foreign currency and Indian currency equivalent to Indian Rs. 277071/- upholding the order of Commr. (Appeals) where currency was allowed to release on redemption fine of Rs. 50000/- and penalty of Rs. 20000/-……..”

In the light of above para from the above referred decision, it is submitted that the hon’ble Tribunal has taken a lenient view when the ulterior motive was absent. As such, extending the ratio of above referred decision, the impugned confiscation and penalty should be set aside.
It was also submitted that as per the provisions of section 125 of the customs act, 1962 regarding option to pay fine in lieu of confiscation it was observed that:-

whenever confiscation of any goods is authorised by this act, the officer adjudging may, in the case of any goods, the importation or exportation whereof is prohibited under this act or under any other law for the time being in force, and shall, in the case any goods, give to the owner of the goods [ or, where such owner is not known, the person from whose possession or custody such goods have been sized,] an option to pay in lieu of confiscation such fine as the said officers thinks fit:

provided that, without prejudice to the provisions of the proviso to the sub-section(2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.

From the perusal of the said provision, it is clear that the adjudicating officer has the discretion to give an option of redemption fine in case of prohibited goods but for other goods, it is mandatory to give the option of redemption fine to the appellant.
Thereafter, reliance was placed on the decision given by the Hon’ble Revisionary authority in the case of Chellani Mukesh, reported as 2012 (276) E.L.T. 129 (G.O.I.) wherein it was held that:-

Confiscation and penalty (Customs) - Absolute confiscation - Option of redemption fine - Non-declaration of Indian currency and attempt to export such illegally - Currencies not being prohibited goods, absolute confiscation is very harsh - Option to redeem confiscated currency granted in view of the various precedent decisions of CESTAT/GOI giving liberal interpretation as regards to absolute confiscation of currencies - However, no ground to reduce personal penalty - Sections 111(d) and 125 of Customs Act, 1962. [paras 7, 8, 9]
In light of the above cited decision, it can be concluded that as currencies are not prohibited goods, it is mandatory to give option to redeem the confiscated currency and that the absolute confiscation is very harsh. Similarly, in the present case, the appellant’s Indian currency notes seized from him have been absolutely confiscated without giving him any option of redemption of the confiscated currency. Such an act is very harsh and so the assessee should have been given an option to redeem the confiscated currency on payment of redemption fine. As such, the impugned order in original has been passed on very harsh terms and should be set aside and the appeal should be allowed as there was no illicit export of Indian currency and the same was only in the form of gifts received from various relatives during the course of marriage function attended by the appellant. Therefore, the appeal should be allowed on justifiable terms.

Aligning with the above submission, reliance was also placed on the decision given in the case of M/s Sonam International Vs Commissioner of Customs, Lucknow, [2012 (279) E.L.T. 572 (Tri. - Del.)], wherein it was held by the Hon’ble Delhi Tribunal that even in case of prohibited goods, though there is discretion with the adjudicating authority to give the option of redemption of goods on payment of fine, then too, the adjudicating authority is duty bound to give reasons for not exercising the said discretion. The relevant extracts are produced for the sake of reference as follows:-

Confiscation - Absolute confiscation - No reason given by adjudicating authority for not allowing redemption on payment of fine - Remanded - Prohibition under Notification No. 9/96-Cus. (N.T.) against import of goods of third country origin from Nepal to India - Goods in question are prohibited goods and liable to confiscation under Section 111(d) of Customs Act, 1962, and were confiscated absolutely - Adjudicating authority has not recorded the reason for not giving the option of payment of fine in lieu of confiscation under Section 125 ibid - Confiscated goods have been sold by the authorities - Tribunal’s view that importer should have been given the option - Remanded to adjudicating authority to decide about the quantum of fine - If goods not available, fine, duty and penalty may be deducted from sale proceeds and balance paid to appellant - Sections 11(1), 111(d) and 125 ibid; Notification No. 9/96-Cus. (N.T.). [paras 13, 14, 19]

Imports - Prohibited goods - Confiscation - Discretion to allow redemption on payment of fine - Reason to be given for not exercising the discretion - Section 125 of Customs Act, 1962.[paras 13, 14]

Indo-Nepal Treaty of Trade - Prohibition of import from Nepal to India of goods which have been exported to Nepal from other Countries - Reason to be given by adjudicating authority for not giving the option of redemption fine on confiscation of prohibited goods - Notification No. 9/96-Cus. (N.T.); Sections 11(1), 111(d) and 125 of Customs Act, 1962. [paras 6, 13, 14]

In light of the above cited decision, even in cases of prohibited goods, the adjudicating authority is required to give reasons for not giving the option of redemption of confiscated goods but in their case, no option of redemption of such goods has been given to the appellant even when there was genuine reason for not following proper procedure for exporting the said currency and moreover, no reason was also disclosed for not giving such an option of redemption of the confiscated currency.

Entitlement to carry US $ 10000 to Pakistan as per FEMA, 1999:- It was also reiterated that as per the provisions of FEMA, 1999, the appellant was entitled to carry upto US $ 10000 while travelling back to Pakistan from India. Therefore, he could have easily converted the Indian currency into US $ and the converted currency would have been much less than the permissible limit of US $ 10000. However, merely due to the fact that the appellant is not very literate person and is not aware of the provisions of the FEMA, 1999, to legitimately carry the currency to his home town Pakistan, cannot be taken as the sole basis to level the charge of illegal export of Indian currency on him. The appellant belongs from a lower education background and so a sympathetic opinion should be framed in the present case and the appeal should be allowed. As such, the amount of Indian currency was much below the permissible limit under FEMA, 1999.

Permissible limit to be applied individually:-It was also submitted that the appellant was travelling from India to Pakistan along with his six family members and the total value of the Indian currency notes confiscated were of Rs. 1,83,500/-. However, the impugned order has been passed by considering the total value of the currency as belonging to the appellant alone and ignoring the other family members. It is submitted that the total currency was of all the family members and accordingly, the confiscation of currency was not warranted. In this regard, reliance is also placed on the recent decision given by the Hon’ble Mumbai Tribunal in the case of Arun Ramanlal Sura Vs CC [2013-TIOL-1242-CESTAT-MUM]. The head note of the above cited judgement is produced for the sake of convenient reference as follows:-

Cus - A person who is going abroad can carry US $25000 with him, therefore, redemption fine and penalties are to be considered separately for each of the appellants – Redemption fine and penalties reduced/dropped: CESTAT - Appeals disposed of : MUMBAI CESTAT.
In light of the above cited decision, the confiscation of currency treating it to be of the appellant alone is not tenable and should be set aside. The appeal should therefore be allowed.

Reasoning of judgement by Commissioner Appeals:-On considering the facts, the Commissioner Appeals observed that as the appellant is an illiterate person and was travelling with a group of family members, the adjudicating authority should have given an option to redeem the confiscating Indian currency notes on payment of redemption fine. Looking on the various cited case laws wherein appellant were allowed to get the said Indian currency redeemed on payment of redemption fine, the appellant was allowed to redeem the confiscated Indian Currency on a redemption fine of Rs 40000/- within a period of one month from the receipt of order. The Commissioner Appeals also found the personal penalty of Rs 7000/- as reasonable in the facts of the case and accordingly upheld the same.

Decision:-Assessee’s appeal was allowed on terms.

Conclusion:- Thegist of this case is that redemption fine is mandatorily required to be given except when the goods that are proposed to be confiscated are prohibited. In the present case as the Indian Currency was not a prohibited item, absolute confiscation was not legal and proper and the option of redemption fine was to be mandatorily given. However, the Indian Currency was confiscated absolutely without even giving the option of redemption fine which was very harsh. Accordingly, the option of redemption fine was awarded by the Commissioner Appeals but the personal penalty was upheld as the contravention was made by the appellant, though due to ignorance of law.

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PJ/Case Study/2013-14/71
21 September 2013

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PJ/Case Study/2013-14/71 21 September 2013

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PJ/Case Study/2013-14/71
21 September 2013