By TIOL News Service

MUMBAI, JAN 12, 2017: ON 14.02.2003,a passenger K. Asad travelling by AI-806 was frisked and it was noticed that the black zipper suitcase carried by him as hand baggage was containing Indian currency of Rs.47 lakhs and foreign currency notesequivalent to Indian currency of Rs.21 lakhs.

The customs authorities after detaining the individual, whose name subsequently turned out to be Abdulla, carried out detailed investigation and recorded statements of Abdulla, Sanjay Agarwal and others.

Alleging that the currency which was seized was sought to be illegally exported by Abdulla in a way that he was to hand over the same to M.S. Kumar in the transit lounge who was to take it to Singapore, a SCN was issued proposing confiscation of the said currency and also for imposition of penalty on Abdulla, M.S. Kumar and Sanjay Agarwal.

Except Sanjay Agarwal, none appeared or submitted reply during the adjudication proceedings.

The adjudicating authority ordered for absolute confiscation of the Indian currency as well as foreign currency under the provisions of Section 113 (d) and (h) of the Customs Act, 1962 and also imposed penalties on all the noticees under Section 114 (i) of the Customs Act, 1962.

The appellant Sanjay Agarwalis before the Tribunal.

It is inter alia submitted that confiscation of Indian and foreign currency is without authority of law inasmuch as the said currency was legally belonging to the appellant and has been claimed by him before the lower authorities; same was being carried by appellant's employee to Hyderabad by domestic flight terminating at Hyderabad itself; seized Indian and foreign currency is not notified or specified goods hence the burden to prove that they are smuggled squarely lies on the customs department which has not been discharged; seizure of Indian and foreign currency and subsequently confiscating the same from a domestic passenger carrying the same in person on domestic flight terminating at Hyderabad is illegal; that as regards the foreign currency seized, the matter was referred by the customs department to the Directorate of Enforcement, Foreign Exchange Management Act and vide order no. DD/19/BZ/BAN/04/ (FEMA)/(VS)/996 dated 28.04.2005 it is categorically held that the foreign currency which has been possessed and seized by the customs authorities was legally acquired currency in respect of sale of jewellery items and said foreign currency was brought back from the United States; that once the foreign currency is held as legally acquired by an authority under FEMA, the question of confiscation of the said currency does not arise.

The AR justified the impugned order.

The Bench observed -

+ The currency in question was recovered from one of the passengers namely Abdullah travelling as Asad, when he was having a valid boarding pass for travelling from Mumbai to Hyderabad in Air India AI 806.The said flight AI 806 is undisputedly flight originating in Mumbai and terminating at Hyderabad as a domestic sector flight .

+ It is also undisputed that Abdullah is an employee of Sanjay Agarwal and is working in the jewellery shop of Sanjay Agarwal in Hyderabad. One M.S. Kumar to whom Abdullah was to hand over the currency notes was not apprehended despite the fact that he had checked in for boarding to Singapore, got himself offloaded due to personal reasons ; that the currency notes which was seized and confiscated were belonging to Sanjay Agarwal and his father Bal Krishna Agarwal and were sale proceeds of the export goods.

+ As regards the Indian currency, it is undisputed fact that Sanjay Agarwal is a proprietor and partner in one of the jewellery shops situated in Hyderabad. It is to be noted that Sanjay Agarwal had categorically stated that he had brought the said amount of Indian currency for purchase of gold which he could not do so, since his employee Abdullah was in the city in Mumbai, he ordered him to take the amount back to Hyderabad by domestic flight originating in Mumbai and terminating in Hyderabad. We find that there is also no dispute that AI 806 was originating in Mumbai and terminating in Hyderabad flying domestic sector.

+ We are unable to understand the logic to seize Indian currency which was to be taken by Abdullah from Mumbai to Hyderabad in a domestic sector flight holding to be an amount sought to be exported.

+ We find that the reasoning adopted by the adjudicating authority to hold that this currency was sought to be exported is totally incorrect inasmuch as per provisions of 2(19) of Customs Act, 1962, export of goods has been defined - means any goods which are to be taken out of India to a place outside India and export has been defined under Section 2(18) - means with its grammatical variation taking out of India to a place outside India. As has been seen from the definition of export and export goods, most important aspect is that goods needs to have been taken out of India and to a place out of India, which in the case in hand is totally absent, inasmuch as Abdullah was to travel from Mumbai to Hyderabad carrying the Indian currency.

+ In order to imaginarily consider that Indian currency which is sought to be confiscated has been smuggled out, is also not in consonance with law as stated in Customs Act, 1962 as the entire seizure of Indian currency by the adjudicating authority is on premise and surmise as has been noticed by the fact that it is the finding “there is an intention to smuggle the Indian currency by handing it over to M.S. Kumar.” A plain intention to do so cannot be held against anyone fastening the charge of smuggling of the goods.

+ Further, the appellant Sanjay Agarwal has been claiming that this amount of Indian currency which has been seized by the authorities were in fact an amount which has been recorded in their books of accounts and informed to the taxing authority i.e. IT department. He would submit that very same amount of Rs.47 lakhs was adjudicated by the Dy. Commissioner of Income Tax by an assessment order dated 25.02.2005, it was held that this amount was not to be considered as undisclosed income declared in the block return, which would mean that the said amount has been properly recorded in the books of accounts. If that be so, the charge of department and the said currency cannot be considered as legal amount in the hands of Abdullah, falls flat.

+ As regards the assorted foreign currency amount of Rs.21.6 lakhs it is the finding of the adjudicating authority that this amount is in respect of illicit sale proceeds. Even this charge of the adjudicating authority is wrong as the department referred the recovery of foreign currency to the Directorate of FEMA, Bangalore... The Dy. Director of FEMA after issuing notice to Bal Krishna Agarwal, Sanjay Agarwal, Abdullah by an adjudication order dated 28.04.2005 came to a conclusion that the foreign currency which was seized by the customs department from Abdullah on 14.02.2003 is licit currency which was brought into India by Bal Krishna Agarwal, the father of SanjayAgarwal, appellant herein. The adjudicating authority of FEMA has not confiscated the said currency as illicit currency and has only penalized Bal Krishna Agarwal and Sanjay Agarwal on procedural aspect of not seeking permission for handing over the same to Abdullah .

+ Once an authority functioning under FEMA has come to a conclusion that foreign currency which was seized on 14.02.2003 by the customs department and subsequently confiscated is licit amount for the sale of jewellery, confiscation of the said amount does not arise.

+ Provisions of [Section 113(d) and (h) - Confiscation of goods attempted to be improperly exported, etc.]is not applicable to the case in hand as it is undisputed that Abdullah employee of Sanjay Agarwal, appellant herein was travelling in flight AI 806 which was flying between Mumbai and Hyderabad as a domestic sector flight. If it is so, then the goods i.e. foreign currency and Indian currency was never sought to be exported. It is also seen that provisions of Section 113(h) are also not applicable for the simple reason that the goods i.e. foreign currency and Indian currency were never for the purpose of export as the passenger was travelling on a domestic sector. Another fault in investigation which we have noticed in the entire case of the department is that Abdullah from whom the foreign currency and Indian currency was recovered was to hand it over to M.S. Kumar for carrying it to Singapore. We find from the entire records that M.S. Kumar was never apprehended nor his statement recorded ; despite that it was the case to hand foreign currency and Indian currency through M.S. Kumar for taking out of country. In the absence of any statement of M.S. Kumar to corroborate the theory of the revenue, we find the case of confiscation of the foreign currency and Indian currency falls down.

Conclusion:

+ Confiscation of foreign currency and Indian currency totaling Rs.68.69 lakhs under Section 113 (d) and (h) of Customs Act, 1962 is incorrect and is liable to be set aside.

+ Since confiscation is set aside, the question of imposing any penalty on the appellant Sanjay Agarwal under Section 114 (i) of Customs Act, 1962 does not arise. Penalty set aside.

(See 2017-TIOL-105-CESTAT-MUM)