Customs, Excise and Gold Tribunal - Tamil Nadu
Shri S. Radhakrishnan And Ors. vs Commissioner Of Customs on 19 December, 2006
Equivalent citations: 2007(212)ELT436(TRI-CHENNAI)
ORDER P. Karthikeyan, Member (T)
1. At 0115 hours on 9.9.2004, S/Shri T. Sakthivel, A. Suresh Babu, and S. Radhakrishnan, passengers bound for Singapore by flight No. IC-555 were intercepted at the arrival hall of Chennai airport by the Customs officers pursuant to intelligence gathered. Baggages of the passengers were examined after the passengers had stated that each of them had carried only 200 Singapore dollars. The examination of the check-in baggage revealed that each of them was also carrying US $ 35,000 in the form of travellers cheques. In the statements recorded from them immediately thereafter, they stated that they were on a pleasure trip to Singapore. Shri T. Sakthivel deposed that he was an employee of M/s. Euro Asia Apparels, Tirupur manufacturing and supplying readymade garments to M/s. M/s Asia Brothers, Chennai. On instructions from an employee of M/s Asia Brothers he had visited their office at Guindy, where he had signed some forms and received travellers cheques for US $ 35,000 from Shri T. Suresh Babu, Accounts Executive, M/s. Asia Brothers with instructions to hand over the same to one Shri R. Ramnath, Managing Director of M/s. Asia Brothers at Singapore. Singapore Dollar 200 was also given to him to meet expenses. Similar statement was given by Shri A. Suresh Babu, another employee of M/s. Euro Asia Apparels. As per his statement, he and his colleague Shri T. Sakthivel had been contacted by Shri T. Suresh Babu, an employee of M/s. Asia Brothers, whom they had met at his office at Guindy. He had signed certain forms given by Shri T. Suresh Babu and he was given US $ 35,000 to be handed over to Shri Ramnath at Singapore. He was also given Singapore $ 200 for expenses. Shri S. Radhakrishnan, an employee of M/s. Asia Brothers stated that the Manager of M/s. Asia Brothers. Shri T. Suresh Babu had made him sign certain papers and he was given travellers cheques for US $ 35,000 to be delivered to Shri R. Ramnath at Singapore, purported to be advance for import of leather by M/s. Vendan Exim Trades, Tambaram.
2. In the course of further investigations Shri T. Suresh Babu was interrogated on 09.09.04, when he deposed that he had arranged the foreign exchange to the tune of US $ 35,000 for each of the three passengers US $ 25,000 under LERMS (business purpose) and US $ 10,000 under Basic Travel Quota (BTQ) as per R.B.I norms. He stated that travellers cheques had been purchased from authorised dealers. The amount was meant for purchase of machinery for the factory M/s. Asia Brothers had proposed to set up at Tirupur and to meet promotional/marketing expenses. The travellers cheques were purchased for US $ 37,500 for which he had issued company cheques and the balance amount for the foreign currency had been signed by Shri Vetrivendan, a Director of the Company, M/s. Asia Brothers. The travellers cheques had been arranged for procuring machinery as per the instructions of Shri Ramnath. He had instructed the passengers to meet Shri Ramanath on their reaching at Singapore to assist him in marketing (their products) and purchasing machinery. In his further statement dated 10.9.2004 Shri T. Suresh Babu gave the details of purchase of foreign exchange for each passenger from various authorised foreign exchange dealers. Thus US $ 30,000 was procured by M/s. Asia Brothers under BTQ, and US $ 75000 under LERMS by M/s. Vendan Exim Trades. He also stated that S/Shri S. Radhakrishnan, T. Sakthivel and A. Suresh Babu were sent on a tour to study market and to participate in Expo Fair in Singapore and Thailand to procure machinery. Their stay was to extend to about 50 to 60 days. He also stated that another of his colleague Ms. Padma Priya had been sent to Singapore earlier and had been given US $ 15,000. The amount was participation fee at an Expo. Shri Vetrivendan, Director of M/s. Asia Brothers deposed in his statement dated 10.09.04 that Shri Ramnath had proposed to send their employees to Singapore to promote their business, participate in exhibitions and to procure machinery at competitive cost. Shri Ramnath had allotted Rs. 45 lakhs for the purpose. He had issued cheques for Rs. 17.7 lakhs as proprietor M/s. Vendan Exim Trades and for Rs. 27.3 lakhs as Director, M/s. Asia Brothers. In his statement dated 21.09.04, Shri Vetrivendan stated that he had also traveled earlier to Singapore taking US$ 35,000 and that Rs. 17.7 lakhs for which he had issued cheques had been transferred from M/s. Asia Brothers earlier. In her statement dated 29.9.2004, Shri Komaleeswari deposed that she had visited Singapore with travellers cheques for US $ 35,000/- which she had handed over to Shri Ramnath. She had travelled to Singapore on 23.8.2004. She had worked at an exhibition and attended another exhibition in August in Singapore before returning to Chennai. Shri R. Jayavelu, an employee of M/s. Asia Brothers, in his statement dated 29.9.04 deposed that in August 2003 he had collected US $ 25,000 in travellers cheques and had handed over the money to Shri Ramnath in Singapore. He had visited Singapore to explain functions of printing machinery in an exhibition for nearly 54 days and returned to Chennai. Shri A. Sankar, another employee of M/s. Asia Brothers in his statement dated 29.9.04 deposed that in August 2004, he had visited Singapore when he had worked at an exhibition before returning to Chennai and had handed over US $ 35,000 to Shri Ramnath. On 06.10.04, a similar statement was given by Shri M. Senthil Kumar, contract employee of M/s. Asia Brothers, when he stated that he had collected travellers cheques worth US $ 25,000 from Shri T. Suresh Babu of M/s. Asia Brothers and had attended exhibition at Singapore and met persons from various countries for promoting sales (of their product). Statements obtained from two others indicated that they had traveled to Sri Lanka with a total of US$ 30,000 to explore the possibility of a joint venture garment unit of M/s. Asia Brothers. They had spent US$ 8,000 and brought back the balance.
3. A Show Cause Notice was issued to S/Shri S. Radhakrishnan, T. Sakthivel, A. Suresh Babu, Ramnath, Vetrivendan and T. Suresh Babu proposing to confiscate the travellers cheques worth US $ 1,05,000 under Section 113(d), (e) and (i) of the Customs Act, 62 (the Act) read with Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 under Foreign Exchange Management Act, 1999 and to impose penalty on each of them under Section 114 (i) of the Customs Act, 1962. In the reply furnished on behalf of S/Shri T. Sakthivel, A. Suresh Babu and S. Radhakrishnan, their Counsel stated that his clients had declared the currency in their baggage but the investigating officers had suppressed the fact. The statements of the three passengers had been obtained under duress. He also stated that US $ 25,000 and US $ 10,000 each were procured by Shri T. Suresh Babu (another client of his) respectively under LERMS and BTQ. These were for sales promotion and purchase of machinery for the factory proposed to be set up at Tirupur. The payments had been made by cheques through various money changers and the travellers cheques could be encashed only by these passengers. The passenges were on a trip to study the market and to participate in Expo Fairs in Singapore and Thailand and to procure machinery. In the light of the statement of Shri T. Suresh Babu, the statement recorded from the passengers that they were going to Singapore for pleasure trip was wrong. In procuring the travellers cheques provisions of Section 7(2)(ii) of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 were complied with, as the various money changers had stated before the Customs Authorities that they had released foreign exchange in travellers cheques to the passengers. So the regulations under FEMA were fully complied with. He also stated that the customs authorities had no jurisdiction in the matter. The passengers could only encash travellers cheques and even if they were to hand over the cash to Shri Ramnath there was nothing wrong in such an arrangement as he would have looked after them when they stayed in Singapore. The fact that Shri A. Suresh Babu had used the Company fund had shown that they visited Singapore to acquire expertise and to improve business of the company. The passengers had taken foreign exchange with them as permitted under law. The Customs authorities were not empowered to go into the motivation or to deal with the business decisions to make it a ground for confiscation. lie stated that Regulations 5 and 7 of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 was not applicable. The passengers had obtained the foreign exchange lawfully under Regulation 7(2)(ii). Customs authority could not enquire about the utilisation or otherwise of the money so drawn. Therefore, Section 113(d) had no application as the foreign currencies were not sought to be exported contrary to any provision; Section 113(e) spoke of concealment in a baggage and there was no such concealment of travellers cheques. Section 113(i) had no application as currency had been declared. Section 114(i) had no application as it spoke of penalty in the case of goods in respect of which there was any prohibition and the impugned currency attracted no prohibition. He stated that the currency had to be returned. He submitted that in any case currency was required to be returned on payment of redemption fine. On behalf of Shri Vetrivendan, it was submitted that he only had drawn a cheque through which the travellers cheques were purchased and he was not involved in any other manner. Show Cause Notice had not disclosed the basis for penalizing him. On behalf of Shri Ramanath, it was submitted that M/s. Asia Brothers had been engaged in the export of readymade garments and had sent its employees to participate in an exhibition and to study markets abroad. The travellers cheques and the money used to buy them were legally procured and there was no violation committed by Shri Ramnath. Travellers cheques would be encashed by the passengers and Shri Ramnath would have looked after them for 50 to 60 days to study the market in Singapore. If the money involved were to be spent on that count there was nothing contrary to the Regulations. It was submitted that he was not involved in any offence attracting penalty.
4. At the time of personal hearing Sr. Counsel Shri B. Kumar reiterated the earlier statements on behalf of the parties that the Sections 113 (d) and (e) of the Act were not applicable. Section 114(i) was not applicable as it was attracted only when prohibited goods were involved and Section 113(i) applied. He further added that the three passengers were bound for Singapore in connection with the work relating to construction of factory and not for pleasure trip, which had been evident from the statement of the Accounts Executive (Shri T. Suresh Babu) recorded on the very same day (of seizure), relied on in the Show Cause Notice. Sr. Counsel had stated that he had submitted a document showing export realization of M/s. Asia Brothers for the years 2001-05, address of the factory and list of machinery installed therein.
5. While adjudicating Show Cause Notice, the Commissioner went by the statements of the persons involved. He denied that there was any procedure for declaring currency by passengers going abroad to the Customs. However, it was obvious from the mahazar that the travellers cheques had not been declared. The allegation of coercion had been made on 15.5.05 i.e. after about 8 months of the seizure of travellers cheques. Therefore, the statements given immediately after the seizure that the three persons had been on a pleasure trip and the travellers cheques were to be handed over to Shri Ramnath at Singapore were reliable. The statements of Shri T. Sakthivel, Shri A. Suresh Babu and Shri S. Radhakrishnan supported the finding that the travellers cheques under seizure were not part of the bona fide baggage of each of them. The circumstances of their coming into possession of the travellers cheques were corroborated by the three statements. The Commissioner found that as per AP (DIR Series) Circular No. 1, dated 1.6.2000 issued under FEMA, 1999 read with Sub-section 5 of Section 10 of FEMA, 1999 (42/99), a person was required to make a declaration and to give such information as would satisfy that the transaction would not involve and was not designed for the purpose of any contravention or evasion of the provisions of the Act or any Rule, Regulation, Notification, Direction or Order issued there under. Shri T. Sakthivel was an employee of M/s. Euro Asia Apparels supplying garments to M/s. Asia Brothers, Chennai, whereas declaration given before moneychangers to obtain travellers cheques for business travel and BTQ was in the letterhead of M/s. Asia Brothers / M/s. Vendan Exim Trades as if he was the employee of M/s. Asia Brothers. Shri T. Sakthivel was not eligible to avail the concession granted under FEMA and the travellers cheques had not been drawn for the approved purpose and the same could not be considered as bona fide baggage. Therefore, contravention of provisions of Section 11 of the Customs act, 1962 read with Section 3(3) of Foreign Trade (Development and Regulations) Act, 1992 (FTDRA) and Section 3 of the Foreign Exchange Management Act, 1999 (FEMA) were clearly established and therefore travellers cheques seized were liable for confiscation under Section 113(d) of the Customs Act and Shri T. Sakthivel was liable for penalty under Section 114 of the Customs Act, 1962.
6. Similar was the case of Shri A. Suresh Babu, an employee of Euro Asia Apparels, supplier of garments to M/s. Asia Brothers, Chennai, who had deposed that he was on a pleasure trip and that he had received travellers cheques for US $ 35,000 to be handed over to Shri Ramnath from Shri A. Suresh Babu. The Counsel for Shri A. Suresh Babu made identical submissions as he had made in respect of Shri T. Sakthivel and Shri A. Suresh Babu. As Shri. Suresh Babu had retracted his initial statement only on 15.5.2005 alleging coercion when he had given the initial statements eight months earlier, the Commissioner made the same finding as regards the liability to confiscation of currency seized from Shri A. Suresh Babu and his liability to penalty. Identical observations and findings were made by the adjudicating authority as regards Shri S. Radhakrishnan and the travellers cheques seized from him also except that there was no charge that Shri Radhakarishnan was not an employee of M/s. Asia Brothers. As regards Shri T. Suresh Babu, Accounts Executive of M/s. Asia Brothers, the Commissioner found that he had lured their employees for illegally carrying foreign exchange out of India thus rendering himself liable for penalty of abetting smuggling of foreign currency under Section 114 of the Customs Act read with FEMA, 1999. As regards Shri Vetrivendan, he had stated that he had given Rs. 18 lakhs from M/s. Vendan Exim Trades, for sponsoring persons for business travel and that the said amount had been transferred from M/s. Asia Brothers earlier. The adjudicating authority found that Shri Vetrivendan had abetted smuggling of foreign currencies and became liable for penalty under Section 114 of the Customs Act 1962 read with FEMA, 1999. As regards Shri Ramnath, Managing Director of M/s. Asia Brothers, the Commissioner inferred from the statements of various persons recorded that Shri R. Ramnath had controlled and directed the activities of sending employees to Singapore, arranging travellers cheques through his Accounts Executive, Shri T. Suresh Babu and receiving the same in Singapore. This was obvious from the statements of various other employees sent earlier to Singapore who had given statements to the effect that they had handed over money on encashment of travellers cheques to him and had been given money to meet their expenses in Singapore separately. Shri Ramnath had lured employees for smuggling foreign currency out of India and rendered himself liable for penal action under Section 114 of the Customs Act read with FEMA, 1999. The Commissioner accordingly passed the following order:
1. I order absolute confiscation of the travellers cheques totaling US $ 105, 000 recovered and seized totaling US $ 1,05000 recovered and seized from the baggage of S/Shri T. Sakthivel, A. Suresh Babu and S. Radhakrishnan under Section 113(d) of the Customs Act, 1962 read with Section 3(3) of the Foreign Trade (Development & Regulation) Act, 1992 and Section 3(3) of the Foreign Exchange Management Act, 1999.
2) I impose a penalty of Rs. 25,000/- (Rupees twenty-five thousand only) each on the three passengers S/Shri T. Sakthivel, A. Suresh Babu and S. Radhakrishnan under Section 114 of the Customs Act, 1962.
3) I impose a penalty of Rs. 25,000/- (Rupees twenty-five thousand only) on Shri T. Suresh Babu under Section 114 of the Customs Act, 1962.
4) I impose a penalty of Rs. 25,000/- (Rupees twenty-five thousand only) on Shri Vetrivendan under Section 114 of the Customs Act, 1962.
5) I impose a penalty of Rs. 5,00,000/- (Rupees five lakhs only) on Shri Ramnath under Section 114 of the Customs Act, 1962.
In the appeal before the Tribunal, the appellants have repeated the arguments advanced before the lower appellate authority. It has also been submitted that the Show Cause Notice had proposed confiscation of travellers cheques under Section 113(d)(e) and (i) of the Act and to penalize the noticees for rendering the goods liable for confiscation or abetting such act. The appellants argued that as per Show Cause Notice itself the travellers cheques carried by them had been lawfully issued by authorised money exchangers M/s. Thomas Cook and M/s. VKC Credit Forex Co. It was further submitted that foreign exchange had been released at the rate of 10,000 US $ under BTQ and 25,000 US $ under LERMS scheme of the Reserve Bank of India per person. The payments for the travellers cheques had been made through cheques through banking channel and travellers cheques had been obtained in a manner provided under the FEMA and RBI Regulations.
7. As per the Regulation at No. 7(2)(ii) of Foreign Exchange Management (Export and Import of Currency) Regulations 2000, Any person may take or send out of India,
i) ------- ------- -------
ii) foreign exchange obtained by him to travel from an authorised person in accordance with the provisions of the Act or the Rules or Regulations or directions made for issued there under.
Therefore, the transaction did not involve any violation of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000. As the travellers cheques allowed to be taken out of India by RBI were not prohibited goods, Section 113(d) of the Customs Act was not attracted. Section 113(e) applied only to concealed goods. As the travellers cheques had been in blue pouches received from money exchangers as compliment, the travellers cheques had not been kept concealed. Section 114(i) attracted only to the goods, which were either dutiable or prohibited under Customs Act or any other law. The subject goods had been obtained lawfully as per the provisions of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 with permission from RBI. They were not prohibited goods. There was no duty on such goods. Therefore, Section 114 (i) would not apply. Therefore, penalty was not backed by law.
8. It was submitted that how the foreign exchange released to a passenger was spent was not within the jurisdiction of Customs authorities to enquire or adjudicate. The FEMA authorities had enquired into the matter and the appellants had learnt that FEMA authorites were not contemplating any action in this regard.
First three noticees were being sent to Singapore to explore demand for garments and to study the prevailing fashions in the context of factory being set up. M/s. Asia Brothers were a bona fide concern exporting garments from the year 2001 onwards to Europe against stiff competition and had exported goods of value of about 7 crores per annum. Those three persons were employees of M/s/. Asia Brothers and were responsible for its administration. They required encouragement in view of the competition in the international trade. The three persons were proposed to be sent to familiarise themselves with the foreign market by attending Textiles Expo in Singapore and Bangkok. They were carrying money permitted in accordance with the RBI regulations. They were to stay abroad for 50 to 60 days to study the market there. Only they could encash the travellers cheques they carried Shri Ramnath would have looked after them during their stay in Singapore. Therefore, the allegation that Shri Ramnath had tried to siphon out money was wrong.
9. During hearing, Sr. Counsel argued that adjudicating authority had changed the basis proposed in the Show Cause Notice when he decided the issue. The adjudicating authority was not entitled to find a person liable on a basis different from what was mentioned in the Show Cause Notice. Section 3(3) of the Foreign Trade Development Act would show that the same did not apply to the case. There was no notification issued under Section 3(2) of that Act prohibiting taking away travellers cheques so permitted by RBI. Since there was no prohibition, Section 113(d) had no application. Hence the entire proceedings were bad in law. The allegation that the passengers had not made any declaration about the foreign currencies in their possession was wrong. There was no rule providing for making declaration of the goods which a passenger could take out of India as there was no export duty on any article nor any form was provided. Failure to make a declaration would have consequence only if there was violation of some penal provision or there was any loss to revenue. In no other cases, declaration was required.
10. Ld. SDR reiterated the findings of the Commissioner in the impugned order.
11. We have carefully gone through the case records and considered the submissions of both sides. The facts of this case are that at 01.15 hours on 9.9.04, S/Shri T. Sakthivel, A. Suresh Babu and S. Radhakrishnan bound for Singapore by IC-555 were intercepted at the arrival hall of the Chennai airport. In the statements recorded immediately on their detention and after inspection of their baggage, each of which had contained 35,000 US $ , they submitted that they were on a pleasure trip and that they were to hand over the travellers cheque for 35,000/- US $ each seized from them to Shri R. Ramnath, Managing Director of M/s Asia Brothers. Shri T. Sakthivel and Shri A. Suresh were employees of M/s Euro Asia Apparels, Tirupur and Shri S. Radhakrishnan was an employee of M/s. Asia Brothers. Statement recorded from Shri T. Suresh Babu, Accounts Executive of M/s. Asia Brothers on 9.9.2004 revealed that travel by the three persons had been funded by Rs 45 lakhs allotted for the purpose by the Managing Director of M/s. Asia Brothers. Rs 27.3 lakhs was drawn from M/s Asia Brothers and Rs. 17.7 lakhs from the account of M/s. Vendan Exim Trades which had been received from M/s. Asia Brothers earlier. As per the statement of Shri T. Suresh Babu, the visit of the three passengers to Singapore had been sponsored by M/s. Asia Brothers so that they could explore the market for their product, study the trends in fashion and also the availability of machinery required for the factory they had proposed to set up at Tirupur. The statements obtained from other persons who had made similar trips to Singapore were also to the effect that they had been sent at various times earlier to participate in trade fairs or to make enquiry regarding machinery required for setting up factory by M/s. Asia Brothers. They had also taken travelers cheques for similar amounts as per the Foreign Exchange Management (Import and Export of Currency) Regulations 2000, US $ 25000 allowed for business travel and, US $ 10,000 as basic travel quota to each passenger travelling abroad in the whole of one year.
12. Confiscation was however ordered under Section 113(d) of the Customs Act, 1962 read with Section 3(3) of the Foreign Trade (Development & Regulation) Act 1992 and Section 3 of the Foreign Exchange Management Act, 1999. As per Regulation 7(2)(ii) of FEMA (Export & Import of Currency) Regulations 2000, any passenger may take or send out of India "Foreign Exchange obtained by drawal from an authorized person in accordance with the provisions of the Act or the Rules or Regulations of Directions made or issued there under". As per Regulation 5 of the FEMA (Current Account Transactions) Rules, 2000, no person shall draw foreign exchange indicated in its Schedule III without prior approval of the Reserve Bank of India. Schedule III at Sl. No. 2 allowed release of foreign exchange by any person upto US $ 10000 or its equivalent in a calendar year for one or more private visit to any country. The said Schedule also specifically excluded release of foreign exchange upto US $ 25000 to a person for business travel. In the instant case, it was established that the confiscated currency seized from each of the passengers was not in excess of US $ 35000 each, of which US $ 10000 was obtained as basic travel quoted (BTQ) and US $ 25000 for business travel. Travellers cheques had been obtained using the funds drawn from legal channels i.e. bank accounts of M/s. Asia Brothers and M/s. Vendan Exim Trades.
13. It is seen from the impugned order that all the persons who had traveled earlier to Singapore stated that they had participated in trade fairs, attended exhibitions or made enquiries about machineries to be purchased for M/s. Asia Brothers. On a careful consideration of all the relevant facts, we are inclined to believe that currencies involved had been obtained for business purpose.
14. The Show Cause Notice had proposed confiscation of the seized currency under 113(d), (e) and (i) of the Customs Act, 1962 read with Foreign Exchange Management (Export & Import of Currency) Regulations, 2000 under Foreign Exchange Management Act, 1999 (FEMA). As against that under the impugned order the currency had been confiscated under Section 113(d) of the Customs Act, read with Section 3(3) of Foreign Trade (Development and Regulation) Act, 1992 (FTDRA) and FEMA, 99. As rightly contended by the Id. Counsel for the appellants we find that neither provisions of Section 3(3) of FTDRA nor Section 3 of the FEMA has any application to the case on hand. Section 3 of FTDRA empowers the Government to provide for prohibiting, restricting, or otherwise regulating export or import of any goods. The impugned order does not speak of any such notification specifying foreign currency. Section 3(3) of FEMA prohibits dealing in foreign exchange otherwise than as provided under that Act, rules or regulations made thereunder. In this case the confiscated currency had been obtained in terms of Foreign Exchange Management (Export & Import of Currency) Regulations, 2000. The foreign currency dealers who had issued the impugned currency were also governed by Circular A.P. (DIR Series) Circular No. 1 (June 1, 2000) relied on by the Commissioner in passing the impugned order. The circular reads as follows:
A.P. (DIR Series) Circular No. 1 - Foreign Exchange Management Act (FEMA), 1999 A.P. (DIR Series) Circular No. 1 (June 1, 2000) Foreign Exchange Management Act (FEMA), 1999:
Attention of the Full Fledged Money Changers (FFMCs) is invited to para 4 of AD (MA Series) Circular No. 11 dated 16th May 2000 wherein it has been indicated that the directions contained therein shall be applicable, mutatis-mutandis to money changers and they shall continue to be governed by the provisions of FLM/ROMP as amended from time to time. In terms of FEMA 1999, the current regulations stand modified as under:
1. Quantum of exchange permitted to be released for the approved purposes.
a) Exchange not exceeding US $ 5000 or its equivalent per person in one calendar year for one more private visits to any country (except Nepal and Bhutan) as against the quantum of exchange now allowed under B'I'Q (para 10 of FLM).
b) Exchange not exceeding US $ 25000 to a person irrespective of period of stay for business travel as against various scales of exchange existing as of now (para 11 of FLM).
2. Documentation It has been decided that henceforth the Reserve Bank will not prescribe the documents which should be verified by the Money Changers while releasing foreign exchange. In this connection attention of Money Chargers is drawn to Sub-section (5) of Section 10 of the Foreign Exchange Management Act, 1999 (42 of 1999) which provides that an authorised person shall before undertaking any transaction in foreign exchange on behalf of any person require that person to make such a declaration and to give such information as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of the Act or any rule, regulation, notification, direction or order issued thereunder. Money changers are advised to keep on record any information/documentation on the basis of which the transaction was undertaken for verification by the Reserve Bank. The said clause further provides that where the said person (applicant) refuses to comply with any such requirement or makes unsatisfactory compliance therewith, the authorised person shall refuse in writing to undertake the transaction and shall if he has reasons to believe that any contravention/evasion is contemplated by the person, report the matter to Reserve Bank.
3. FFMCs are advised that they shall continue to be governed by all other provisions of FLM.
4. Amendments to FLM will be issued separately. In the meantime authorized persons may bring the contents of this Circular to the notice of their constituents.
5. The directions contained in this Circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange management Act, 1999 (42 of 1999). Any contravention or non-observance of these directions is subject to the penalties prescribed under the Act.
[Amount of foreign exchange allowed as per Note 1(a) of the circular was US $ 10000 at the material time.]
15. The currencies confiscated had been obtained from authorized foreign exchange dealers. If the currency dealers had suspected that the series of passengers who had visited Singapore for promoting business of M/s Asia Brothers in 2003 and 2004 had made unauthorized use of the foreign exchange released by them, they would have reported it to RBI. In any case there is no allegation of such report about the impugned currency and the same cannot therefore be treated as prohibited goods for the purpose of the Act. Confiscation had been proposed in the Show Cause Notice under Section 113(d) read with Foreign Exchange Management (Export & Import of Currency) Regulations, 2000 under Foreign Exchange Management Act, 1999 (FEMA). Section 113(d) of the Act authorizes confiscation of prohibited goods attempted to be exported. Confiscation of the currency is not sustainable as no violation of the FEMA (Export & Import of Currency) Regulations, 2000 is involved in the transactions as alleged in the Show Cause Notice. The order of confiscation of the impugned travelers cheques and penalties imposed on the appellants as a consequence thereof are therefore liable to be set aside. We order accordingly and allow the appeals, with consequential relief.
(Operative portion of the Order pronounce in Open Court on 19.12.06)