Custom, Excise & Service Tax Tribunal
Commissioner Of Customs vs L. Rajkmar on 20 December, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNALSOUTH ZONAL BENCH
CHENNAI
Appeal No.C/276/2005
[Arising out of Order-in-Appeal No.02/2005-TRY (CUS) (ADK) dt. 23.2.2005 by the Commissioner of Customs, & Central Excise (Appeals), Trichy]
For approval and signature :
Honble Shri Mathew John, Technical Member
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ? :
3. Whether the Member wishes to see the fair copy of
the order? :
4. Whether Order is to be circulated to the Departmental authorities ? :
Commissioner of Customs,
Trichy Appellant
Versus
L. Rajkmar Respondent
Appearance:
Shri M. Rammohan Rao, DC (AR) For the Appellant
Shri B. Kumar, Sr. Advocate
Shri M.A. Abdul Huk, Advocate For the Respondent
CORAM :
HonbleShri Mathew John, Technical Member
Date of Hearing :20-12-2013 Date of Decision :20-12-2013
FINAL ORDER No.40672/2013
1. In this case, assorted foreign currencies and coins equivalent to the value of Indian Rs.10,03,922/- were seized by customs officers in Trichy on 18-11-03 at 6.30 a.m. from the respondent while riding a two wheeler on the Cauvery bridge in Trichy. Since under the Foreign Exchange Management Act, 1999 (in short, FEMA) and Rules and Regulations made thereunder an individual was not authorized to possess foreign currency of such high value the officers conducted investigations. Since it appeared that the currencies were smuggled into India and also was intended for smuggling out of India, further proceedings were initiated by recording the statement of Sri L.Rajkumar (respondent herein) from whose possession said currencies were seized. In his statement dt. 23-12-03 Shri Rajkumar admitted that he bought these foreign currencies through brokers. He also stated that he knew that seized foreign currency was illicitly imported into India. He also stated that he was taking the currency for giving to traders in Burma Bazaar in Chennai for a commission for smuggling it to Singapore. Based on such statement, customs officials made out a case that the currencies were liable for confiscation under section 111 (d) and under section 113 (d) of the Customs Act, 1962. On adjudication, the seized currency was absolutely confiscated. The vehicle was confiscated under section 115 of the Customs Act and ordered to be released on payment of redemption fine of Rs.1000/-. Further penalty of Rs.40,000/- under section 112 and Rs.10,000/- under section 114 of the Customs Act, 1962 were imposed. Aggrieved by the order, the respondent filed an appeal with Commissioner (Appeals). The Commissioner (Appeals) held that lower authority solely relied upon the statement of the respondent and arrived at the conclusion that foreign currencies were illicitly imported into India and attempted to be illicitly exported out of India and the said statement was neither corroborated by any other statement nor by any other evidence. The Commissioner (Appeals) held that respondent denied that foreign currency was illicitly imported into India but was only collected through local brokers. As regards the attempted illicit export, there is no such attempt as the respondent was intercepted at Trichy Cauvery Bridge having possession of the foreign currencies and not anywhere near a customs barrier. Consequently, he set aside the order of the lower authority and ordered that value of the foreign currency absolutely confiscated should be paid to the respondent in equivalent Indian Rupees. Aggrieved by the order of the Commissioner (Appeals) Revenue has filed this appeal.
2. Arguing for the Revenue, Ld. AR submits that section 3 & 4 of FEMA clearly puts restriction on dealing and holding or transferring any foreign exchange or foreign currencies by a resident in India, without necessary permission from Reserve Bank of India. He submits that in this case, the respondent was not having necessary permission from RBI for dealing in or holding foreign currency. He relies on section 3(c) and Explanation thereunder reading as under :-
"3. Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve bank, no person shall
(a) ....
(b) ....
(c) receive otherwise than through an authorised person, any payment by order or on behalf of any person resident outside India in any manner;
Explanation. For the purpose of this clause, where any person in, or resident in, India receives any payment by order or on behalf of any person resident outside India through any other person (including an authorised person) without a corresponding inward remittance from any place outside India, then, such person shall be deemed to have received such payment otherwise than through an authorised person."
Ld. AR submits that from the confession statement of the respondent, it is admitted that the respondent bought the currencies from persons who brought the currency illicitly into India and he was also attempting to export such currency through traders of Burma Bazaar. Therefore, it is contended that section 111 (d) in the matter of import and 113 (d) in the matter of export were contravened. He further argues that if the said sections are not strictly applicable the currency could not be returned to the respondent. On this point he relies on the decision of Commissioner of Customs (Preventive) Vs Amit Kumar Saha 2004 (174) ELT 158 (Cal.).He particularly relies on para 32 of the order which is reproduced below :-
"32.Admittedly, Shri Saha was found to be only a carrier in the proceedings commenced under the Foreign Exchange Regulation Act, 1973, and neither had any attempt been made by the person or persons who had entrusted the seized currency to Shri Saha nor has the person to whom it was to be delivered come forward to establish that the same had been lawfully acquired and was entitled to return of the same. In such a scenario, the direction to return the seized currency to Shri Saha, who was not lawfully entitled to possess the same, would defeat the very raison detre for Sections 111 and 113 of the Customs Act, 1962, and Section 8(1) of the Foreign Exchange Regulation Act, 1973. Technically speaking, Shri Sahas action of being in possession of foreign currency may not attract the provisions of either Sections 111 or 113 of the Customs Act, but that, in our view, would not render the order of confiscation of the said currency bad and/or entitle him to receive back the same, since he was not lawfully entitled to be in possession thereof. In the peculiar facts of the case we are of the view that certain presumptions are required to be drawn regarding the manner in which such a large sum of foreign currency came to be in Shri Sahas possession and the manner in which the same was to be utilised and in the face of such presumption we are convinced that the learned Tribunal was wrong in setting aside the order of confiscation and directing that the seized currency be returned to Shri Saha."
Ld. AR submits that aforecited decision of Hon. Calcutta High Court's has been maintained by Hon.Supreme Court in 2005 (182) ELT A146 (SC).
3. He further argues that in view of the prohibition under section 111 (d) of the Customs Act, the goods becomes liable to confiscation if there is contravention of prohibition under any other law. He also relies on the following decisions:-
1) S.Faisal Khan Vs JCC (Airport) Chennai -
2010 (259) ELT 541 (Mad.)
2) Sidhharth Shankar Roy Vs CC Mumbai
2013 (291) ELT 244 (Tri.-Mumbai).
4. He relies on para 17.1 of the order in the case of Sidhhart Shankar Roy (supra) which reads as under:-
17.1 The? show-cause notice issued by the Asst. Commissioner of Customs (AIU) proposed to confiscate the currency under the said provision of law and to impose penalties on the appellants u/s 112 of the Customs Act. The adjudicating authority ordered absolute confiscation of the currency u/s 111(d) of the Customs Act and imposed penalties on the appellants u/s 112 of the Act. The proposal in the show-cause notice for confiscation of the seized foreign currency was based on alleged violation of the restriction/prohibition imposed u/s 11 of the Customs Act read with Section 13(2) of the FERA. As we have already noted, Section 13(2) of the FERA imposed certain restrictions on export of foreign exchange other than foreign exchange obtained from an authorized dealer or a money-changer. Accordingly, no person could export such foreign exchange out of India without a general or special permission of the RBI or a written permission of a person authorized in this behalf by the RBI. By virtue of Section 67 of the FERA, such restriction imposed u/s 13 should also be deemed to have been imposed u/s 11 of the Customs Act and all the provisions of the Customs Act should have effect accordingly. It is not in dispute that such restriction on export of goods would amount to a prohibition for the purposes of Section 113 of the Customs Act. Any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under the Customs Act or any other law for the time being in force, shall be liable to confiscation u/s 113(d) of the Customs Act. If it is found that the foreign currency in question was attempted to be exported contrary to the prohibition imposed by or under Section 11 of the Customs Act or Section 13(2) of the FERA, 1973 by any or both of the appellants, the currency would certainly attract Section 113(d) of the Customs Act and accordingly it would be liable to confiscation. That Section 111(d) of the Customs Act was invoked instead of Section 113(d) of the Act in the show- cause notice and in the impugned order will not, in our view, be fatal to the Revenue inasmuch as the cause of action for the Customs Department to confiscate the currency was clearly brought out in the show-cause notice as attempt to export the currency out of India in violation of the prohibition imposed u/s 13(2) of the FERA, which was, by virtue of Section 67 of the FERA, deemed to be prohibition imposed u/s 11 of the Customs Act. It was held by the Apex Court in the case of Roche Products Ltd. v. Collector of Customs [1989 (44) E.L.T. 194 (S.C.)] cited by the ld. JCDR that, when an authority had power to do a certain act and in exercise of such power he did the same but with reference to wrong provision of law, that would be a mere irregularity and would not vitiate such act or action. Again, it was held by the Apex Court in the case of J.K. Steel Ltd. v. UOI [1978 (2) E.L.T. J355 (S.C.)] cited by the ld. JCDR that, if the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. In that case, the demand notice was issued u/r 9(2) of the Central Excise Rules, 1944. Both the Asst. Collector and the Collector of Central Excise sustained the demand of duty under the said provision of law. When the Collectors order was challenged before the Government, the latter treated the demand as one under Rule 10. In further appeal, the assessee questioned this change of rule. It was in that context that the Honble Supreme Court rendered the above ruling. In the case of Collector of Central Excise, Calcutta v. Pradyumna Steel Ltd. [1996 (82) E.L.T. 441 (S.C.)] relied on by the ld. JCDR, the Apex Court held that mention of wrong provision of law when the power exercised was available under a different provision was itself not sufficient to invalidate the exercise of that power. Thus there is a line of decisions in support of the view taken by us with regard to the provision of law invoked in the show-cause notice and the impugned order for confiscation of the foreign currency. Therefore, the non-mention of Section 113(d) of the Customs Act in the show-cause notice or in the impugned order would not per se invalidate the confiscation of the foreign currency ordered on the ground of violation of prohibition imposed u/s 13(2) of the FERA, 1973/Section 11 of the Customs Act, 1962. In any case, neither of the appellants has challenged the confiscation on the ground of wrong provision of law having been invoked, nor has their counsel argued to this effect.
5. He also relies on CC (Air) Chennai Vs Samynathan Murugesan 2009 (247) ELT 21 (Mad.) to argue that prohibited goods could not be allowed to be redeemed on payment of redemption fine. He relies on the decision of Hon. Supreme Court in Om Prakash Bhatia Vs CC Delhi - 2003 (155) ELT 423 (SC) to interpret the meaning of prohibited goods. He further relies on Notification No.1156 (E) dt. 26.12.2000 issued under sub-section (1) of section 38 of the FEMA, 1999 under which the officers of Central Excise not below the rank of Deputy Commissioner are given powers to investigate matters referred to in clause (g) of sub-section (3) of section (6) in the matter of export, import or holding of currency or currency notes. He therefore submits that Central Excise officers had the jurisdiction to investigate and adjudicate the case.
6. Opposing the prayer Ld. Senior Advocate for the respondent submits that confiscation was ordered only under section 111(d) and under section 113 (d) of the Customs Act, 1962. There is no reference to the provisions of the FEMA in final part of the order though there is discussion about the provisions in FEMA in SCN and the reply to the SCN. He also argues that investigating officers had seized the goods under Customs Act and FEMA. The Superintendent of Customs recorded statement under section 108 of the Customs Act and not under FEMA. He further points out that adjudication is to be done as per section 16 of the FEMA read with notification 1155 (E) dt. 26.12.2000. He points out to sub-section (3) of Section 16 sub-section of FEMA which reads as under :-
"(3) No adjudicating authority shall hold an enquiry under sub-section (1) except upon a complaint in writing made by any officer authorized by a general or special order by the Central Government".
7. He raised an issue that officers below the rank of Deputy Commissioner are not authorized to conduct any investigation and section 16 envisages that investigating officer shall file complaint to the adjudicating authority and thereafter only adjudication shall be taken up and no such procedure was followed in this case. In the matter of confiscation under section 111 (d), he submits that though at the time of recording the statement the respondent was made to state that all the goods were illicitly brought into India, it is clear that the respondent bought it from persons whom he could not identify since the brokers brought the persons having currency to him and the respondent had no clear knowledge regarding the origin of the goods and any confession about acts of persons not known to the person making the statement cannot be of evidentiary value. He further submits that the appellant had purchased the foreign currency from persons who were coming from abroad and who used to retain some part of the foreign currency with them. Foreign exchange up to a specified amount could be imported without any declaration as laid down in Foreign Exchange Management (Export and Import of Currency) Regulation 2000. The total amount seized was only about Rs.10 lakhs, equivalent to the currency which could have been carried legitimately a few persons.
8. Regarding attempted export, he submits that the respondent had never travelled abroad and he was not in the habit of smuggling any currency or goods as evident from the statement itself. The statement only states that he was proceeding to Chennai to hand over the currency to traders in Burma Bazaar. This cannot be considered as attempt to export. According to him, the only contravention is that of section 4 and section 6 (3) (g) of FEMA imposing prohibition on holding of foreign currency and currency notes dealing with any foreign exchange. He argues that customs authorities concerned did not have jurisdiction to investigate such matter and even if they had power to investigate, the procedure prescribed for investigation and adjudication were not followed as per law. At any rate, he points out that finding portion is not with reference to any provision under FEMA and it is only with reference to section 111 (d) and section 113 (d) of Customs Act, 1962. He further relies on the same decision as relied upon by Ld. AR for Revenue in the case of Amit Kumar Saha in which Hon. Calcutta High Court pointed out that in the case of town seizure of currency as in the present case, section 111 or section 113 of the Customs Act were not applicable. Therefore, the confiscation was not legally maintainable. He points out that in the said case, Ld. High Court ordered that release of the goods to the respondent in that case was not proper for the reason as recorded in paras 30 & 31 which are reproduced below :-
30.As will be seen from the second case also no one came forward to dispute the ownership of the goods or to raise any dispute regarding the direction for return of the seized goods either to the rightful owners or the person from whose possession they were seized.
31.As will be noticed in the instant case, Shri Saha not only did not claim ownership of the seized currency, but he could not also identify the actual owner thereof, nor was any claim made with regard to the ownership of the same. It will also be noticed from the materials on record that Shri Saha had been found guilty under Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973, and that in the absence of any specific and direct evidence about the improper importation and/or exportation of the seized currency, Shri Saha had only been charged as a carrier of the foreign currency.
He also submits that Indian currency equivalent to the foreign currency seized has already been paid to him and the impugned order did not permit release of foreign currency to the respondent. So the challenge is about payment of Indian currency equivalent and not release of foreign currency to the respondent.
9. In a rejoinder the Ld. AR submits relies on notification
S.O. 1156(E) dated 26-12-2000 is issued under section 38 which as under:-reads as under:-
S.O.1156(E), dated 26-12-2000 In exercise of the powers conferred under sub-section (1) of section 38 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Central Government hereby authorise officers of the Customs and Central Excise, not below the rank of Deputy Commissioner and officers of the Directorate General of Revenue Intelligence not below the rank of Deputy Director, to exercise the powers conferred under the Act for the contravention referred to in clause (g) of sub-section (3) of section 6 and clause (a) of sub-section (1) of section 7 of the said Act in accordance with the provisions of section 38 (1) of the said Act.
10. As per the notification Customs and Central Excise Officers not below the rank of Deputy Commissioner are competent to investigate such cases. He further submits that SCN was issued by the Joint Commissioner who had jurisdiction to investigate as per this notification. So he argues that the case is investigated by competent authority though seizure and the statements were recorded by a lower authority. His submission is that an officer who is empowered to do a job cannot do every action in an investigation himself and he has to necessarily take the help of his subordinates.He further submits that complaint mentioned in section 16 (3) of FEMA is to be read as SCN issued by the Joint Commissioner itself.
11. I have considered submissions on both sides. I note that the goods were seized under the Customs Act and FEMA. The statements were recorded as per the provisions of section 108 ofthe Customs Act and the confiscation was ordered under section 111(d) and 113 (d) of the Customs Act.
12. In the matter of illegal import of the currency the only evidence relied upon by Revenue is the statement of the appellant. This statement does not state that the goods were smuggled into India by the appellant. The statement is about the action of persons who were brought to him by brokers and hence not known to him. Such statements about acts of persons not known to the person making the statement cannot be admitted as evidence. The seizure is not anywhere near a customs barrier. So there is no circumstantial evidence of smuggling of currency into India. The goods are not notified under section 123 of the Customs Act. The explanation in section 3 of FEMA pointed out by the Ld. A. R. for Revenue does not create a presumption that such currency is smuggled into India. It only creates a presumption that the currency is acquired other than through an authorized person. So the initial burden to prove that the goods were smuggled was on Revenue having regard to provisions under regulation 6 in Foreign Exchange Management (Export and Import of Currency) Regulations, 2000. So the finding of the Commissioner (Appeal) that illegal import of the goods in question is not proved cannot be faulted. Such arguments are equally applicable in the matter of proving attempt to export also which aspect also has to be held to be not proved. So the confiscation of the goods under section 111(d) and 113 (d) of the Customs Act is not maintainable in such circumstances as ordered by the Kolkatta High Court in the case of Amit Kumar Saha (Supra).
13. Section 111(d) of the Customs Act, 1962 lays down that goods imported contrary to any prohibition under any other law for the time being in force are liable to confiscation. It is argued by Revenue that under FEMA there is a prohibition on trading in foreign currency and on possession of foreign currency without the required permission from the Reserve Bank of India. The argument is that the customs officers have power to enforce this prohibition and since the prohibition was clearly contravened in this case the seizure of the goods was valid even if the illegal import and attempt at export are held to be not proved.
14. Section 111(d) reads as under:
SECTION 111.?Confiscation of improperly imported goods, etc. The following goods brought from a place outside India shall be liable to confiscation :
---
(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;
---
15. The above section makes it amply clear that the goods are liable to confiscation under Customs Act if the goods are imported or attempted to be imported contrary to any prohibition under Customs Act or under any other law for the time being in force. So the prohibition imposed under Customs Act or any other law for the time being in force referred therein has to be a prohibition on import [prohibition on export in the case of section 113 (d)]. The prohibition in FEMA on trading and possession of foreign currency will not come within the scope of section 111(d) because this section deals with import and prohibitions on import and no other prohibition. The decisions in the case of S. Faisal Khan (Supra) and Sidharth Shankar Roy (supra) deal with seizure of foreign currencies in customs area when it was being illegally imported or exported. In such a situation the customs does have jurisdiction to seize the currency because there is clearly an attempt to import or export foreign exchange illegally and there is a prohibition on such import or export as per Regulation 5 of Foreign Exchange Management (Export and Import of Currency) Regulation 2000, issued in exercise of powers under section 6 (3) (g) of FEMA. But the situation in this case is quite different in as much as seizure was not when the attempt to illegally import or export was taking place. The proof of illegal import or export in this case is not reliable as already explained. Then it is only a case of contravening prohibition on dealing in foreign currency and holding such currencies which can be dealt with only under FEMA and not under Customs Act.
16. Another contentious issue raised is whether the officers of Customs and Central Excise are competent to investigate offences under section 6 (3) (g) of the FEMA and if so such power has been exercised properly in this case. The argument of Revenue is that Notification S. O. 1156(E) dated 26-12-2000 empowers officers not below the rank of Deputy Commissioner for conducting investigation. It is argued that since Show Cause Notice is issued by the Joint Commissioner, above the rank of Deputy Commissioner, the power is properly exercised notwithstanding the fact that the seizure was effected by a Superintendent below the rank of Deputy Commissioner and statements also was recorded by officers below the rank of the Deputy Commissioner. The argument of Revenue that an officer empowered to investigate can take assistance of his subordinates in doing the job and hence there is no infirmity in the proceedings is not a correct argument. An officer empowered to investigate a matter can definitely take assistance of subordinate officers but substantive power of seizure and recording of statement cannot be delegated in the guise of taking help. Such actions cannot have legal validity. So a seizure made by a Superintendent for enforcing prohibitions of FEMA cannot be valid. So is the case with statements recorded. Further there is a procedure laid down in Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. Such procedure was not followed for adjudication proceeding either.
17. I also note that the Indian Currency equivalent of seized and confiscated currency is already released to the respondent and there is no chance a release of foreign currency to a person not authorized to hold foreign currency taking place as a result of this order.
18. In the circumstances, I do not find it proper to interfere with the order of the Commissioner (Appeal). So the appeal filed by Revenue is dismissed.
(Dictated and pronounced in open court) (MATHEW JOHN) TECHNICAL MEMBER gs 15