Jyoti Balasundaram, Member (J)
1. The contravention or otherwise of Section 18(1) of the Foreign Exchange Regulation Act, 1973 and consequent eligibility to confiscation under Section 113(i) of the Customs Act, 1962 of foreign currency sought to be despatched on 28-3-1987 in the form of registered letters through Air Post Mail by the appellants who are authorised dealers in foreign exchange, to their overseas offices arises for determination in the above appeal.
2. Initially the case of the Department as elaborated in the show cause notice was that the appellants, as per the conditions of the Licence issued to them by the Reserve Bank of India in terms of Section 6 of the FERA, 1973, are entitled to transfer of funds abroad against RBI permits by way of Demand Draft, Mail Transfer and Telegraphic Transfers on Thomas Cook's offices abroad. Even though the general permission had been granted by the RBI under Notification 36/76 RBI dated 10-5-1976 to authorised dealers to send out of India foreign currency in the form of currency notes, etc. which are acquired by them in the normal course of their business, this general permission is further subject to the terms of their authorisation and as the export in the present case was not covered by either the notification or the RBI licence, the appellants were charged with contravention of Section 13(2) of FERA, 1973 and the currency was alleged to be liable to confiscation under Section 113(i) of the Customs Act. This charge has been dropped by the adjudicating authority upon the clarification issued by the Reserve Bank of India in its letter dated 1-10-1987 that the general permission granted under Notification 36/76 covers the appellants even though the Licence issued to them does not specifically refer to export of foreign currency. The second charge of the Department is that Section 18(1) of the FERA prescribes that the Central Government by notification may prohibit taking or sending out of India any goods or class of goods unless the exporter furnishes to the prescribed authority, a declaration in the prescribed form indicating the full export value of the goods and a firm declaration that the full value of the export goods has been or will be paid in prescribed manner within the prescribed period. The Central Government by virtue of Notification No. F-1/67/EC/73-2, dated 1-1-1974 prohibited the export of all goods by post unless the exporter gives a declaration in the prescribed form about the full export value of the goods and as the appellants had not furnished the requisite declaration the Department alleged violation of Section 18(1) and that the currency was liable to confiscation under Section 113(i) of the Customs Act, 1962 in view of the provisions of Section 67 FERA, 1973. This charge has been upheld by the Collector of Customs, holding inter alia that the law requires a declaration with regard to export of currency by post parcels and in the absence of such declaration, the goods are prohibited goods liable to confiscation and that Section 13(2) under which the appellants are authorised to send out foreign currency and Section 18(1) are not mutually exclusive and they have to be read in conjunction. He also held that the provisions of Section 113(i) of the Customs Act are attracted in the cases of non-declaration of post-parcels, rejecting the contention of the appellants that penalty can be imposed only under Section 117 for violation of Section
82. Further a penalty of Rs. 1 lakh was also imposed upon the appellants under Section 114(i). Hence this appeal.
3. We have heard Shri A.N. Haksar, and Shri R.S. Gagrat, Senior Advocates and Shri V.C. Bhartiya, learned DR.
4. The main thrust of Shri Haksar's argument is that Section 13 of the FERA, 1973 applies to currency while Section 18 applies to goods other than currency and he draws our attention to the definition of currency occurring in the FERA [Section 2(f)] and, therefore, once the appellants have been exonerated of the charge of violation of Section 13, the further charge of violation of Section 18 does not arise. He further contends that the declaration as required to be furnished in terms of notification dated 1-1-1974 was not required to be furnished by the appellants since no sale transaction was involved and since export of foreign currency was permissible by the authorised dealers in foreign exchange. He submits that the foreign currency in question was not contraband when found inside the packets for export and, therefore, were not dutiable or prohibited goods liable to confiscation under Section 113(i). Finally he submits that even assuming without admitting a declaration was required, there was a label/declaration "accompanying the goods" inside the packets and, therefore, at best there was only a technical violation, not warranting such a steep redemption fine and penalty.
5. Rebutting the contention of the learned DR, Shri Bhartiya submits that Sections 13 and 18 of the FERA, 1973 are to be read together and not independently of each other. He refers to notification of 1-1-1974 prohibiting the export by post of all goods to any place outside India (other than Nepal and Bhutan) without a declaration by the exporter containing details of full export value of the goods and submits that the proviso thereto, exempting goods the export of which in the opinion of the RBI does not involve in any transaction in foreign exchange and which the Reserve Bank has, by a general or special order, permitted to be exported without furnishing a declaration, from the coverage of the notification, itself militates against the stand of the appellants that no declaration is called for in the case of export of foreign currency by authorised dealers in foreign exchange. He submits that Section 113(i) of the Customs Act has been rightly invoked as the declaration under Section 82 is also an entry for the purpose of Section 113(i). He draws our attention to the finding of the adjudicating authority regarding the fact that as per the panchnama no declarations were found inside the packets. He, therefore, contends that the goods have been rightly confiscated and that the fine and penalty is not disproportionate to the value of currency which amounts to over Rs. 24 lakhs when converted into Indian currency.
6. We have considered the submissions of both the sides. The relevant sections of Foreign Exchange Regulation Act are reproduced below :
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6.1. At the outset, we wish to emphasise that in determining whether for contravention of the provisions of Section 18(1), we are proceeding on the basis that there were no declarations even inside the registered covers as this point has not been agitated before us and appears to have been given up in the arguments before us, although mentioned 'en passant'. Section 18(1) prohibits export of goods unless a declaration has been furnished in respect thereof and "goods" includes "currency" in terms of Section 2(22) of the Customs Act, 1962 and though the expression 'goods' has not been defined in the FERA, definition of 'currency' in Section 2(f) of the FERA which is an inclusive definition does not exclude goods as such. Therefore, the cantention that the "currency" is not "goods" within the meaning of Section 18(1) can't be accepted. Both currency and goods are dealt with under separate sections but this will not lead to the conclusion that "currency" is not "goods". The prohibition regarding currency is contained in Section 18(1) and is imposed by a notification issued under this section. According to the Notification No. F1/67/EC/73-2, dated 1-1-1974 export by post of all the goods out of India is prohibited unless the exporter furnishes a declaration true in all particulars. The notification reads as follows:
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6.2. The contention of the appellants that this notification is applicable only to export of goods where remittances are going to be received back in India is not well founded for the reason that there is nothing in the wording of the notification to so limit its construction. Further, the FERA is primarily concerned with the conservation of foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country and was in fact enacted for this purpose. All the Sections of the Act including Section 18(1)(a) have to be read with its preamble in mind as held by the Hon'ble Calcutta High Court in the case of Collector of Customs, Calcutta v. Lexus Exports P. Ltd., reported in 1994 (69) E.L.T. 228. Therefore, a declaration is required in respect of any export of currency by post parcels and in the absence of such a declaration the goods are prohibited goods liable to confiscation under Section 113(i) of the Customs Act read with Section 18(1) of the FERA. Although the main object of Section 18 appears to be to ensure declaration and realisation of full export value and the notification which has been issued with this object in mind prescribes the method and manner by which the authorities are enabled to discharge their responsibility, it cannot be so discharged unless a declaration or requisite certificate or order is filed before them or accompanies the parcel. Admittedly the appellant has not complied with any of the conditions prescribed therein, thereby defeating the very purpose of Section 13 read with Section 18. There is nothing in Sections 13 and 18 to indicate that they are mutually exclusive. Our view in this regard is fortified by the requirement in proviso (c) to Notification No. F1/67/EC/73-2 dated 1-1-1974 of general or special order of waiver of declarations by the Reserve Bank of India.
7. In the light of the above discussion we uphold the-finding of the adjudicating authority of contravention of Section 18(1) FERA and Section 82 of the Customs Act, 1962. The declaration under Section 82 begins an entry for the purpose of Section 113(i) and 'currency' being prohibited goods within the meaning of Section 2(f) of the Customs Act, we hold that the appellants are guilty of contravention of Section 113(i) read with Section 18(1) and Notification No. Fl /67/EC/73-2, dated 1-1-1974 and consequent liability of the currency to confiscation and the appellants liable to penalty. However, having regard to the fact that the appellants are authorised dealers in foreign exchange and various returns are prescribed by Reserve Bank of India to keep a check of the foreign currency by them, we reduce the quantum of redemption fine to Rs. 1 lakh (Rupees One Lakh) and reduce the penalty to Rs. 25,000/- (Rupees Twenty Five thousand only).
7.01 Subject to the above modification the impugned order is confirmed and the appeal rejected.