Outbound Foreign Currency

 Absence of Mens Rea (Guilty Mind) for Smuggling

• • The primary contention is that the adjudicating authority erred in concluding that the appellant possessed the requisite mens rea for "smuggling" foreign currency.

  • While the appellant admitted carrying currency without declaration and being aware it was an offence, this is argued to be a potential procedural violation under the Foreign Exchange Management Act, 1999 (FEMA), and the Customs Act, 1962, rather than automatic proof of smuggling intent.

  • Smuggling typically entails a deliberate intent to illicitly export or import goods contrary to a prohibition or restriction, often with an element of deceit or clandestine action.

  • The alleged "concealment" of a relatively small sum within personal luggage does not, by itself, elevate the act to one of sinister intent synonymous with smuggling.

  • Detection during routine security screening, rather than through sophisticated intelligence, suggests a less severe transgression.

  • Inconsistencies in post-seizure explanations can be attributed to confusion, panic, or ill-considered advice, and do not retrospectively establish mens rea. The burden of proving mens rea lies with the prosecution.

• Reliability of Contradictory Statements

  • The adjudicating authority's reliance on starkly contradictory and unreliable statements from a second individual to draw adverse inferences against the primary appellant is contested.

  • If a witness's testimony is tainted by falsehood and inconsistency for assessing their own role, it remains equally tainted when used as a basis to determine the true nature, ownership, or intended use of the currency found in the appellant's possession.

  • Statements recorded under Section 108 of the Customs Act, 1962, are admissible but their evidentiary value is significantly diminished when fraught with contradictions or retractions. Such statements require caution and strong independent corroboration.

  • Consideration should be given to whether statements meet the voluntariness standards of Section 24 of the Indian Evidence Act, 1872.

• Rejection of Explanations and Documentary Evidence for Currency Source

  • The rejection of the appellant's explanation and invoices supporting the legitimate acquisition of foreign currency is challenged as being based on presumption rather than conclusive proof.

  • The argument is that a businessman may acquire currency for future transactions, and the department failed to provide positive evidence that the specific funds were expended during intervening trips.

  • The rejection of explanations for smaller sums, especially when based on the unreliable statements of another individual, without further independent evidence, is also questioned. The adjudicating authority's approach is argued to demand an impractical standard of proof for every unit of currency.

• Classification of Foreign Currency as "Prohibited Goods" and Denial of Redemption

  • A significant error is argued to be the classification of seized foreign currency as "prohibited goods," which led to its absolute confiscation and denial of the option of redemption under Section 125 of the Customs Act, 1962.

  • Foreign currency, under customs and allied laws, is typically "restricted" (regulated and subject to conditions primarily under FEMA) rather than inherently "prohibited".

  • Mere non-declaration or exceeding permissible limits, while a contravention, does not automatically render the currency "prohibited goods" for the purpose of denying redemption.

  • Prohibitions under other laws (like FEMA) must be specifically notified under the Customs Act to be enforceable by customs authorities, and no such notification was reportedly presented for the seized currency.

  • Section 125(1) of the Customs Act, 1962, mandates giving an option to pay a fine in lieu of confiscation for "any other goods" (i.e., not absolutely prohibited), which is argued to include foreign currency in this context.

  • Judicial precedents, including a Delhi High Court judgment, support the allowance of redemption for non-declared foreign currency.

  • The principle of "venial breach" suggests that detection within the airport, before boarding, indicates the act of export was not complete and there was opportunity for declaration or correction, making absolute confiscation arguably unjustified.

• Confiscation of Ordinary Personal Items

  • The absolute confiscation of an ordinary backpack under Section 119 of the Customs Act, 1962, is considered harsh and unwarranted, particularly if the main offence concerning the currency is viewed with leniency or if redemption is allowed.

  • Even if a technical offence of concealment is made out, the confiscation of a common utility item is argued to be disproportionate, and an option for redemption upon a nominal fine should have been considered.

• Excessive and Disproportionate Penalties

  • The substantial penalties imposed under Section 114(i) of the Customs Act, 1962, are argued to be unduly severe and disproportionate to the actual nature and gravity of the offence.

  • While Section 114(i) allows penalties up to three times the value, the discretion in levying penalty must be exercised judiciously.

  • Mitigating factors, such as the appellant being a businessman without a history of smuggling, detection during routine checks (not targeted intelligence), alleged absence of involvement in an organized syndicate, cooperation, and the potential for currency redemption, should have led to a significant reduction in penalty.

  • The principle of proportionality in imposing penalties is paramount, and international standards suggest that confiscation of all undeclared money at customs may violate this principle.

• Ignorance or Misinterpretation of Complex Regulations as a Mitigating Factor

  • While ignorance of the law is generally not an excuse, the complexities of FEMA regulations regarding permissible limits, documentation, and declaration requirements can be intricate.

  • The appellant's admission of awareness might pertain to a general principle, not a full and precise understanding of all specific monetary limits or the grave consequences of non-compliance.

  • If the contravention was partly attributable to a lack of precise knowledge of complex rules, this could serve as a significant mitigating factor when determining the quantum of penalty.

• Reliance on Uncorroborated Aspects of Statements

  • The adjudicating authority's reliance on the appellant's shifting explanations is contested, arguing that the initial statement is likely the most contemporaneous and accurate.

  • Subsequent variations, particularly if influenced by a fabricated document or ill-advised counsel, should be viewed cautiously.

  • The department should not selectively rely on admissions that suit its narrative while ignoring exculpatory aspects or surrounding circumstances that might explain inconsistencies.

• Procedural Issues and Violation of Principles of Natural Justice

  • Allegations include the incorrect application of the burden of proof, with the department reportedly failing to establish a prima facie case that the foreign currency was "prohibited goods".

  • Concerns were raised regarding search and seizure irregularities, including the involvement of personnel who may lack statutory authority for customs searches and seizures.

  • The investigation was allegedly conducted in a biased manner, and the personal hearing was perceived as a mere formality without due consideration of submissions, thus potentially denying a fair hearing and violating principles of natural justice.

• Constitutional and Legal Violations

  • The absolute confiscation without adequate justification is argued to violate the fundamental right to property (Article 300A).

  • The adjudicating authority is also alleged to have exceeded statutory powers by imposing absolute confiscation without considering relevant factors mandated under Section 125.