Customs Cannot Arrogate Powers Under FEMA To Confiscate Currency Or Travel Cards: CESTAT Delhi

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that customs officers cannot arrogate powers under the Foreign Exchange Management Act (FEMA), 1999, to confiscate currency or travel cards under the Customs Act, 1962.

A Bench comprising Judicial Member Ajay Sharma and Technical Member C J Mathew observed that while customs officers have the authority to intercept and seize currency at airports, they cannot adjudicate matters under the Customs Act for violations that fall strictly under FEMA.

The Bench underscored that:

"The confiscation of 'foreign currency' and liability to confiscation of 'foreign currency' embedded in 'travel cards' by recourse to section 113(d) of Customs Act, 1962 and imposition of consequential penalty under section 114 of Customs Act, 1962 is extra-legal and egregious exercise of power,"

The case dates back to August 2018, when Amit Bali, an employee of Salt Experiences, was intercepted at IGI Airport, New Delhi, while departing for London. He was carrying foreign currency and travel cards totaling approximately Rs. 81 lakh, intended to cover travel and business expenses for the Chairman of Hero MotoCorp Ltd, a client of the company.

The Customs Department alleged that the amount exceeded limits under the Foreign Exchange Management (Export and Import of Currency) Regulations and that the travel cards were issued in the names of third parties. It ordered confiscation of the currency and imposed a penalty of Rs. 3.2 crore on the appellant and its executives under Section 114 of the Customs Act.

The Tribunal firstly, clarified that the Customs department had misinterpreted the definition of “goods” under the Customs Act. Section 2(22) of the Act lists both “currency” and “baggage” as goods, but the Tribunal noted that they are treated separately by law. Currency is not baggage, and the rules that apply to a traveller's baggage, such as limits on luggage or personal items, do not automatically apply to currency carried for legitimate business purposes abroad.

The Tribunal also observed that the foreign currency was sourced legitimately from authorised dealers for valid business promotion activities. It highlighted the legislative shift from the old Foreign Exchange Regulation Act (FERA) to FEMA, noting that the Customs department had effectively “chosen to revive a rescinded authority under a repealed law”. The Court stressed that administrative standing orders cannot “arrogate” powers to an agency that the substantive law has not granted.

The Bench further stated:

"......carriage of 'foreign currency' or 'travel card' is not subject to any prohibition imposed by or under Customs Act, 1962; 'read with' is to be invoked when such prohibition in 'any other law for the time being in force' is deemed as 'prohibition imposed by or under Customs Act, 1962' which is not in conformity with the present factual matrix."

It held that any recourse for foreign exchange violations must remain within the framework of FEMA and cannot be funnelled through the punitive provisions of the Customs Act.

Accordingly, the Tribunal allowed the appeals and quashed the orders of confiscation and penalty.

For Appellant: Senior Counsel, Prakash Shah, with Advocate Vishnu Kant

For Respondent: Commissioner (AR), Ranjan Prakash and Joint Commissioner (AR), Nikhil Mohan Goyal