CESTAT Hyderabad Overturns Foreign Currency Confiscation

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 18.11.2025

CESTAT Hyderabad Overturns Foreign Currency Confiscation

In a landmark decision, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Hyderabad, has ruled in favor of the appellant, in a case involving the confiscation of foreign currency. The judgment, delivered by Hon’ble Member (Judicial), highlights critical legal principles and procedural lapses that led to the decision.

Case Background

The case originated from an incident on September 30, 2000, when Appellant, an 80-year-old retired professor from JNTU Hyderabad, was intercepted by CISF officers at the airport while traveling to London. ​ During a security check, foreign currency amounting to USD 36,405 was found in his hand baggage. ​ The currency was inventoried and handed over to Customs Authorities, who subsequently seized it, alleging that it was smuggled. ​

The appellant explained that he had legally earned the foreign currency while working in the USA after his retirement and had brought it to India for personal expenses. ​ He claimed to have kept the remaining currency in a Federal Bank locker and was carrying it back to the USA to address a family medical emergency. ​ He also stated that he was unaware of the Reserve Bank of India (RBI) regulations regarding foreign currency. ​

Despite providing bank statements and other evidence to support his claims, the Adjudicating Authority ordered the absolute confiscation of the foreign currency and imposed penalties. ​ The First Appellate Authority upheld this decision, prompting the appellant to approach the CESTAT. ​

Key Arguments and Legal Provisions ​

The appellant’s counsel argued that the foreign currency was not concealed and was legally acquired during his stay in the USA. ​ He cited Section 6(4) and (5) of the Foreign Exchange Management Act (FEMA), 1999, which allows individuals to hold, own, transfer, or invest in foreign currency acquired while residing outside India. ​ Additionally, the counsel pointed out that foreign currency is not a “notified item” under Section 123 of the Customs Act, placing the burden of proof on the Revenue to establish that the currency was obtained from unauthorized sources. ​

Another critical argument was the lack of jurisdiction of the investigating officer. ​ The appellant’s counsel highlighted that, as per Notification S.O. ​ 1156(E) dated December 26, 2000, only officers of Customs and Central Excise not below the rank of Deputy Commissioner are authorized to investigate such cases under FEMA. ​ In this case, the investigation and statement recording were conducted by a Superintendent of Customs, which violated the legal provisions.

Tribunal’s Observations and Final Order

After hearing both parties and reviewing the evidence, the Tribunal found that the investigation was conducted by an officer who lacked the jurisdiction to do so. ​ It emphasized that while empowered officers can seek assistance from subordinates, substantive powers such as seizure and statement recording cannot be delegated. ​

The Tribunal also noted that the appellant had provided sufficient evidence to prove the legal acquisition of the foreign currency, including bank statements from the USA. It ruled that the Revenue failed to establish that the currency was smuggled or obtained from unauthorized sources. ​ Furthermore, the Tribunal referred to previous judgments, including the CESTAT Kolkata Bench decision in Appellant Vs The Commissioner of Customs (Airport and Administration), Kolkata, which emphasized that absolute confiscation is unwarranted when the offense is not proven and the individual is unaware of the regulations.

In light of these findings, the Tribunal allowed the appeal and granted consequential reliefs to the appellant. ​

Key Takeaways

This judgment underscores the importance of adhering to procedural requirements and respecting the jurisdictional authority of investigating officers. ​ It also highlights the need for the Revenue to provide concrete evidence when alleging smuggling or unauthorized acquisition of foreign currency. ​ The case serves as a reminder that justice prevails when the rule of law is upheld. Appellant’s victory is a testament to the importance of presenting a strong legal defense and the role of the judiciary in ensuring fairness and justice. This decision will undoubtedly serve as a precedent for similar cases in the future, reinforcing the principles of due process and legal compliance.​

Source: CESTAT Hyderabad

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