SHRI S. RADHAKRISHNAN Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) AT 0115 hours on 9.9.2004, S/Shri T. Sakthivel, A. Suresh Babu, and S. Radhakrishnan, passengers bound for Singapore by flight No. IC -555 were intercepted at the arrival hall of Chennai airport by the Customs officers pursuant to intelligence gathered. Baggages of the passengers were examined after the passengers had stated that each of them had carried only 200 Singapore dollars. The examination of the check -in baggage revealed that each of them was also carrying US 35,000 in the form of travellers cheques. In the statements recorded from them immediately thereafter, they stated that they were on a pleasure trip to Singapore. Shri T. Sakthivel deposed that he was an employee of M/s. Euro Asia Apparels, Tirupur manufacturing and supplying readymade garments to M/s. M/s Asia Brothers, Chennai. On instructions from an employee of M/s Asia Brothers he had visited their office at Guindy, where he had signed some forms and received travellers cheques for US 35,000 from Shri T. Suresh Babu, Accounts Executive, M/s. Asia Brothers with instructions to hand over the same to one Shri R. Ramnath, Managing Director of M/s. Asia Brothers at Singapore. Singapore Dollar 200 was also given to him to meet expenses. Similar statement was given by Shri A. Suresh Babu, another employee of M/s. Euro Asia Apparels. As per his statement, he and his colleague Shri T. Sakthivel had been contacted by Shri T. Suresh Babu, an employee of M/s. Asia Brothers, whom they had met at his office at Guindy. He had signed certain forms given by Shri T. Suresh Babu and he was given US 35,000 to be handed over to Shri Ramnath at Singapore. He was also given Singapore 200 for expenses. Shri S. Radhakrishnan, an employee of M/s. Asia Brothers stated that the Manager of M/s. Asia Brothers. Shri T. Suresh Babu had made him sign certain papers and he was given travellers cheques for US 35,000 to be delivered to Shri R. Ramnath at Singapore, purported to be advance for import of leather by M/s. Vendan Exim Trades, Tambaram.

(2.) IN the course of further investigations Shri T. Suresh Babu was interrogated on 09.09.04, when he deposed that he had arranged the foreign exchange to the tune of US 35,000 for each of the three passengers US 25,000 under LERMS (business purpose) and US 10,000 under Basic Travel Quota (BTQ) as per R.B.I norms. He stated that travellers cheques had been purchased from authorised dealers. The amount was meant for purchase of machinery for the factory M/s. Asia Brothers had proposed to set up at Tirupur and to meet promotional/marketing expenses. The travellers cheques were purchased for US 37,500 for which he had issued company cheques and the balance amount for the foreign currency had been signed by Shri Vetrivendan, a Director of the Company, M/s. Asia Brothers. The travellers cheques had been arranged for procuring machinery as per the instructions of Shri Ramnath. He had instructed the passengers to meet Shri Ramanath on their reaching at Singapore to assist him in marketing (their products) and purchasing machinery. In his further statement dated 10.9.2004 Shri T. Suresh Babu gave the details of purchase of foreign exchange for each passenger from various authorised foreign exchange dealers. Thus US 30,000 was procured by M/s. Asia Brothers under BTQ, and US 75000 under LERMS by M/s. Vendan Exim Trades. He also stated that S/Shri S. Radhakrishnan, T. Sakthivel and A. Suresh Babu were sent on a tour to study market and to participate in Expo Fair in Singapore and Thailand to procure machinery. Their stay was to extend to about 50 to 60 days. He also stated that another of his colleague Ms. Padma Priya had been sent to Singapore earlier and had been given US 15,000. The amount was participation fee at an Expo. Shri Vetrivendan, Director of M/s. Asia Brothers deposed in his statement dated 10.09.04 that Shri Ramnath had proposed to send their employees to Singapore to promote their business, participate in exhibitions and to procure machinery at competitive cost. Shri Ramnath had allotted Rs. 45 lakhs for the purpose. He had issued cheques for Rs. 17.7 lakhs as proprietor M/s. Vendan Exim Trades and for Rs. 27.3 lakhs as Director, M/s. Asia Brothers. In his statement dated 21.09.04, Shri Vetrivendan stated that he had also traveled earlier to Singapore taking US 35,000 and that Rs. 17.7 lakhs for which he had issued cheques had been transferred from M/s. Asia Brothers earlier. In her statement dated 29.9.2004, Shri Komaleeswari deposed that she had visited Singapore with travellers cheques for US 35,000/ - which she had handed over to Shri Ramnath. She had travelled to Singapore on 23.8.2004. She had worked at an exhibition and attended another exhibition in August in Singapore before returning to Chennai. Shri R. Jayavelu, an employee of M/s. Asia Brothers, in his statement dated 29.9.04 deposed that in August 2003 he had collected US 25,000 in travellers cheques and had handed over the money to Shri Ramnath in Singapore. He had visited Singapore to explain functions of printing machinery in an exhibition for nearly 54 days and returned to Chennai. Shri A. Sankar, another employee of M/s. Asia Brothers in his statement dated 29.9.04 deposed that in August 2004, he had visited Singapore when he had worked at an exhibition before returning to Chennai and had handed over US 35,000 to Shri Ramnath. On 06.10.04, a similar statement was given by Shri M. Senthil Kumar, contract employee of M/s. Asia Brothers, when he stated that he had collected travellers cheques worth US 25,000 from Shri T. Suresh Babu of M/s. Asia Brothers and had attended exhibition at Singapore and met persons from various countries for promoting sales (of their product). Statements obtained from two others indicated that they had traveled to Sri Lanka with a total of US 30,000 to explore the possibility of a joint venture garment unit of M/s. Asia Brothers. They had spent US 8,000 and brought back the balance.

(3.) A Show Cause Notice was issued to S/Shri S. Radhakrishnan, T. Sakthivel, A. Suresh Babu, Ramnath, Vetrivendan and T. Suresh Babu proposing to confiscate the travellers cheques worth US 1,05,000 under Section 113(d), (e) and (i) of the Customs Act, 62 (the Act) read with Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 under Foreign Exchange Management Act, 1999 and to impose penalty on each of them under Section 114 (i) of the Customs Act, 1962. In the reply furnished on behalf of S/Shri T. Sakthivel, A. Suresh Babu and S. Radhakrishnan, their Counsel stated that his clients had declared the currency in their baggage but the investigating officers had suppressed the fact. The statements of the three passengers had been obtained under duress. He also stated that US 25,000 and US 10,000 each were procured by Shri T. Suresh Babu (another client of his) respectively under LERMS and BTQ. These were for sales promotion and purchase of machinery for the factory proposed to be set up at Tirupur. The payments had been made by cheques through various money changers and the travellers cheques could be encashed only by these passengers. The passenges were on a trip to study the market and to participate in Expo Fairs in Singapore and Thailand and to procure machinery. In the light of the statement of Shri T. Suresh Babu, the statement recorded from the passengers that they were going to Singapore for pleasure trip was wrong. In procuring the travellers cheques provisions of Section 7(2)(ii) of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 were complied with, as the various money changers had stated before the Customs Authorities that they had released foreign exchange in travellers cheques to the passengers. So the regulations under FEMA were fully complied with. He also stated that the customs authorities had no jurisdiction in the matter. The passengers could only encash travellers cheques and even if they were to hand over the cash to Shri Ramnath there was nothing wrong in such an arrangement as he would have looked after them when they stayed in Singapore. The fact that Shri A. Suresh Babu had used the Company fund had shown that they visited Singapore to acquire expertise and to improve business of the company. The passengers had taken foreign exchange with them as permitted under law. The Customs authorities were not empowered to go into the motivation or to deal with the business decisions to make it a ground for confiscation. lie stated that Regulations 5 and 7 of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 was not applicable. The passengers had obtained the foreign exchange lawfully under Regulation 7(2)(ii). Customs authority could not enquire about the utilisation or otherwise of the money so drawn. Therefore, Section 113(d) had no application as the foreign currencies were not sought to be exported contrary to any provision; Section 113(e) spoke of concealment in a baggage and there was no such concealment of travellers cheques. Section 113(i) had no application as currency had been declared. Section 114(i) had no application as it spoke of penalty in the case of goods in respect of which there was any prohibition and the impugned currency attracted no prohibition. He stated that the currency had to be returned. He submitted that in any case currency was required to be returned on payment of redemption fine. On behalf of Shri Vetrivendan, it was submitted that he only had drawn a cheque through which the travellers cheques were purchased and he was not involved in any other manner. Show Cause Notice had not disclosed the basis for penalizing him. On behalf of Shri Ramanath, it was submitted that M/s. Asia Brothers had been engaged in the export of readymade garments and had sent its employees to participate in an exhibition and to study markets abroad. The travellers cheques and the money used to buy them were legally procured and there was no violation committed by Shri Ramnath. Travellers cheques would be encashed by the passengers and Shri Ramnath would have looked after them for 50 to 60 days to study the market in Singapore. If the money involved were to be spent on that count there was nothing contrary to the Regulations. It was submitted that he was not involved in any offence attracting penalty.