The German national was arrested in the spring after using a change machine at a bank in the western city of Bregenz to convert huge quantities of damaged coins into banknotes.
Police discovered 117kg (258lb) of scrap one- and two-euro coins, with a total vale of 15,000 euros ($17,000), in his car.
Having been charged with fraud and put in detention, the man explained that he regularly went to China to buy damaged coins retrieved from cars and washing machines sent there to be destroyed.
However, an appeal court in Innsbruck on Tuesday upheld a lower court's decision to acquit him, rejecting an appeal from prosecutors.
“My client was using a machine which is designed precisely to determine whether a coin is legal tender or not. So there can't be any fraud,” the man's lawyer Christoph Eberle, told AFP.
The man made frequent trips to China with up to 30,000 euros in cash in order to stock up on damaged euros but Eberle said that his client had always made the relevant declarations to customs authorities.
There is a thriving trade in damaged coins found in cars and washing machines sent to China to be scrapped, with the coins being resold in bulk for a fraction of their face value.
In 2012, a similar case came before Germany's Federal Court of Justice which found it was not illegal to exchange large quantities of such coins at the country's central bank, even if in that case they had been sold exported to be melted down for scrap.