2006 (9) TMI 161 - HC - Customs

Jewellery found in bags in their original packing - personal effects of a tourist are allowed to be imported temporarily so there is no violation of Baggage Rules even if the new personal effects are in the original packing confiscation on basis of presumption that personal effects have been brought in with a view to dispose them of in India is not justified no smuggling petitioner can t be relegated to statutory remedy when matter is pending before HC for 3 years- petition allowed

Summary

The core legal questions considered by the Court include:

(a) Whether the Directorate of Revenue Intelligence (Respondent No.3) had jurisdiction to issue the show cause notice under Section 124 of the Customs Act, 1962 in the facts and circumstances of the case;

(b) Whether the jewellery brought by the Petitioner constituted "personal effects" under the Baggage Rules, 1998, thereby exempting them from declaration and duty;

(c) Whether the Petitioner had the intention to smuggle the jewellery into India for sale or commercial purposes;

(d) Whether the writ petition was maintainable in view of the statutory remedy available;

(e) The applicability and interpretation of relevant provisions of the Customs Act, the Baggage Rules, 1994 and 1998, and Circular No.72/1998-Cus dated 24.09.1998;

(f) Whether the confiscation order and penalty imposed under the Customs Act were justified.

Issue-wise Detailed Analysis:

1. Jurisdiction of Respondent No.3 to Issue Show Cause Notice

The Petitioner challenged the jurisdiction of the Directorate of Revenue Intelligence to issue the show cause notice under Section 124 of the Customs Act, 1962. The Court noted that the Petitioner raised this as a jurisdictional issue, arguing that since the jewellery was her personal effects and exempt under the Baggage Rules, the Respondent had no authority to initiate proceedings.

The Court observed that after more than three years and multiple hearings, it would be inequitable to compel the Petitioner to pursue the statutory remedy and that the jurisdictional question could be examined under Article 226 of the Constitution. The Court held that if the jewellery was indeed personal effects exempt from declaration, the Respondents had not exercised jurisdiction in accordance with law and had no authority to issue the show cause notice.

2. Interpretation of "Personal Effects" under Baggage Rules and Circular No.72/1998-Cus

The Court examined Rule 11 of the Baggage Rules, 1994 and Rule 7 of the Baggage Rules, 1998, which replaced the earlier Rules. The 1994 Rules defined personal effects as "all clothings and other articles, new or used, which a tourist may personally and reasonably require taking into account all the circumstances of his visit but excluding all merchandise imported for commercial purposes." The 1998 Rules allowed duty-free clearance of used personal effects and travel souvenirs subject to certain conditions, including re-export upon departure.

The Court also analyzed Circular No.72/1998-Cus dated 24.09.1998, which clarified that personal effects include personal jewellery among other items. The circular emphasized that the Board did not intend to verify the newness of every product unless the goods were prima facie new in original sealed packaging that could be disposed of off hand. The Court noted that the circular restricted duty-free import to used personal effects, but did not require verification of newness for each item.

The Court found that the jewellery carried by the Petitioner fell within the definition of personal effects as per the circular and Rules. It was not alleged that the jewellery was in sealed original packaging that could be disposed of off hand, and many items were admittedly used and worn by the Petitioner over the years.

3. Intention of the Petitioner Regarding the Jewellery

The Respondent argued that the Petitioner intended to smuggle jewellery into India for sale, citing the Petitioner's VAT refund claim in England and the air ticket indicating a short stay. However, the Court found these contentions unconvincing. The air ticket was purchased months in advance and could be changed; the Petitioner had plans to travel to Indonesia where her parents resided and produced evidence of previous travel plans consistent with this.

The Court also noted that some jewellery was intended as gifts to her parents in Indonesia and some for personal use. The valuation discrepancy between the Petitioner's statement (Rs.1.27 crores) and customs witnesses (Rs.25 lakhs) further undermined the smuggling allegation. The Court held it was illogical to import jewellery worth Rs.1.27 crores for smuggling and sell it at Rs.25 lakhs.

Therefore, the Court concluded that the Petitioner did not have the intention to smuggle the jewellery into India for commercial purposes.

4. Treatment of Jewellery Packaging and Newness

The Respondent contended that jewellery in original boxes indicated an intention to sell. The Court rejected this argument, observing that jewellery is delicate and usually transported in specially designed boxes to prevent damage. The Court drew an analogy to laptops which are often carried in original bags but are not presumed to be imported for sale.

The Court emphasized the pragmatic interpretation of "new goods in original packaging" and held that the expression "new" excludes "like new" or used goods. Since many items were used and the jewellery was not in sealed packaging, the presumption of commercial import did not arise. Even if such a presumption arose, it was rebuttable and was rebutted on facts here.

5. Maintainability of Writ Petition

The Respondent argued that since the order was appealable, the Petitioner should have pursued statutory remedies rather than filing a writ petition. The Court disagreed, particularly because the Petitioner raised a jurisdictional issue. The Court held that it was appropriate to entertain the writ petition under Article 226 rather than relegating the Petitioner to the statutory remedy after prolonged delay and multiple hearings.

6. Confiscation and Penalty under Customs Act

The Court found that since the jewellery was personal effects exempt under the Baggage Rules, there was no violation of the Customs Act warranting confiscation under Sections 111(d) or 111(l). Consequently, the show cause notice and the order of confiscation and penalty were quashed.

Significant Holdings:

"If the jewellery was her personal effects and exempt under the Baggage Rules, the Respondents did not exercise their jurisdiction in accordance with law and had no jurisdiction to issue the show cause notice."

"The Board circular dated 24.09.1998 itself states that it is not the intention of the Board to verify the newness of every product which a traveller brings with him as his personal effect."

"The expression 'new' connotes that which is not at all used. It does not include 'like new'."

"It could not be said that the jewellery was new goods packed in their original packaging, much less that it could be disposed of off hand."

"The benefit of doubt must go to the Petitioner."

"There is no question of confiscation of the goods under Section 111(d) or Section 111(l) of the Customs Act."

"The Respondents have overstepped their jurisdiction and were over enthusiastic in trying to nail the Petitioner."

The Court ultimately quashed the show cause notice dated 12th December, 2002 and the order dated 14th August, 2003, allowed the writ petition, ordered release of the confiscated goods to the Petitioner, and awarded costs of Rs.5,000/- to the Petitioner.