2025 (5) TMI 2025 - HC - Customs

Seizure of gold bangles of a foreign national - Baggage Rules - absolute confiscation - payment of redemption fine - customs duties and penalty - waiver of customs duty - HELD THAT - Ld. Counsel for the Petitioner submits that the Petitioner is willing to undertake to re-export of the goods as the Petitioner is a Canadian national. Accordingly the custom duty is waived in the present case. The Petitioner shall pay the redemption fine and the penalty of Rs. 3, 80, 000/- and Rs. 3, 50, 000/- respectively. Subject to the said payment the gold items shall be released to the Petitioner. In the facts of this case since re-export is being agreed to by the Petitioner no storage charges shall be collected. The petition is disposed of in these terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

- Whether the Order-in-Original dated 31st March 2021, which directed absolute confiscation of the gold bangles seized from the Petitioner, was passed in a procedurally fair manner, particularly regarding the timing of personal hearings and issuance of hearing notices.

- Whether the seized gold bangles, being personal effects of a foreign national, are exempt from customs duty and confiscation under the Baggage Rules, 2016 and relevant Supreme Court precedents.

- The legality and appropriateness of the penalty and redemption fine imposed under the Customs Act, 1962, and whether the Petitioner is entitled to release of the seized goods subject to certain conditions.

- The question of waiver of customs duty in light of the Petitioner's willingness to re-export the goods.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Procedural Fairness in Passing the Order-in-Original

Relevant legal framework includes principles of natural justice and fair hearing, which require that a party be given a reasonable opportunity to present their case before an adverse order is passed. The Customs Act, 1962 and related procedural rules govern the issuance of Show Cause Notices and hearings.

The Court noted that the impugned Order-in-Original was dated 31st March 2021, but the hearing notices were issued for dates after the order (2nd, 5th, and 6th April 2021). This indicated that the order was passed prior to the personal hearing, suggesting a predetermined decision and violation of fair hearing principles.

The Petitioner's counsel emphasized that multiple adjournments were sought during the personal hearing process, and the delay in hearing notice issuance was prejudicial. The Court found such a long gap between passing the order and fixing the hearing unacceptable, especially given the nature of the goods (jewellery) and the Petitioner's status as a foreign national.

The Court's reasoning underscored that procedural fairness is paramount, and the timing of the Order-in-Original undermined this principle. The Court relied on the established legal norm that the hearing must precede the order to ensure just adjudication.

Issue 2: Applicability of Baggage Rules, 2016 and Exemption of Seized Gold Bangles

The Baggage Rules, 2016 provide exemptions for personal effects of travelers, including foreign nationals, subject to prescribed limits and conditions. The Supreme Court decision in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani (2017) was cited, which held that personal effects of foreign residents are exempted under these rules.

The Petitioner claimed the bangles were old, personal jewelry gifted by her mother-in-law, and photographs were submitted to establish ownership and personal use. The Court recognized the relevance of these facts and the precedent that personal effects should not be confiscated if they fall within the exemption scope.

The Court observed that the seized bangles, being personal effects of a foreign citizen, should be exempted from confiscation and customs duty as per the Baggage Rules and the Supreme Court's interpretation. This formed a significant basis for modifying the initial confiscation order.

Issue 3: Imposition of Penalty, Redemption Fine, and Release of Goods

The Customs Act, 1962 provisions under Sections 111, 112, and 125 were relevant here. Section 111 deals with confiscation and penalties for prohibited imports, Section 112 provides for penalties in case of contraventions, and Section 125 allows for redemption of goods on payment of fine and duty.

The Commissioner of Customs (Appeal) partially allowed the Petitioner's appeal, modifying the absolute confiscation to release of the bangles upon payment of a redemption fine of Rs. 3,80,000/- and a reduced penalty of Rs. 3,50,000/-, along with applicable customs duty.

The Court accepted the appeal order's terms and further waived customs duty considering the Petitioner's undertaking to re-export the goods, which is consistent with customs law principles encouraging re-export to avoid undue hardship to foreign nationals.

The Court mandated payment of the redemption fine and penalty as a condition for release, balancing enforcement of customs laws with fairness to the Petitioner.

Issue 4: Waiver of Customs Duty and Re-export Undertaking

The Petitioner's willingness to re-export the gold bangles was a crucial factor. The Court noted that since the Petitioner is a foreign national and agreed to re-export, customs duty could be waived, consistent with the objective of the Baggage Rules and customs regulations to facilitate legitimate travel and personal effects movement.

The Court ordered release of the goods upon payment of the fines and penalties, without storage charges, considering the re-export agreement, thereby ensuring no undue financial burden on the Petitioner.

3. SIGNIFICANT HOLDINGS

- "Such a long gap in passing of the Order-in-Original and fixing of personal hearing shall, that too in a case of seizure of jewellery of a foreign resident, would be completely unacceptable."

- "Since the Petitioner is a foreign citizen and the gold bangles are personal effects, the same would be fully exempted under the Baggage Rules, 2016 as well, in terms of the decision of the Supreme Court in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani."

- The Court upheld the principle that personal hearing must precede any adverse order under customs law to ensure adherence to natural justice.

- The Court recognized that personal effects of foreign nationals, especially old jewellery gifted and worn, fall under exemption and should not be confiscated outright.

- The Court allowed partial modification of the confiscation order, permitting release of goods on payment of redemption fine and penalty, with waiver of customs duty on re-export undertaking.

- The Court emphasized that no storage charges shall be collected given the Petitioner's agreement to re-export, reflecting a balanced approach to enforcement and fairness.