2025 (5) TMI 2079 - HC - Customs

Seeking release and re-export of gold jewellery - Petitioner wearing the detained goods - personal effects under the Baggage Rules 2016 - time prescribed under Section 110 - Whether gold jewellery worn by a passenger would fall within the ambit of personal effects under the Rules - HELD THAT - The Supreme Court in Directorate of Revenue Intelligence and Ors. v. Pushpa Lekhumal Tolani 2017 (8) TMI 684 - SUPREME COURT while considering the relevant provisions of the Customs Act 1962 ( the Act ) read with the Baggage Rules 1998 that were in force during the relevant period held that it is not permissible to completely exclude jewellery from the ambit of personal effects . At this stage it would be relevant to consider the decision of the Madras High Court in Thanushika vs. The Principal Commissioner of Customs (Chennai) 2025 (2) TMI 321 - MADRAS HIGH COURT wherein the High Court was dealing with a case where the gold jewellery of a Sri Lankan tourist was seized by the Customs Department. The High Court after analysing various provisions of the Act and the Rules held that the said Rules would only apply to baggage and would not extend to any article carried on the person as mentioned in Rule 3 of the Rule. Thus it is now settled that the used jewellery worn by the passenger would fall within the ambit of personal effects in terms of the Rules which would be exempt from detention by the Customs Department. The detained goods being personal effects of the Petitioner the detention of the same itself would be contrary to law Accordingly the detained goods would be liable to be released on this ground itself. However there is another issue which is required to be considered i.e. non issuance of the show cause notice within the prescribed period under the Act. Once the goods are detained it is mandatory to issue a show cause notice and afford a personal hearing to the Petitioner.. The time prescribed under Section 110 of Act is a period of six months. However subject to complying with the requirements therein a further extension for a period of six months can be taken by the Customs Department for issuing the show cause notice. In this case the one year period itself has elapsed yet no show cause notice has been issued. Accordingly the detention is impermissible. The present writ petition is disposed of in above terms.

Summary

The core legal questions considered in this judgment include:

1. Whether gold jewellery worn by a passenger qualifies as "personal effects" under the Baggage Rules, 2016, and thus is exempt from customs duty and detention.

2. The applicability and interpretation of the Customs Act, 1962 and the Baggage Rules, 2016, particularly regarding the classification of jewellery as personal effects or otherwise.

3. Whether the Customs Department complied with procedural requirements under the Customs Act, 1962, specifically the issuance of a show cause notice within the prescribed time frame after detention of goods.

4. The legality of the detention and seizure of the gold jewellery without issuance of a show cause notice and the consequent entitlement to release of the detained goods.

Issue 1: Classification of Gold Jewellery as Personal Effects under the Baggage Rules, 2016

The legal framework revolves around the Customs Act, 1962, and the Baggage Rules, 2016, which regulate the import and clearance of goods brought by passengers arriving in India. Rule 2(vi) defines "personal effects" as items required for daily necessities but explicitly excludes jewellery. Rule 3 permits duty-free clearance of used personal effects and souvenirs carried by passengers in bona fide baggage, subject to value limits. Rule 5 allows duty-free clearance of jewellery brought by passengers residing abroad for more than one year, subject to weight and value caps.

The Court examined precedents, notably the Supreme Court's ruling in the Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which clarified that jewellery cannot be categorically excluded from the ambit of personal effects. The Supreme Court emphasized that bona fide jewellery worn by a passenger, whether new or used, intended for personal use or to be taken out of India, is not liable to customs duty. The Court noted that the newness of jewellery is irrelevant and that the law protects personal jewellery from being treated as dutiable goods when brought in bona fide baggage.

Further, the Division Bench of this Court in Saba Simran v. Union of India distinguished between "jewellery" and "personal jewellery," holding that used personal jewellery worn by passengers is not subject to the monetary restrictions applicable to newly acquired jewellery under the Baggage Rules. The Court also referred to the Madras High Court's decision in Thanushika v. The Principal Commissioner of Customs, which held that the Rules apply to baggage and not to articles "carried on the person," reinforcing the protection of personal jewellery worn by passengers from detention.

The Court applied these precedents and statutory provisions to the facts, observing that the detained gold chain and kada were worn by the petitioner and were used personal items, supported by photographic evidence. The Court concluded that the detained goods fall within the definition of personal effects exempt from customs duty and detention under the Rules.

Competing arguments from the Customs Department, which treated the jewellery as dutiable goods and imposed penalties, were rejected on the basis that the jewellery was bona fide personal effects, not subject to the monetary caps or seizure provisions applicable to newly acquired or commercial goods.

The Court concluded that the detention of the jewellery was contrary to law as it failed to recognize the jewellery's status as personal effects.

Issue 2: Procedural Compliance Regarding Show Cause Notice under the Customs Act, 1962

Section 110 of the Customs Act mandates issuance of a show cause notice within six months of detention of goods, with a possible extension of six months upon compliance with prescribed conditions. This procedural safeguard ensures that detention is not arbitrary and that the affected party is afforded an opportunity for a hearing.

In this case, the Customs Department detained the gold jewellery on 26th December 2023 but failed to issue any show cause notice within the statutory period of one year. The Court held that such failure renders the detention impermissible and illegal.

The Court emphasized the mandatory nature of the statutory timelines and procedural safeguards, noting that the absence of a show cause notice and personal hearing violates principles of natural justice and statutory requirements.

The Court rejected any justification for non-compliance with the procedural mandate and held that the detained goods must be released on this ground as well.

Significant Holdings and Final Determinations

The Court held as follows:

"The detained goods clearly appear to be used personal gold items of the Petitioner."

"The used jewellery worn by the passenger would fall within the ambit of personal effects in terms of the Rules, which would be exempt from detention by the Customs Department."

"The detention of the same itself would be contrary to law."

"Once the goods are detained, it is mandatory to issue a show cause notice and afford a personal hearing to the Petitioner. The time prescribed under Section 110 of Act, is a period of six months. However, subject to complying with the requirements therein, a further extension for a period of six months can be taken by the Customs Department for issuing the show cause notice. In this case, the one year period itself has elapsed, yet no show cause notice has been issued. Accordingly, the detention is impermissible."

Accordingly, the impugned orders were set aside, and the detained gold jewellery was ordered to be released to the petitioner within four weeks, subject to verification. The petitioner was permitted to collect the goods through an authorized representative upon proper communication. The Court mandated payment of storage or warehousing charges but rejected any customs duty, redemption fine, or penalty imposed under the impugned orders.

The core principles established include:

- Jewellery worn by a passenger and bona fide used personal jewellery fall within the ambit of personal effects under the Baggage Rules and are exempt from customs duty and detention.

- The newness or value of jewellery is not determinative; bona fide personal use is the key criterion.

- Customs authorities must distinguish between personal jewellery and commercial or newly acquired jewellery when exercising detention powers.

- Procedural safeguards under the Customs Act, including timely issuance of show cause notices and personal hearings, are mandatory and failure to comply invalidates detention.

- Detention of personal effects without due process and statutory compliance is unlawful.