2025 (5) TMI 2080 - HC - Customs

Seeking release of gold jewellery and the iPhone 16 Pro - gold jewellery worn or carried by the passenger - qualify as used personal effects - Baggage Rules 2016 - non-issuance of show cause notice - time prescribed under Section 110 - 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 (hereinafter 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 . 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. Moreover the one detained iPhone 6 pro is also permissible for daily necessity and use of the Petitioner. Further in the present case the fact that no show cause notice has been issued upon the Petitioner is also not in dispute. This Court while deciding upon the issue of non-issuance of show cause notice in various cases has held that once the goods are detained it is mandatory to issue a show cause notice and afford a hearing to the Petitioner. The time prescribed under Section 110 of The Customs Act 1962 is a period of six months and subject to complying with the formalities a further extension for a period of six months can be taken by the Department for issuing the show cause notice. In this case since no show cause notice has been issued till date the detention is therefore impermissible. Hence the detention of the Petitioner s detained articles is set aside and the same shall be released to the Petitioner within four weeks subject to verification and payment of full storage charges. The present writ petition is disposed of in above terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the gold jewellery (yellow metal kada and chain) and the iPhone 16 Pro, detained by Customs, qualify as "used personal effects" exempt from customs duty under the Baggage Rules, 2016.

- Whether the gold jewellery worn or carried by the passenger can be excluded from the ambit of "personal effects" as per the Customs Act, 1962 and the Baggage Rules.

- The validity and legality of the detention and confiscation order issued by the Customs Department, including the imposition of penalty and confiscation of goods.

- Whether the Customs Department was obliged to issue a show cause notice before detaining or confiscating the goods and the consequences of non-issuance of such notice.

- The applicability of the provisions of the Customs Act, 1962 and the Baggage Rules, 2016, including relevant Supreme Court and High Court precedents, to the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

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

The Court examined the relevant provisions of the Baggage Rules, 2016, specifically Rule 2(vi) and Rule 3, which define "personal effects" and prescribe duty-free allowances for bona fide baggage of passengers arriving from countries other than Nepal, Bhutan, or Myanmar. Rule 2(vi) excludes jewellery from the definition of personal effects, but Rule 3 provides for clearance of used personal effects and travel souvenirs free of duty.

Additionally, Rule 5 permits duty-free clearance of jewellery up to specified weight and value limits for passengers residing abroad for more than one year. Annexure-I excludes gold or silver in any form other than ornaments from duty-free allowance.

The Court noted that the detained gold items were jewellery worn by the passenger and the iPhone was a used mobile phone, which is a daily necessity.

Relevant precedents include the Supreme Court's ruling in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which held that jewellery worn by a passenger cannot be completely excluded from "personal effects" and that used jewellery intended for personal use is exempt from customs duty. The Court emphasized that the newness of jewellery is immaterial and that bona fide jewellery carried by passengers for personal use is not liable to confiscation.

The Court also relied on a recent Division Bench decision of the Delhi High Court in Saba Simran v. Union of India, which distinguished between "jewellery" as newly acquired goods subject to monetary limits and "personal jewellery" which is used and exempt from duty. The Supreme Court's dismissal of the Union of India's Special Leave Petition against this decision further cemented this interpretation.

In Mr. Makhinder Chopra v. Commissioner of Customs, the Court reiterated that bona fide personal jewellery is exempt from seizure and must be distinguished from newly acquired jewellery.

Applying these principles, the Court concluded that the gold kada and chain worn by the petitioner fall within the ambit of used personal effects exempt from customs duty and detention. The iPhone 16 Pro, being a used personal electronic device, is also exempt.

Issue 2: Legality of Detention, Confiscation, and Penalty Imposed by Customs Department

The order-in-original dated 16th May 2025 by the adjudicating authority directed absolute confiscation of the gold jewellery and permitted redemption of the iPhone on payment of customs duty and a redemption fee. A penalty was also imposed under Sections 112(a) and 112(b) of the Customs Act, 1962.

The Court scrutinized the legality of such confiscation and penalty, particularly in light of the petitioner's claim that the goods were personal effects and no show cause notice was issued prior to detention or confiscation.

Section 110 of the Customs Act mandates issuance of a show cause notice to the person from whom goods are detained, affording an opportunity of hearing before confiscation or penalty is imposed. The Court held that non-issuance of a show cause notice renders the detention and confiscation impermissible and illegal.

The Court observed that this procedural safeguard is mandatory and the time limit for issuance of the notice is six months, extendable by another six months. Since no show cause notice was issued in this case, the detention and confiscation orders cannot be sustained.

Issue 3: Application of Law to Facts and Treatment of Competing Arguments

The petitioner argued that the gold jewellery and iPhone were used personal effects exempt from customs duty and that no show cause notice was issued, making the detention unlawful.

The Customs Department contended that the petitioner failed to declare the goods at the red or green channel and that the jewellery exceeded permissible limits, justifying confiscation and penalty under the Customs Act.

The Court analyzed the photographs and documents, finding that the jewellery was indeed worn by the petitioner and was used personal jewellery. The iPhone was also a used device.

Relying on binding Supreme Court and High Court precedents, the Court rejected the Department's contention that jewellery is categorically excluded from personal effects. It emphasized the distinction between used personal jewellery and newly acquired jewellery subject to duty.

Further, the Court held that the absence of a show cause notice was a fatal procedural lapse, rendering the detention and confiscation illegal irrespective of the Department's claims.

3. SIGNIFICANT HOLDINGS

"The detained articles clearly appear to be the used personal effects of the Petitioner."

"In terms of the Rule 2(vi) read with Rule 3 of the Baggage Rules, 2016 the Petitioner would be permitted clearance of articles, free of duty in his bona fide baggage, including used personal effects."

"The Supreme Court... held that it is not permissible to completely exclude jewellery from the ambit of 'personal effects'."

"The expression 'jewellery' as it appears in Rule 2(vi) would thus have to be construed as inclusive of articles newly acquired as opposed to used personal articles of jewellery which may have been borne on the person while exiting the country or carried in its baggage."

"The Department is required to make a distinction between 'jewellery' and 'personal jewellery' while considering seizure of items for being in violation of the Baggage Rules."

"Once the goods are detained, it is mandatory to issue a show cause notice and afford a hearing to the Petitioner."

"Since no show cause notice has been issued till date, the detention is therefore impermissible."

Final determinations:

- The gold jewellery (yellow metal kada and chain) worn by the petitioner are used personal effects exempt from customs duty and cannot be confiscated.

- The iPhone 16 Pro, being a used personal electronic device, is also exempt from detention and confiscation.

- The Customs Department's order of absolute confiscation and penalty is set aside due to non-compliance with mandatory procedural requirements, including the failure to issue a show cause notice.

- The detained goods shall be released to the petitioner within four weeks subject to verification and payment of storage charges.