2025 (5) TMI 2081 - HC - Customs

Seeking release of the gold jewellery - Petitioner wearing the detained goods - personal effects under the Baggage Rules 2016 - 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 ( 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 a passenger would fall within the ambit of personal effects in terms of the Rules which would be exempt from detention by the Customs Department. 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. Thus the detention of the Petitioner s detained article is set aside and the same shall be released to the Petitioner within four weeks subject to verification. In facts of this case 50 % of the storage or warehousing charges shall be paid by the Petitioner. The present writ petition is disposed of in above terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

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

- Whether the Customs Department's detention of the gold jewellery without issuing a show cause notice is permissible under the Customs Act, 1962.

- The interpretation and application of the relevant provisions of the Baggage Rules, 2016, particularly Rules 2(vi), 3, and 5, and the scope of "personal effects" and "jewellery" therein.

- The applicability and binding nature of judicial precedents, including Supreme Court and Delhi High Court decisions, on the interpretation of jewellery as personal effects.

- The procedural requirements under the Customs Act regarding detention and issuance of show cause notices.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether gold jewellery worn by a passenger falls within the ambit of "used personal effects" under the Baggage Rules, 2016

Relevant legal framework and precedents: The Court examined Rule 2(vi) of the Baggage Rules, 2016, which defines "personal effects" as things required for daily necessities but excludes jewellery explicitly. Rule 3 permits clearance of used personal effects free of duty, and Rule 5 allows duty-free clearance of jewellery up to specified weight and value limits depending on the passenger's gender.

However, Annexure-I excludes gold or silver in any form other than ornaments from duty-free clearance.

The Court relied heavily on the Supreme Court's ruling in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which clarified that jewellery cannot be completely excluded from "personal effects" and that used jewellery worn by a passenger is bona fide personal property exempt from customs duty. The Supreme Court emphasized that the newness of jewellery is irrelevant and that jewellery meant to be taken out of India is not liable to import duty.

The Court also considered the Division Bench decision in Saba Simran v. Union of India & Ors., which distinguished "jewellery" from "personal jewellery," holding that used personal jewellery worn by a passenger is not subject to the monetary caps in Rules 3 and 4. The Supreme Court's dismissal of the Union of India's Special Leave Petition against this ruling further cemented this interpretation.

Additionally, the Court referred to the decision in Mr. Makhinder Chopra v. Commissioner of Customs, which affirmed that bona fide jewellery in personal use by a tourist falls within personal effects and must be distinguished from other jewellery for customs purposes.

Court's interpretation and reasoning: The Court held that the detained gold chain weighing 94 grams, worn by the Petitioner, is a used personal effect and bona fide jewellery exempt from customs duty under the Baggage Rules. The Court rejected the strict exclusion of jewellery from personal effects, aligning with the Supreme Court's and Division Bench's precedents.

The Court noted the photograph evidence showing the Petitioner wearing the jewellery, supporting the conclusion that it is a personal effect rather than dutiable imported goods.

Application of law to facts: Since the jewellery was worn and used by the Petitioner, it falls within the exemption for used personal effects. The weight of the jewellery exceeded the limits prescribed for duty-free clearance of jewellery under Rule 5, but the Court relied on the precedents that used personal jewellery is not subject to these caps.

Treatment of competing arguments: The Customs Department's argument that jewellery is excluded from personal effects was rejected based on authoritative judicial pronouncements. The Court also dismissed any contention that the jewellery was newly acquired or imported for sale.

Conclusions: The gold jewellery worn by the Petitioner qualifies as used personal effects and is exempt from customs duty and detention.

Issue 2: Whether detention of the jewellery without issuance of a show cause notice is permissible under the Customs Act, 1962

Relevant legal framework: Section 110 of the Customs Act, 1962 mandates that upon detention of goods, the Customs Department must issue a show cause notice within six months, extendable by another six months, and provide an opportunity for hearing before final confiscation or penalty.

Court's interpretation and reasoning: The Court observed that no show cause notice had been issued to the Petitioner despite detention of the gold chain. It held that the non-issuance of such notice renders the detention impermissible and illegal.

Application of law to facts: Since the Customs Department failed to comply with the procedural requirement of issuing a show cause notice and affording the Petitioner a hearing, the detention was unlawful.

Treatment of competing arguments: The Customs Department conceded no show cause notice was issued but argued a personal hearing notice was given. The Court found this insufficient to satisfy statutory requirements.

Conclusions: The detention of the jewellery without issuance of a show cause notice is invalid and must be set aside.

Issue 3: Procedural and ancillary matters concerning release of the detained article

The Court ordered the release of the detained gold jewellery within four weeks, subject to verification and appraisement. The Petitioner was directed to appear for appraisement and collect the jewellery either personally or through an authorised representative, upon proper communication.

The Court also directed that the Petitioner pay 50% of the storage or warehousing charges incurred during detention.

3. SIGNIFICANT HOLDINGS

The Court's key legal reasoning includes the following verbatim excerpts:

"In the opinion of the Court, having considered the facts of the case and the documents placed on record, the detained article clearly appears to be a used personal effect 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."

"It is now settled that the used jewellery worn by a passenger would fall within the ambit of personal effects in terms of the Rules, which would be exempt from detention by the Customs Department."

"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."

Core principles established:

• Used jewellery worn by a passenger is bona fide personal effect exempt from customs duty under the Baggage Rules, 2016.
• Jewellery cannot be categorically excluded from "personal effects" for customs purposes, especially when worn or used by the passenger.
• Non-issuance of a show cause notice upon detention of goods under the Customs Act, 1962, renders such detention invalid.
• Procedural safeguards under the Customs Act must be strictly followed to uphold the legality of detention and confiscation.

Final determinations on each issue:

• The detained gold jewellery worn by the Petitioner is a used personal effect exempt from customs duty and not liable to detention.
• The Customs Department's detention without issuance of a show cause notice is illegal and must be set aside.
• The detained jewellery shall be released to the Petitioner within four weeks after verification and appraisement, subject to payment of 50% of storage charges.