2025 (5) TMI 2082 - HC - Customs

Seeking release of gold jewellery worn or carried by passengers - personal effects under the Baggage Rules 2016 - Residence-cum-Work Permit - limited applicability of Rules qua a foreign national - 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 also 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 jewellery being personal effects of the Petitioner the detention of the same itself would be contrary to law. Accordingly the detained jewellery would be liable to be released on this ground itself. Insofar as the issue of limited applicability of Rules qua a foreign national is concerned this Court has considered the said issue in several cases including Nathan Narayansamy vs. Commissioner of Customs 2023 (9) TMI 1549 - DELHI HIGH COURT . the Co-ordinate Bench of this Court was also dealing with a similar situation wherein certain jewellery was recovered and seized from the baggage items of a tourist holding Malaysian passport. It is an undisputed fact that the Petitioners are residents of Singapore. In view of the law discussed above and considering the weight and the nature of detained jewellery the same are clearly personal jewellery of the Petitioners which would be exempt under the Rules. Accordingly the Order-in-Original is also set aside and the detained jewellery are directed to be released within a period of 4 weeks. Petition is disposed of in these terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the gold jewellery detained by the Customs Department from the Petitioners, who are residents of Singapore, qualifies as personal effects under the Baggage Rules, 2016, and is therefore exempt from customs duty and liable for release.

- The interpretation and applicability of the Baggage Rules, 2016, particularly the definitions and exemptions relating to "personal effects" and "jewellery" for passengers arriving from abroad.

- The extent of applicability of the Baggage Rules to foreign nationals, especially tourists or residents of foreign countries traveling to India.

- The legality of the detention and seizure of the jewellery by the Customs Department and the validity of the Order-in-Original disposing of the detained jewellery.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the detained gold jewellery qualifies as personal effects under the Baggage Rules, 2016

The relevant legal framework is the Baggage Rules, 2016, particularly Rule 2(vi) which defines "personal effects" as things required for satisfying daily necessities but excludes jewellery. Rule 3 allows clearance free of duty for used personal effects and travel souvenirs carried by passengers arriving from countries other than Nepal, Bhutan, or Myanmar. Rule 5 permits duty-free clearance of jewellery up to certain weight and value limits for passengers returning to India after residing abroad for more than one year.

However, Annexure-I excludes "gold or silver in any form other than ornaments" from duty-free allowance. The Court noted that the detained jewellery consisted of gold chains and bangles, which are ornaments.

The Court relied on binding precedents, notably the Supreme Court's decision in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which held that jewellery used personally by a passenger cannot be completely excluded from the ambit of personal effects. The Supreme Court emphasized that the newness of jewellery or proximity of purchase is irrelevant, and that bona fide jewellery intended for personal use or to be taken out of India is not liable to import duty.

The Court further referred to the Division Bench decision in Saba Simran v. Union of India & Ors., which clarified that personal jewellery worn or carried by a passenger as used personal effects is not subject to the monetary limits prescribed for new jewellery under the Rules. This position was upheld by the Supreme Court in dismissing a Special Leave Petition challenging the Division Bench's ruling.

Additionally, the Court cited its own earlier decision in Makhinder Chopra v. Commissioner of Customs, which held that customs officials must distinguish between "jewellery" and "personal jewellery" and that bona fide personal jewellery is protected from detention.

The Court also considered the Madras High Court's ruling in Thanushika v. Principal Commissioner of Customs, which held that the Rules apply to baggage and articles carried on the person, and that customs officials must apply their mind before detaining personal effects including jewellery.

Applying these principles, the Court concluded that the detained gold jewellery, being used personal jewellery of the Petitioners, falls within the ambit of personal effects and is exempt from customs duty and detention under the Rules.

Issue 2: Applicability of the Baggage Rules to foreign nationals and tourists

The Petitioners are residents of Singapore and hold foreign nationality. The Court examined the limited applicability of the Baggage Rules to foreign nationals, referencing its earlier decisions including Nathan Narayansamy v. Commissioner of Customs. In Nathan Narayansamy, the Court held that the proviso to Rule 3 applies to tourists of foreign origin, allowing duty-free clearance of bona fide baggage articles except those listed in Annexure-I, which excludes gold or silver in any form other than ornaments.

The Court noted that Rule 5, which permits duty-free jewellery clearance up to specified limits, applies only to passengers returning to India after residing abroad for more than one year and is intended for Indian nationals. Therefore, this Rule does not apply to foreign nationals such as the Petitioners.

Nonetheless, the Court emphasized that the jewellery carried by foreign nationals as personal effects and bona fide use remains protected from detention. The Court relied on its decisions in Anjali Pandey v. Commissioner of Customs and Makhinder Chopra, which directed release of jewellery seized from foreign tourists, underscoring that customs officials must exercise discretion and avoid mechanical detention of personal jewellery.

Thus, while the Rules have limited application to foreign nationals, the protection accorded to bona fide personal jewellery remains intact.

Issue 3: Legality of detention and seizure of the jewellery and validity of the Order-in-Original

The detained jewellery was seized on 13th January 2023, followed by issuance of a show cause notice and an Order-in-Original dated 15th May 2024, which recorded the jewellery as disposed of. However, the Respondents clarified that the jewellery had not been disposed of.

The Court found that the detention itself was contrary to law since the jewellery constituted personal effects exempt under the Rules. The Court held that the Customs Department failed to differentiate between personal jewellery and other forms of jewellery, and did not apply their mind to the facts of the case.

Consequently, the Court set aside the Order-in-Original and directed the release of the detained jewellery within four weeks, subject to payment of warehousing and storage charges, if any. The Court also permitted release through an Authorized Representative upon receipt of proper communication from the Petitioners.

3. SIGNIFICANT HOLDINGS

"The detained jewellery clearly appears to be used personal gold items of the Petitioners."

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

"It is not permissible to completely exclude jewellery from the ambit of 'personal effects'."

"The newness of jewellery or proximity of purchase is of no consequence."

"Personal jewellery which is not found to have been acquired on an overseas trip and was always a used personal effect of the passenger would not be subject to the monetary prescriptions incorporated in Rules 3 and 4 of the 2016 Rules."

"The Customs Officials have to be conscious of the fact that personal effects including jewellery of tourists are protected by the law from detention and same cannot be detained in a mechanical manner."

"The detained jewellery being personal effects of the Petitioner, the detention of the same itself would be contrary to law."

"The Order-in-Original is set aside and the detained jewellery are directed to be released within a period of 4 weeks."

Core principles established include the recognition that used personal jewellery worn or carried by passengers qualifies as personal effects exempt from customs duty and detention; that the Baggage Rules protect bona fide personal jewellery irrespective of newness; and that customs authorities must apply discretion and avoid mechanical seizures, especially in cases involving foreign nationals.

The final determination was that the detained gold jewellery of the Petitioners, who are foreign residents, are personal effects exempt under the Baggage Rules, and the detention and seizure were unlawful. The jewellery must be released forthwith upon compliance with procedural formalities.