2025 (5) TMI 2083 - HC - Customs

Seeking release of gold jewellery worn or carried by passengers - personal effects under the 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 ( 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 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. Hence considering the facts of the case and the documents placed on record including the photographs it is clear that the detained jewellery are the personal effects of the Petitioners. 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. However there are other issues that are required to be considered in the present matter i.e. waiver of show cause notice by pre-printed forms and non-issuance of the same within the prescribed period under the Act. Further 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. In view of the above discussion the detained jewellery is liable to be released. The petition is disposed of in the aforesaid terms.

1. The core legal questions considered by the Court in this matter include:

- Whether gold jewellery worn or carried by passengers qualifies as "personal effects" under the Baggage Rules, 2016, and is thereby exempt from customs duty and detention.

- Whether the Customs Department can validly detain such jewellery without issuing a show cause notice as mandated under the Customs Act, 1962.

- The validity and effect of a pre-drafted waiver signed by the passengers, purportedly waiving their right to a show cause notice and personal hearing.

- The procedural compliance by the Customs Department concerning timelines for issuing show cause notices under the Customs Act.

2. Issue-wise detailed analysis:

a) Classification of gold jewellery as personal effects under the Baggage Rules, 2016

The relevant legal framework consists primarily of the Baggage Rules, 2016, specifically Rule 2(vi), Rule 3, Rule 5, and Annexure-I. Rule 2(vi) defines "personal effects" as items necessary for daily necessities but expressly excludes jewellery. Rule 3 permits duty-free clearance of used personal effects and travel souvenirs carried in bona fide baggage, subject to value limits. Rule 5 provides specific allowances for jewellery brought by passengers residing abroad or returning to India, with prescribed weight and value caps differentiated by gender. Annexure-I lists prohibited items, including gold or silver in any form other than ornaments.

The Court referred extensively to binding precedents, notably the Supreme Court's ruling in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani (2017), which clarified that jewellery cannot be completely excluded from the ambit of personal effects. The Supreme Court emphasized that bona fide jewellery worn or carried by passengers, whether new or used, is not dutiable if intended for personal use or to be taken out of India. The Court also highlighted that the newness of jewellery is immaterial and that personal jewellery worn on the person falls within the protective ambit of personal effects.

The Delhi High Court's Division Bench decision in Saba Simran v. Union of India further refined this position by distinguishing "jewellery" as a general category from "personal jewellery" worn or used by the passenger. The Court held that personal jewellery, especially used jewellery borne on the person, is not subject to the monetary restrictions applicable to newly acquired jewellery under the Rules. This interpretation was upheld by the Supreme Court when it dismissed the Union of India's Special Leave Petition challenging the Division Bench's ruling.

Another relevant precedent is the Delhi High Court's judgment in Mr. Makhinder Chopra v. Commissioner of Customs, which reinforced that Customs officials must differentiate between jewellery as a general category and bona fide personal jewellery. The Madras High Court's ruling in Thanushika v. The Principal Commissioner of Customs was also noted, which held that the Rules apply to baggage and not to articles carried on the person, supporting the exemption of worn jewellery from detention.

Applying these precedents and statutory provisions to the facts, the Court observed that the detained gold kada, weighing approximately 99 grams each and worn by the Petitioners upon arrival, are clearly used personal effects. Photographic evidence corroborated that the jewellery was worn and belonged to the Petitioners personally. The Court concluded that such jewellery falls within the protective ambit of personal effects under the Rules and is exempt from customs duty and detention.

The Court rejected any mechanical or blanket detention of jewellery without proper consideration of the passenger's bona fide use and ownership, emphasizing that Customs officials must apply their mind to the facts of each case.

b) Validity of detention without issuance of show cause notice and waiver by pre-drafted form

The Customs Act, 1962, specifically Section 124, mandates issuance of a show cause notice before confiscation or imposition of penalty. The notice must be in writing, specify grounds for confiscation, allow the person to make written representations, and afford a reasonable opportunity of personal hearing. The provisos allow for oral notice at the request of the person but do not permit waiver of these procedural rights by pre-drafted forms.

The Court examined the practice of Customs Department relying on pre-printed waiver forms signed by passengers, which purportedly dispense with the issuance of show cause notice and personal hearing. Citing prior decisions, including Amit Kumar v. Commissioner of Customs and Makhinder Chopra (supra), the Court held that such waivers do not satisfy the mandatory requirements of Section 124. The principles of natural justice cannot be circumvented by mechanical acceptance of pre-drafted waivers.

Further, the Court noted that once goods are detained, the Customs Department is required to issue a show cause notice within six months under Section 110 of the Act, with a possible extension of another six months under prescribed conditions. In the instant case, more than one year had elapsed since detention without issuance of any show cause notice, rendering the detention unlawful and impermissible.

c) Application of law to facts and procedural compliance

The Court applied the legal principles and precedents to the facts that the Petitioners were senior citizens carrying traditional gold kada as gifts for their granddaughter, which were ultimately brought back worn by the wife. The detained jewellery was established as personal effects, exempt from customs duty and detention.

The Customs Department failed to issue a show cause notice within the statutory period and relied on a pre-drafted waiver form, both of which the Court found contrary to law. The Court emphasized the mandatory nature of procedural safeguards under the Customs Act and the necessity of individualized consideration by Customs officials.

Accordingly, the Court directed release of the detained jewellery and observed that the Petitioners were entitled to a personal hearing, which was scheduled. The Customs Department was directed to consider any documents presented by the Petitioners and release the jewellery within four weeks, without imposing storage charges.

3. Significant holdings:

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

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

"Jewellery that is bona fide in personal use by the tourist would not be excluded from the ambit of personal effects as defined under the Baggage 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 undertaking in a standard form waiving the issuance of show cause notice and personal hearing would not satisfy the requirements of Section 124 of the Act."

"Once the goods are detained, it is mandatory to issue a show cause notice and afford a personal hearing to the person within the prescribed time. Failure to do so renders the detention impermissible."

Core principles established include:

- Used personal jewellery worn or carried by passengers qualifies as personal effects exempt from customs duty and detention under the Baggage Rules.

- Customs authorities must distinguish between new jewellery subject to value and weight limits and bona fide personal jewellery.

- Procedural safeguards under the Customs Act, including issuance of show cause notice and personal hearing, are mandatory and cannot be waived by pre-printed forms.

- Detention without compliance with statutory timelines and procedural requirements is unlawful.

Final determinations:

- The detained gold jewellery worn by the Petitioners are personal effects exempt from customs duty and detention.

- The Customs Department's detention without issuance of a show cause notice within the prescribed period and reliance on a pre-drafted waiver is contrary to law.

- The detained jewellery shall be released forthwith following a personal hearing and consideration of documents by the Customs Department, without any storage charges.

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