2025 (5) TMI 2085 - HC - Customs

Seeking release of gold jewellery worn or carried by passengers - personal effects under the Baggage Rules 2016 - applicability of Rules qua a foreign national - 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 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 Petitioner is a Malaysian passport holder. In view of the law discussed above on the ground of limited applicability of the Rules to the tourist of foreign origin and as the detained jewellery is part of personal effects the detention would have to be set aside. 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. Accordingly the writ petition is disposed of in above terms. All the pending applications if any are also disposed of.

Summary

The core legal questions considered in this judgment are:

1. Whether the gold jewellery seized by Customs from the petitioner, a foreign national, qualifies as personal effects under the Baggage Rules, 2016, and is therefore exempt from duty and detention.

2. The scope and applicability of the Baggage Rules, 2016, particularly the provisions related to foreign nationals and the limits on duty-free jewellery allowance.

3. The legality of continued detention of the jewellery without issuance of a Show Cause Notice (SCN) within the prescribed time under Section 110 of the Customs Act, 1962.

4. The procedural requirements and rights of the detained passenger, including entitlement to personal hearing and release of goods.

Issue-wise Detailed Analysis:

1. Whether the seized jewellery qualifies as personal effects under the Baggage Rules, 2016

The legal framework governing this issue includes the Customs Act, 1962 and the Baggage Rules, 2016. Rule 2(vi) defines "personal effects" as things required for daily necessities but excludes jewellery. However, Rule 3 and Rule 5 of the Rules carve out exceptions allowing duty-free clearance of used personal effects and jewellery within prescribed limits for passengers arriving from countries other than Nepal, Bhutan, or Myanmar.

Annexure-I explicitly prohibits gold or silver in any form other than ornaments from duty-free clearance.

The Court examined precedents, notably the Supreme Court's ruling in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which clarified that jewellery worn by a passenger cannot be categorically excluded from personal effects. The Supreme Court emphasized that bona fide jewellery for personal use, whether new or used, is not liable to import duty if it is intended to be taken out of India.

Further, the Division Bench of the Delhi High Court in Saba Simran v. Union of India distinguished between "jewellery" and "personal jewellery," holding that used personal jewellery borne on the person is part of personal effects and exempt from the monetary limits applicable to new jewellery. This position was upheld by the Supreme Court by dismissing the Special Leave Petition challenging the ruling.

The Court also referred to the decision in Mr Makhinder Chopra vs. Commissioner of Customs, which reinforced that bona fide jewellery in personal use by tourists falls within personal effects and cannot be detained mechanically by Customs.

The Madras High Court's decision in Thanushika vs. The Principal Commissioner of Customs was noted for holding that the Rules apply to baggage and articles carried on the person, and Customs officials must apply their mind before detaining goods of tourists.

Applying these precedents and the statutory provisions to the facts, the Court found the detained jewellery to be used personal gold items of the petitioner, worn or carried bona fide, and thus qualifying as personal effects exempt from duty and detention.

2. Applicability of the Baggage Rules to foreign nationals and limits on jewellery allowance

The petitioner is a Malaysian citizen holding a foreign passport. The Court examined the scope of the Baggage Rules vis-`a-vis foreign nationals, relying on the coordinate bench decision in Nathan Narayansamy vs. Commissioner of Customs, where it was held that the proviso to Rule 3 applies to tourists of foreign origin, permitting duty-free clearance of bona fide baggage within specified limits.

The Court noted that the jewellery seized - a gold wire/chain and a gold kada - fall within the category of ornaments and thus are exempt from seizure under Entry 5 of Annexure-I, which prohibits gold or silver in any form other than ornaments.

Rule 5 of the Rules, which allows higher jewellery limits, applies only to passengers returning to India after residing abroad for over one year, and thus does not apply to the petitioner.

Hence, the Court held that the Rules have limited application to foreign nationals, but the detained jewellery being personal effects and ornaments must be released.

3. Legality of detention without issuance of Show Cause Notice within prescribed time

Section 110 of the Customs Act mandates issuance of a Show Cause Notice within six months of detention, with a possible extension of six months, failing which the detention becomes impermissible.

In the present case, more than one year had elapsed since detention without issuance of any SCN or passing of an Order-in-Original. The Court held that such prolonged detention without compliance with statutory procedure is illegal and must be set aside.

4. Procedural rights and release of detained goods

The Court emphasized the requirement of affording a personal hearing and procedural fairness before detention or confiscation. It held that the Customs Department's submission that the petitioner may file an appeal was untenable in the absence of any SCN or Order-in-Original.

The Court ordered release of the detained jewellery to the petitioner or an authorized representative upon proper communication. It also directed payment of applicable storage and warehousing charges by the petitioner.

Significant Holdings:

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

"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'."

"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 detention of the Petitioner's jewellery is accordingly set aside."

Core principles established include:

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

- The Baggage Rules apply with limited scope to foreign nationals, but bona fide personal jewellery remains protected.

- Prolonged detention without issuance of a Show Cause Notice within the prescribed statutory period is illegal.

- Customs authorities must apply their mind and afford procedural fairness before detaining or confiscating personal effects.

Final determinations:

- The detained gold jewellery of the petitioner is bona fide personal effects and not liable to detention or duty.

- The detention without issuance of SCN within six months is unlawful and must be quashed.

- The detained jewellery shall be released forthwith upon compliance with procedural formalities and payment of storage charges.