2025 (5) TMI 2111 - HC - Customs

Seeking release of gold jewellery worn or carried by passengers - personal effects under the Baggage Rules 2016 - liability to pay the warehousing/storage charges - 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. However there are other issues that are required to be considered in the present matter i.e. limited applicability of Rules qua a foreign national and non-issuance of the SCN within the prescribed period under the Act. 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. 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. Thus the detention of the Petitioner s jewellery is accordingly set aside. In the facts of this case it is made clear that no storage charges shall be insisted upon by the Central Warehousing Corporation for release of the detained jewellery to the Petitioner. Accordingly the writ petition is disposed of in above terms.

Summary

The core legal questions considered in this judgment include:

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

2. The applicability and scope of the Baggage Rules, 2016, particularly regarding foreign nationals and tourists of foreign origin.

3. The procedural requirement of issuing a Show Cause Notice (SCN) within the prescribed period under the Customs Act, 1962, following detention of goods.

4. Whether storage or warehousing charges can be imposed on detained personal effects in the absence of proper notice or adjudication.

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

The legal framework under consideration primarily involves the Baggage Rules, 2016, specifically Rules 2(vi), 3, and 5, along with Annexure-I which lists prohibited or restricted articles. Rule 2(vi) defines "personal effects" as items required for daily necessities but explicitly excludes jewellery. Rule 3 permits clearance free of duty for bona fide baggage, including used personal effects and travel souvenirs, with monetary limits for articles other than those listed in Annexure-I. Rule 5 provides duty-free clearance limits for jewellery brought by passengers returning to India after residing abroad for more than one year.

The Court examined precedents including the Supreme Court's decision in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which clarified that jewellery cannot be categorically excluded from the scope of personal effects. The Supreme Court emphasized that bona fide jewellery used personally by a passenger, whether new or used, is not liable for import duty if it is intended to be taken out of India. This interpretation aligns with the international customs practice of facilitating smooth passenger clearance through the green channel.

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 worn by a passenger is exempt from the monetary limits prescribed for new articles under the Rules. This position was upheld by the Supreme Court when it dismissed the Special Leave Petition challenging the decision.

The Court also referred to the decision in Mr. Makhinder Chopra v. Commissioner of Customs, which reinforced that bona fide personal jewellery is protected under the Baggage Rules and cannot be detained mechanically by customs officials.

Applying these principles to the facts, the Court found that the detained metal bangle weighing 51 grams was worn by the Petitioner and constituted used personal jewellery. Therefore, it fell within the ambit of personal effects exempt from customs duty and detention under the Rules.

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 do not extend to articles carried on the person, further supporting the exemption of worn jewellery from detention.

Issue 2: Limited Applicability of the Baggage Rules to Foreign Nationals

The Court addressed whether the Baggage Rules apply in full to foreign nationals, given the Petitioner's status as a Tajikistan passport holder. The Court relied on the decision in Nathan Narayansamy v. Commissioner of Customs, where it was held that the Rules apply with limited scope to foreign tourists, primarily through the proviso to Rule 3. This proviso allows duty-free clearance of used personal effects and travel souvenirs, with specified value limits for articles other than those listed in Annexure-I.

The Court noted that Annexure-I excludes gold or silver in any form other than ornaments from duty exemption, thereby protecting personal jewellery from seizure. Further, Rule 5, which provides specific jewellery allowances, applies only to Indian nationals returning after residing abroad for over a year and is thus inapplicable to foreign nationals.

Subsequent decisions, including Anjali Pandey v. Commissioner of Customs and Makhinder Chopra (supra), have consistently directed the release of jewellery seized from foreign tourists, reinforcing the limited applicability of the Rules to such persons and the protection afforded to personal jewellery.

Given the Petitioner's foreign national status and the nature of the detained jewellery as personal effects, the Court concluded that the detention was unlawful on this ground as well.

Issue 3: Non-Issuance of Show Cause Notice within the Prescribed Period

Under Section 110 of the Customs Act, 1962, once goods are detained, the Customs Department is mandated to issue a Show Cause Notice within six months, extendable by an additional six months under certain conditions. The Petitioner's jewellery was detained on 15th January 2024, but no SCN was issued even after one year.

The Court held that such non-compliance with statutory procedural requirements renders the detention impermissible and unlawful. The absence of an SCN and opportunity for a personal hearing violates principles of natural justice and statutory mandates, necessitating release of the detained goods.

Issue 4: Imposition of Warehousing or Storage Charges

The Petitioner was being made liable to pay warehousing or storage charges despite the absence of any Show Cause Notice or adjudication. The Court ruled that since the detention itself was unlawful, no storage charges could be imposed. The Central Warehousing Corporation was directed not to insist on any such charges for release of the jewellery.

Significant Holdings and Core Principles

The Court succinctly encapsulated the legal position regarding personal jewellery under the Baggage Rules, stating:

"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."

On the limited applicability of the Rules to foreign nationals, the Court reiterated:

"The Baggage Rules would have limited application to foreign nationals. The detained jewellery being part of personal effects, the detention would have to be set aside."

Regarding procedural compliance, the Court emphasized:

"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 the Act is six months, extendable by six months. In this case, the one year period has elapsed without issuance of any show cause notice. Accordingly, the detention is impermissible."

Finally, the Court ordered the release of the detained jewellery within four weeks, allowing collection through an authorized representative upon proper communication from the Petitioner, and clarified that no storage charges shall be imposed.