2025 (5) TMI 2143 - HC - Customs

Challenging the detention of the Petitioners goods - personal effects under the Baggage Rules 2016 - Non- issuance of Show Cause Notice - procedural requirements for timeline 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 . 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 articles is set aside and the same shall be released to the Petitioner /authorised signatory within four weeks subject to verification. The Petitioner may appear before the concerned official for appraisement of the detained article and shall thereafter collect it either in person or through an Authorised Representative in which case the detained article shall be released after receiving a proper email from the Petitioner or some form of communication that the Petitioner has no objection to the same being released to the concerned Authorised Representative. With the undertaking of re-export 50 % of the storage charges shall be paid. The Petitioner shall appear for appraisement before the Customs authorities on 05th June 2025. The present writ petition is disposed of in above terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the detention of the Petitioner's goods, comprising one silver gold chain and one gold kada weighing approximately 149 grams, by the Customs authorities was lawful under the Customs Act, 1962 and the Baggage Rules, 2016.

- Whether the detained goods qualify as "used personal effects" or "personal jewellery" exempt from duty and detention under the applicable legal framework.

- Whether the Customs authorities complied with the procedural requirements, particularly the issuance of a Show Cause Notice within the prescribed timeline under Section 110 of the Customs Act, 1962.

- The interpretation and application of the Baggage Rules, 2016, especially the definition and treatment of jewellery in the context of personal effects.

- The relevance and binding nature of precedents, including Supreme Court and Delhi High Court decisions, on the classification of jewellery as personal effects and the consequent duty exemptions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Lawfulness of Detention of Goods under Customs Act and Baggage Rules

The legal framework governing the detention and clearance of goods brought by passengers into India is primarily the Customs Act, 1962, notably Section 110, and the Baggage Rules, 2016. Section 110 prescribes timelines for issuance of Show Cause Notices following detention of goods, mandating that such notice be issued within six months, extendable by another six months. The Baggage Rules define categories of goods permissible for duty-free clearance as bona fide baggage, including used personal effects and jewellery within specified limits.

The Court examined the detention receipt dated 26th October 2023 and noted that no Show Cause Notice had been issued to the Petitioner till the date of hearing, exceeding the maximum one-year period allowed under Section 110. This non-compliance rendered the detention illegal and contrary to statutory provisions. The Court emphasized the mandatory nature of procedural safeguards, including the issuance of notice and opportunity for hearing, which were not fulfilled.

The detained articles, a gold chain and kada weighing about 149 grams, were assessed against the Baggage Rules. The Court found that the articles appeared to be used personal effects of the Petitioner, who is an Indian passport holder residing in Bahrain, returning to India. The Rules allow clearance free of duty for used personal effects, including jewellery within prescribed weight and value limits, when bona fide baggage is carried by passengers.

Issue 2: Classification of Jewellery as Personal Effects under Baggage Rules

The Baggage Rules, 2016, specifically Rule 2(vi) and Rule 3, exclude jewellery from the definition of personal effects but provide for duty-free clearance of jewellery within specified weight and value caps depending on the passenger's gender and residency status (Rule 5). Annexure I excludes gold or silver in any form other than ornaments from duty-free allowance.

The Court relied heavily on binding precedents, particularly the Supreme Court decision in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani (2017), which clarified that jewellery cannot be entirely excluded from the ambit of personal effects. The Supreme Court held that bona fide jewellery worn or carried by a passenger, whether new or used, is not liable to import duty if it is intended to be taken out of India and is part of the passenger's personal effects.

Further, the Delhi High Court Division Bench in Saba Simran v. Union of India (2024) distinguished between "jewellery" and "personal jewellery," holding that used personal jewellery borne by a passenger does not attract the monetary limits prescribed for new jewellery under the Rules. This distinction was upheld by the Supreme Court in the dismissal of the Union of India's Special Leave Petition against the Division Bench's order.

In Mr. Makhinder Chopra v. Commissioner of Customs (2025), the Court reiterated that bona fide jewellery in personal use by a tourist falls within the ambit of personal effects and is exempt from detention. The Department must differentiate between "jewellery" and "personal jewellery" when considering seizures.

Applying these precedents, the Court concluded that the Petitioner's jewellery, being used personal effects, was wrongly detained and exempt from duty and detention under the Baggage Rules.

Issue 3: Procedural Non-Compliance Regarding Show Cause Notice

The Court underscored the procedural mandate under Section 110 of the Customs Act that once goods are detained, a Show Cause Notice must be issued within six months, extendable by six more months with proper compliance. The absence of any Show Cause Notice to the Petitioner, despite the detention dating back to October 2023, violated this statutory requirement.

The Court held that such non-issuance renders the detention impermissible and illegal. The procedural safeguards are designed to protect the rights of the detained party and ensure fair administrative action. The failure to comply with these requirements necessitated the release of the detained goods.

Issue 4: Application of Law to Facts and Treatment of Competing Arguments

The Petitioner's contention that the goods were used personal effects and thus exempt from detention was supported by documentary evidence and consistent with the legal framework and precedents. The Respondent failed to produce any Show Cause Notice or justify the detention within the prescribed timelines.

The Court considered the Respondent's position but found no legal basis to sustain the detention. The absence of procedural compliance and the settled legal position on personal jewellery weighed decisively in favor of the Petitioner.

The Court also addressed the issue of storage charges and re-export undertaking, directing the Petitioner to pay 50% of storage charges and appear for appraisement, balancing administrative concerns with the Petitioner's rights.

3. SIGNIFICANT HOLDINGS

"Considering the timeline prescribed under Section 110 of the Customs Act, the detention would be completely illegal and would be contrary to law."

"The detained articles clearly appear to be used personal effects of the Petitioner."

"In terms of 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 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."

"Once the goods are detained, it is mandatory to issue a Show Cause Notice and afford a hearing to the Petitioner."

"No notice has also been issued till date and the maximum period of one year to issue notice under Section 110 of the Customs Act has also lapsed."

"The detention of the Petitioner's detained articles is set aside and the same shall be released to the Petitioner/authorised signatory within four weeks, subject to verification."

The Court established the core principle that bona fide used personal jewellery carried by a passenger is exempt from duty and detention under the Baggage Rules and Customs Act, provided it is intended for personal use and not for import into India. Procedural compliance, including timely issuance of Show Cause Notices under Section 110, is mandatory for lawful detention. Failure to adhere to these requirements invalidates the detention.

Accordingly, the Court directed the release of the detained goods, subject to verification and payment of partial storage charges, reinforcing the protection of passengers' rights against unlawful detention by Customs authorities.