2025 (5) TMI 2144 - 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 - 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 clear that the detained jewellery are the personal effects of the Petitioner. The goods are directed to be released through the Petitioner or an authorised representative within a period of four weeks. In the facts of this case no warehouse charges shall be liable to be paid by the Petitioner. The petition is disposed of in these terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

- Whether the gold jewellery detained by the Customs authority from the petitioner qualifies as "used personal effects" or "personal jewellery" under the applicable Customs Baggage Rules and is therefore exempt from duty and detention.

- Whether the Customs authority was justified in detaining the petitioner's gold jewellery without issuing a Show Cause Notice.

- The interpretation and applicability of the Customs Baggage Rules, 2016, specifically Rules 2(vi), 3, and 5, and Annexure-I, in relation to the carriage of gold jewellery by passengers arriving from foreign countries.

- The relevance of judicial precedents, including Supreme Court and High Court decisions, on the classification of jewellery as personal effects and the consequent rights of passengers to carry such jewellery duty-free.

- The procedural and substantive obligations of Customs authorities when detaining goods identified as personal jewellery.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Detained Gold Jewellery as Personal Effects or Personal Jewellery under Customs Rules

The relevant legal framework comprises the Customs Baggage Rules, 2016, particularly Rule 2(vi) defining "personal effects," Rule 3 permitting duty-free clearance of used personal effects and travel souvenirs, and Rule 5 which provides specific exemptions for jewellery brought by passengers residing abroad or returning to India.

Rule 2(vi) excludes jewellery from the definition of personal effects, but Rule 5 allows duty-free clearance of jewellery up to prescribed weight and value limits for passengers returning to India, differentiated by gender.

Annexure-I lists prohibited or restricted items, including "gold or silver in any form other than ornaments," indicating that gold jewellery in the form of ornaments is not prohibited per se.

The Court examined the factual matrix, including the petitioner's claim that the detained jewellery was old, used personal jewellery and not newly acquired goods. Photographic evidence of the jewellery was submitted, supporting the petitioner's assertion.

Judicial precedents were pivotal in interpreting these provisions. The Supreme Court in the Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani clarified that jewellery cannot be entirely excluded from the ambit of personal effects. The Court emphasized that bona fide personal jewellery, whether new or used, intended for personal use or to be taken out of India, is not liable to import duty. The reasoning included that declarations made at the green channel imply no dutiable goods are carried and that the newness of jewellery is irrelevant to its classification as personal effects.

The Division Bench of the Delhi High Court in Saba Simran v. Union of India further refined this understanding, distinguishing between "jewellery" and "personal jewellery," holding that used personal jewellery borne on the person or in baggage does not attract the monetary limits prescribed for newly acquired jewellery under the Rules. This position was upheld by the Supreme Court by dismissing the Special Leave Petition challenging the Division Bench's decision.

In Mr. Makhinder Chopra v. Commissioner of Customs, the Delhi High Court reiterated that bona fide personal jewellery is protected from detention under the Baggage Rules and that Customs authorities must distinguish between "jewellery" and "personal jewellery" when considering seizures.

The Madras High Court in Thanushika v. Principal Commissioner of Customs held that the Rules apply to baggage and do not extend to articles carried on the person, reinforcing the protection of personal jewellery from mechanical detention.

Applying the above legal principles and precedents to the facts, the Court found that the detained jewellery clearly constituted used personal jewellery of the petitioner, falling within the exemption under the Rules.

Issue 2: Procedural Validity of Detention Without Show Cause Notice

The petitioner contended that no Show Cause Notice had been issued prior to detention, which is a procedural requirement under the Customs Act and Rules for seizure or detention of goods. The Court noted this omission and considered it in light of the substantive illegitimacy of the detention itself.

Given that the jewellery was bona fide personal jewellery exempt from detention, the failure to issue a Show Cause Notice further undermined the legality of the detention. The Court's direction to release the goods implicitly addressed this procedural lapse by ordering release without any liability for warehouse charges.

Issue 3: Application of Law to Facts and Treatment of Competing Arguments

The Customs authority's detention was presumably premised on the view that the jewellery exceeded permissible limits or was newly acquired gold subject to duty. However, the petitioner's evidence and submissions established the jewellery as old, used personal effects.

The Court weighed the statutory provisions, the legislative intent behind the Baggage Rules, and the judicial pronouncements emphasizing the protection of personal jewellery from arbitrary detention. The Court rejected any mechanical or blanket application of the Rules that would ignore the bona fide nature of the jewellery.

The competing argument that jewellery is excluded from personal effects was addressed by the Supreme Court's authoritative interpretation that jewellery cannot be completely excluded and that used personal jewellery is protected.

The Court's reasoning emphasized the necessity for Customs officials to apply their mind and consider the facts of each case rather than resort to mechanical detention.

3. SIGNIFICANT HOLDINGS

"The detained jewellery clearly appear to be used personal jewellery 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'."

"The Department is required to make a distinction between 'jewellery' and 'personal jewellery' while considering seizure of items for being in violation of the Baggage Rules."

"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 goods are directed to be released through the Petitioner or an authorised representative, within a period of four weeks. In the facts of this case, no warehouse charges shall be liable to be paid by the Petitioner."

The Court conclusively determined that the detained gold jewellery was bona fide personal jewellery exempt from customs duty and detention under the applicable Baggage Rules and judicial precedents. The detention without issuance of a Show Cause Notice was procedurally improper. The petitioner's right to possession was upheld, and the goods were ordered to be released forthwith without any financial burden for storage.