2025 (6) TMI 277 - HC - Customs

Absolute confiscation of certain gold items and conditional confiscation of electronic goods - It is the case of the Petitioner that no Show Cause Notice was issued and no personal hearing was also granted to the Petitioner prior to passing of the impugned order - Violation of principles of natural justice - HELD THAT - The Petitioner is willing to pay the redemption fine for the iPhones and prays for the gold items to be released. Considering the above the gold items shall be released to the Petitioner without any storage charges. However insofar as the iPhones are concerned the storage charges and redemption fee shall be payable. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the impugned Order-in-Original passed by the Additional Commissioner of Customs, which ordered absolute confiscation of certain gold items and conditional confiscation of electronic goods, was legally sustainable.

- Whether the Petitioner was entitled to a Show Cause Notice and personal hearing prior to passing the impugned order, and if the waiver of such procedural safeguards violated principles of natural justice.

- Whether the gold items seized constituted personal effects or jewellery exempt from confiscation under the Customs Act and relevant notifications.

- The applicability and interpretation of the Customs Act, 1962 provisions invoked (Sections 111(d), 111(j), 111(l), 111(m), 112(a), 112(b), and 125(3)) in the context of the seized goods and the Petitioner's conduct.

- The validity of the denial of 'Free Allowance' and declaration of the Petitioner as an 'ineligible passenger' under Notification No. 50/2017-Cus and the Baggage Rules, 2016.

- The appropriateness of the penalty imposed and the option for redemption of confiscated goods.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Confiscation and Denial of Free Allowance

Legal Framework and Precedents: The Customs Act, 1962 governs the confiscation of goods under Sections 111(d), (j), (l), and (m), which relate to improper import/export and non-declaration of goods. Notification No. 50/2017-Cus and Baggage Rules, 2016, regulate free allowance and passenger eligibility for duty-free imports. Prior judgments, including the referenced case on waiver of Show Cause Notice, emphasize adherence to procedural fairness.

Court's Interpretation and Reasoning: The Court noted that the Additional Commissioner denied the free allowance on the basis that the Petitioner failed to declare the detained goods at the Red Channel and upon interception at the Green Channel. The order declared the Petitioner an "ineligible passenger" under the relevant notification, thereby disqualifying him from any duty-free exemption.

Key Evidence and Findings: The seized items included a yellow metal Kada (50 grams), a yellow metal chain (99 grams), and three iPhone 15 Pro devices. The assessable value was Rs. 10,39,144/-. Photographic evidence was submitted by the Petitioner to establish the gold items as personal jewellery.

Application of Law to Facts: The Court assessed whether the gold items were legitimately exempt from confiscation as personal effects and whether the Petitioner's failure to declare these goods justified the denial of free allowance and confiscation.

Treatment of Competing Arguments: The Petitioner argued the gold items were personal jewellery and thus should not be confiscated. The Respondent relied on the Customs Act provisions and the Petitioner's non-declaration to justify confiscation and penalty.

Conclusions: The Court found merit in the Petitioner's claim regarding the gold items being personal jewellery and noted the procedural lapse in not issuing a Show Cause Notice. Consequently, the Court ordered release of the gold items without storage charges, indicating the confiscation was not justified.

Issue 2: Procedural Fairness - Waiver of Show Cause Notice and Personal Hearing

Legal Framework and Precedents: Articles 226 and 227 of the Constitution of India guarantee the right to fair procedure. The Customs Act requires issuance of Show Cause Notices before confiscation. Judicial precedents, including the cited case, hold that waiver of such notices violates natural justice.

Court's Interpretation and Reasoning: The Court observed that no Show Cause Notice was issued to the Petitioner, nor was a personal hearing granted before the impugned order was passed. This procedural omission was contrary to settled legal principles.

Key Evidence and Findings: The record confirmed absence of any Show Cause Notice or opportunity for hearing prior to confiscation order.

Application of Law to Facts: The Court applied the principle that procedural fairness is mandatory and that failure to provide notice and hearing vitiates the order.

Treatment of Competing Arguments: The Respondent did not contest the procedural lapse but justified confiscation on substantive grounds.

Conclusions: The Court held that the waiver of Show Cause Notice was unlawful, reinforcing the Petitioner's entitlement to procedural safeguards.

Issue 3: Penalty Imposition and Redemption Option

Legal Framework and Precedents: Sections 112(a) and 112(b) of the Customs Act authorize imposition of penalties for non-declaration and concealment. Section 125(3) allows redemption of confiscated goods upon payment of redemption fee and customs duty.

Court's Interpretation and Reasoning: The impugned order imposed a penalty of Rs. 1,29,000/- on the Petitioner and allowed redemption of the iPhones on payment of Rs. 32,000/- plus applicable customs duty. The Court accepted the Petitioner's willingness to pay redemption fees for the iPhones but limited the release prayer to gold items.

Key Evidence and Findings: The Petitioner agreed to pay redemption charges for the iPhones but contested absolute confiscation of gold items.

Application of Law to Facts: The Court distinguished between the gold items and electronic goods, permitting release of gold items without storage charges and upholding redemption conditions for iPhones.

Treatment of Competing Arguments: The Petitioner sought release of gold items without penalty; the Respondent sought full confiscation and penalty. The Court balanced these by ordering release of gold items but maintaining penalty and redemption for iPhones.

Conclusions: The Court directed release of all detained goods within two weeks, with redemption fees applicable only to iPhones, and no storage charges on gold items.

3. SIGNIFICANT HOLDINGS

- The Court emphasized the mandatory nature of procedural fairness under the Customs Act and Constitution, stating: "The waiver of Show Cause Notice is itself contrary to law as held by this Court in several cases."

- It was held that personal jewellery, even if seized, cannot be absolutely confiscated without due procedure and proper classification under customs rules.

- The Court clarified that "the offer of redemption, if accepted, shall be subject to condition that the Passenger shall not dispute the identity and valuation of the goods," thereby affirming the procedural and substantive safeguards in redemption.

- The final determination allowed release of the gold items without storage charges, recognizing them as personal effects, while upholding penalty and redemption fee for electronic goods, demonstrating nuanced application of customs law.