2025 (7) TMI 939 - HC - Customs

Seeking release of one detained gold chain - no appraisal of the gold chain has been done till date - no SCN has been issued to the Petitioner - Violation of principles of natural justice - HELD THAT - The issue whether gold jewellery worn by a passenger would fall within the ambit of personal effects under the Rules has now been settled by various decisions of the Supreme Court as also this Court. The Supreme Court in the 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 (hereinafter 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 . In Saba Simran v. Union of India Ors. 2024 (12) TMI 19 - DELHI HIGH COURT the Division Bench of this Court was seized with the issue of deciding the validity of the seizure of gold jewellery by the Customs Department from an Indian tourist. Thus it is now settled that 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. In view of the above and considering the facts of the case it is clear that the detained jewellery are the personal effects of the Petitioner. Accordingly the detained jewellery would be liable to be released - Under such circumstances the detention of the Petitioner s jewellery is not tenable. Accordingly the said detention is set aside. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the detention of the gold chain weighing 115 grams by the Customs Department without issuance of a Show Cause Notice (SCN) and appraisal is lawful under the Customs Act, 1962.

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

- The applicability and interpretation of the provisions of Section 110 of the Customs Act, 1962, and the Baggage Rules, 2016, particularly Rules 2(vi), 3, and 5, in relation to jewellery brought by passengers arriving from abroad.

- The scope and effect of precedents laid down by the Supreme Court and the Delhi High Court regarding the treatment of jewellery as personal effects for customs clearance.

- Whether warehousing charges can be imposed when the Customs Department has delayed taking action for an extended period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Detention Without Issuance of Show Cause Notice and Appraisal

The Customs Act, 1962, under Section 110, mandates that once goods are detained, a Show Cause Notice must be issued within six months, with a possible extension of six months subject to compliance with procedural requirements. In the present case, the gold chain was detained on 11th November 2022, and as of the hearing in 2025, no SCN had been issued, nor had any appraisal been conducted.

The Court emphasized the mandatory nature of these procedural safeguards, holding that the failure to issue an SCN within the prescribed period renders the detention impermissible. The Court noted that the one-year period had already elapsed, and therefore, the continued detention of the jewellery without due process was unlawful.

The Respondent's counsel suggested the Petitioner appear for appraisal, but the Court clarified that the absence of an SCN and the expiration of statutory timelines made the detention untenable regardless.

Issue 2: Classification of Gold Jewellery as Personal Effects under Baggage Rules, 2016

The Baggage Rules, 2016, define "personal effects" in Rule 2(vi) as "things required for satisfying daily necessities but does not include jewellery." Rule 3 allows clearance free of duty for used personal effects and travel souvenirs, subject to certain value limits and exclusions listed in Annexure-I, which specifically excludes gold or silver in any form other than ornaments.

Rule 5 permits duty-free clearance of jewellery brought by passengers residing abroad for more than one year, with specified weight and value caps differentiated by gender.

The Court examined whether jewellery worn by a passenger qualifies as personal effects exempt from customs duty. It referred to authoritative precedents, including the Supreme Court's ruling in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which held that jewellery cannot be completely excluded from the ambit of personal effects. The Court noted that the Supreme Court recognized bona fide jewellery for personal use, whether new or used, as exempt from duty when brought into India for personal use or to be taken out again.

Further, the Division Bench of the Delhi High Court in Saba Simran v. Union of India clarified that "personal jewellery" worn by a passenger is distinct from "jewellery" in general and that used personal jewellery is not subject to the monetary caps under the Baggage Rules. This decision was upheld by the Supreme Court, which dismissed the Union of India's challenge, thereby reinforcing the principle that used personal jewellery worn by passengers is exempt from customs duty and seizure.

The Court also referred to its own earlier decision in Mr. Makhinder Chopra vs. Commissioner of Customs, which confirmed that bona fide jewellery in personal use falls within the ambit of personal effects and must be distinguished from other jewellery subject to customs restrictions.

Applying these precedents, the Court concluded that the detained gold chain, being worn by the Petitioner and used as a personal effect, is exempt from customs duty and cannot be lawfully detained.

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

The Petitioner's case was that the gold chain was worn and thus constituted a personal effect. The Respondent's argument centered on the need for appraisal and further proceedings before release.

The Court found that the Respondent's failure to initiate timely proceedings by issuing an SCN and conducting appraisal was a fatal procedural lapse. The Court held that the statutory time limits under the Customs Act are mandatory and cannot be circumvented by delaying action.

Regarding the classification of the jewellery, the Court relied on binding precedents to reject any argument that the jewellery should be treated as dutiable goods or subject to seizure. The Court emphasized that jewellery worn by the passenger is to be treated as personal effects exempt from customs duty.

Consequently, the Court ordered the release of the detained jewellery and allowed the Petitioner to collect it through an authorized representative upon proper communication.

Issue 4: Waiver of Warehousing Charges

Given that the Customs Department had not taken any action for nearly three years since the detention, the Court held that warehousing charges shall stand waived. This reflects the principle that undue delay by authorities in enforcing customs procedures should not penalize the passenger.

3. SIGNIFICANT HOLDINGS

"Once the goods are detained, it is mandatory to issue a SCN and afford a personal hearing to the Petitioner. The time prescribed under Section 110 of the Customs Act, 1962, 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 SCN. In this case, the one year period itself has elapsed, yet no SCN has been issued. Accordingly, the detention is impermissible."

"It is now settled that 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."

"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. Further, 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."

"In the facts of this case, considering that for the last almost three years, the Customs Department has not taken any action, warehousing charges shall stand waived."

The Court conclusively held that the detention of the Petitioner's gold chain was unlawful due to procedural lapses and the settled legal position that bona fide jewellery worn by passengers is exempt from customs duty and detention. The jewellery was ordered to be released forthwith, and the petition was disposed of accordingly.