2025 (5) TMI 2027 - HC - Customs

Seeking release of the gold jewellery - Scope and ambit of personal effects under the Baggage Rules - Confiscation order passed without issuance of SCN - No proper opportunity of personal hearing - compliance of the requirements to issue SCN - prescribed statutory period - HELD THAT - At this stage it would 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 is another issue that is required to be considered in the present matter i.e. non-issuance of the SCN within the prescribed period under the Act. It is settled law that 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. The petition is disposed of in the aforesaid terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the gold jewellery worn by the petitioner qualifies as "personal effects" under the Baggage Rules, 2016, thereby exempting it from customs duty and detention.

- Whether the Customs Department's detention of the petitioner's gold jewellery without issuance of a Show Cause Notice (SCN) within the prescribed statutory period is lawful.

- The applicability and interpretation of the relevant provisions of the Customs Act, 1962 and the Baggage Rules, 2016, including the distinction between "jewellery" and "personal jewellery."

- The legal consequences of non-issuance of a Show Cause Notice within the statutory timeframe under Section 110 of the Customs Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether gold jewellery worn by the petitioner falls within the ambit of "personal effects" under the Baggage Rules, 2016

The legal framework governing this issue comprises the Customs Act, 1962 and the Baggage Rules, 2016. Rule 2(vi) defines "personal effects" as items required for satisfying daily necessities but expressly excludes jewellery. However, Rule 3 and Rule 5 provide for duty-free clearance of used personal effects and jewellery within specified weight and value limits for passengers arriving from countries other than Nepal, Bhutan, or Myanmar.

The Court referred to authoritative precedents, notably the Supreme Court's decision in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which held that jewellery cannot be completely excluded from the ambit of personal effects. The Supreme Court emphasized that bona fide jewellery in personal use, whether new or used, is not liable to import duty if it is intended to be taken out of India by the passenger. It also rejected the relevance of the jewellery's newness or proximity of purchase to the travel date.

The Court further relied on the Division Bench judgment in Saba Simran v. Union of India, which distinguished between "jewellery" and "personal jewellery." It held that personal jewellery, which is used and borne on the person, is not subject to the monetary caps prescribed for newly acquired jewellery under the Rules. This position was upheld by the Supreme Court in the dismissal of the Special Leave Petition challenging the Division Bench's decision.

Additionally, the Court considered the decision in Mr. Makhinder Chopra v. Commissioner of Customs, which reaffirmed that bona fide personal jewellery falls within the ambit of personal effects and is protected from detention. The Madras High Court's ruling in Thanushika v. Principal Commissioner of Customs was also noted for its observation that the Rules apply to baggage and not to articles carried on the person, reinforcing that personal jewellery worn by a passenger should not be detained mechanically.

Applying these principles to the facts, the Court found that the detained gold chain, weighing 60 grams and worn by the petitioner, constituted used personal jewellery and thus qualified as personal effects under the Rules. The Court observed that the jewellery was bona fide and for personal use, and therefore, its detention by Customs was contrary to law.

Issue 2: Legality of detention without issuance of Show Cause Notice within the prescribed period under the Customs Act

Section 110 of the Customs Act mandates that once goods are detained, a Show Cause Notice must be issued within six months, with a possible extension of another six months subject to compliance with procedural requirements. Failure to issue the SCN within this statutory timeframe renders the detention impermissible.

In the present case, the Court noted that more than one year had elapsed since the detention of the jewellery, yet no Show Cause Notice had been issued by the Customs Department. This non-compliance with the statutory mandate was held to vitiate the detention itself.

During the hearing, the petitioner's counsel informed the Court that a personal hearing notice had been issued recently. The Court directed that the petitioner be allowed to appear before the Customs Department on the scheduled date, either personally or through authorized representatives. The Customs officer was mandated to consider the petitioner's submissions and release the detained jewellery within four weeks. The Court also ordered waiver of storage charges.

Issue 3: Treatment of competing arguments and overall conclusions

The Customs Department did not appear to contest the petition or provide counter-arguments during the hearing. The Court, therefore, primarily relied on the petitioner's submissions, documentary evidence, and binding precedents.

The Court emphasized that Customs officials must apply their minds and not adopt a mechanical approach when dealing with personal effects, including jewellery. The protection of bona fide personal jewellery from detention is a settled principle, and any deviation requires strict compliance with procedural safeguards.

The Court concluded that the detained jewellery was a personal effect exempt from customs duty and that the detention without issuance of a timely Show Cause Notice was unlawful. Hence, the detained jewellery was liable to be released forthwith.

3. SIGNIFICANT HOLDINGS

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

"Personal jewellery which is not found to have been acquired on an overseas trip and was always a used personal effect of the passenger would not be subject to the monetary prescriptions incorporated in Rules 3 and 4 of the 2016 Rules."

"The 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."

"Once the goods are detained, it is mandatory to issue a show cause notice and afford a personal hearing to the Petitioner within the prescribed period under Section 110 of the Act."

"The detained jewellery being personal effects of the Petitioner, the detention of the same itself would be contrary to law."

"The one year period itself has elapsed, yet no show cause notice has been issued. Accordingly, the detention is impermissible."

Core principles established include:

- Used personal jewellery worn by a passenger qualifies as personal effects under the Baggage Rules and is exempt from customs duty and detention.

- The Customs Department must issue a Show Cause Notice within the statutory period after detention; failure to do so invalidates the detention.

- Customs officials must distinguish between jewellery and personal jewellery and apply the law with due regard to the facts of each case, avoiding mechanical detention.

Final determinations:

- The detained gold jewellery is bona fide personal jewellery exempt from customs duty.

- The detention without issuance of a timely Show Cause Notice is unlawful.

- The detained jewellery shall be released within four weeks upon personal hearing and consideration of petitioner's submissions, with waiver of storage charges.