2025 (6) TMI 130 - HC - Customs

Seeking release of the four gold bangles of the Petitioner weighing a total of 173 grams - SCN was indeed not issued to the Petitioner upon detention and the Petitioner also did not appear for the appraisement of the detained articles - violation of principles of natural justice - HELD THAT - This Court while deciding the issue pertaining to non-issuance of the Show Cause Notice within the prescribed period under the Customs Act 1962 has held 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 since the detention in this case is of 05th February 2024 and no SCN has been issued till date further detention is impermissible. 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 . 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. Conclusion - 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 the Customs Act 1962 is a period of six months with a possible extension of another six months subject to compliance. In this case since one year has elapsed without issuance of the SCN further detention is impermissible. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

(a) Whether the Customs Department was obligated to issue a Show Cause Notice (SCN) within the prescribed period under the Customs Act, 1962, following the detention of the petitioner's gold jewellery;

(b) Whether the failure to issue the SCN within the statutory timeframe renders the continued detention of the goods impermissible;

(c) Whether the gold jewellery seized from the petitioner constitutes "personal effects" under the Baggage Rules, 2016, and thereby qualifies for duty-free clearance;

(d) The legal interpretation of "jewellery" vis-`a-vis "personal effects" under the applicable Customs and Baggage Rules, including the relevance of prior judicial precedents;

(e) The applicability of the monetary and weight limits prescribed under the Baggage Rules for duty-free clearance of jewellery;

(f) The procedural and substantive rights of the petitioner with respect to the detained articles and their lawful release.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Obligation to Issue Show Cause Notice and Effect of Non-Issuance

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 another six months subject to compliance with statutory requirements. The Court emphasized that the issuance of SCN and providing a personal hearing to the detained party is mandatory and procedural compliance is essential.

In the instant case, the detention occurred on 5th February 2024, but no SCN has been issued even after the lapse of the one-year period, which is beyond the maximum permissible timeframe. The Customs Department conceded the non-issuance of the SCN and the petitioner's non-appearance for appraisement. The Court held that such failure renders further detention impermissible, citing the statutory mandate and procedural fairness principles.

The Court's reasoning underscored the principle that procedural safeguards must be strictly adhered to, and the absence of a timely SCN undermines the legality of continued detention. This aligns with established jurisprudence emphasizing the necessity of due process in customs enforcement actions.

Issue (c), (d) and (e): Classification of Gold Jewellery as Personal Effects under the Baggage Rules, 2016

The Baggage Rules, 2016, particularly Rule 2(vi) and Rule 3, define "personal effects" and prescribe duty-free allowances for used personal effects and jewellery brought by passengers returning to India. Rule 2(vi) defines "personal effects" as things required for satisfying daily necessities but explicitly excludes jewellery. However, Rule 3 and Rule 5 provide specific provisions for duty-free clearance of jewellery up to prescribed weight and value limits, differentiated by gender.

The Court examined the legal framework and prior authoritative decisions, including the Supreme Court's ruling in the Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which clarified that jewellery cannot be categorically excluded from "personal effects." The Supreme Court held that bona fide jewellery worn by a passenger, whether new or used, is part of personal effects and is not liable for import duty if it is intended to be taken out of India.

The Court further relied on a Division Bench decision of the same High Court in Saba Simran v. Union of India, which distinguished between "jewellery" and "personal jewellery," holding that used personal jewellery worn by passengers does not attract the monetary caps applicable to newly acquired jewellery under the 2016 Rules. This distinction was upheld by the Supreme Court when it dismissed the Union of India's Special Leave Petition challenging the Division Bench's ruling.

Additionally, the Court cited its own prior decision in Mr. Makhinder Chopra v. Commissioner of Customs, which reinforced that bona fide personal jewellery worn by tourists falls within the ambit of personal effects and is exempt from seizure under the Baggage Rules.

Applying these precedents, the Court concluded that the gold bangles seized from the petitioner, being used personal jewellery worn by her, constitute personal effects exempt from customs duty and seizure under the Rules.

Issue (f): Rights of the Petitioner and Release of Detained Articles

Given that the detained articles are personal effects and the Customs Department failed to issue the SCN within the statutory period, the Court held that the detention itself is unlawful. Accordingly, the Court ordered the release of the gold bangles subject to payment of warehousing charges.

The Court also clarified the procedural mechanism for release, allowing the petitioner to collect the articles either personally or through an Authorized Representative, provided the Customs Department receives appropriate communication from the petitioner consenting to release to the representative.

This approach balances the petitioner's rights with procedural safeguards for the Customs Department, ensuring lawful and orderly release of the detained goods.

3. SIGNIFICANT HOLDINGS

The Court's ruling establishes several key principles and determinations:

"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 the Customs Act, 1962, is a period of six months, with a possible extension of another six months subject to compliance. In this case, since one year has elapsed without issuance of the SCN, further detention is impermissible."

"The used jewellery worn by the passenger falls within the ambit of personal effects as defined under the Baggage Rules, 2016, and is exempt from customs duty and detention."

"The detention of bona fide personal jewellery without issuance of a Show Cause Notice within the prescribed period is contrary to law and the detained articles shall be released upon payment of warehousing charges."

"Personal jewellery is distinct from jewellery newly acquired abroad, and the monetary and weight caps applicable to newly acquired jewellery do not apply to used personal jewellery worn by the passenger."

These holdings reaffirm the procedural safeguards under the Customs Act and clarify the substantive rights of passengers regarding personal jewellery under the Baggage Rules. The judgment consolidates the jurisprudence that personal jewellery worn by passengers is protected from arbitrary detention and duty, provided it is bona fide and intended for personal use.