2025 (6) TMI 379 - HC - Customs

Seeking release of detained articles - personal effects or not - detention and confiscation of goods without issuance of a valid show cause notice and personal hearing - violation of principles of natural justice - waiver of SCN - pre-printed waiver obtained by the Customs Department from the Petitioner - 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 . 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 - In view of the above and considering the facts of the case it is clear that the detained articles are the personal effects of the Petitioner. The detained articles being personal effects of the Petitioner the detention of the same itself would be contrary to law. Accordingly the detained articles would be liable to be released on this ground itself. The gold items shall be released by the Customs Department to the Petitioner. Conclusion - i) The printed waiver of SCN and the printed statement made in the request for release of goods cannot be considered or deemed to be an oral SCN in compliance with Section 124. ii) The impugned Order-in-Original dated 1st August 2024 is set aside to the extent that it orders absolute confiscation. The impugned Order-in-Original dated 1st August 2024 is set aside to the extent that it orders absolute confiscation - petition disposed off.

Summary

The core legal questions considered in this judgment include:

1. Whether the non-issuance of a Show Cause Notice (SCN) and denial of personal hearing violates principles of natural justice and statutory requirements under the Customs Act, 1962.

2. Whether a pre-printed waiver of SCN and personal hearing signed by the passenger can be considered valid and compliant with Section 124 of the Customs Act.

3. Whether the gold bangles worn by the petitioner qualify as "personal effects" under the Baggage Rules, 2016, and are thus exempt from customs duty and detention.

4. The applicability and interpretation of the Baggage Rules, 2016, particularly concerning jewellery brought by passengers returning to India.

5. The validity of the Customs Department's Order-in-Original confiscating the gold bangles and imposing penalties.

6. The extent to which precedents and Supreme Court rulings affect the treatment of jewellery as personal effects and the procedural requirements for confiscation.

Issue 1: Validity of Non-Issuance of Show Cause Notice and Denial of Personal Hearing

The legal framework mandates issuance of a SCN and opportunity for personal hearing before confiscation of goods under Section 124 of the Customs Act, 1962. The Court examined whether the petitioner validly waived these rights by signing a pre-printed waiver form.

Precedents such as Amit Kumar v. The Commissioner of Customs and Mr Makhinder Chopra vs. Commissioner of Customs were pivotal. These decisions held that a pre-printed waiver of SCN and personal hearing is contrary to law and violates natural justice. The Court emphasized that such waiver forms cannot substitute for the statutory requirement of issuing a SCN and granting a hearing.

The Court found that the petitioner's waiver was a standard pre-printed form, which cannot be deemed a valid oral SCN compliant with Section 124. Therefore, the non-issuance of SCN and denial of personal hearing vitiated the entire confiscation process.

The Customs Department's reliance on the waiver to deny procedural safeguards was rejected, and the Court set aside the Order-in-Original to the extent it ordered absolute confiscation based on this procedural irregularity.

Issue 2: Classification of the Detained Articles as Personal Effects under the Baggage Rules, 2016

The Court analyzed the Baggage Rules, 2016, particularly Rules 2(vi), 3, and 5, which define "personal effects" and prescribe duty-free allowances for used personal effects and jewellery brought into India by returning residents or tourists.

Rule 2(vi) excludes jewellery from personal effects in a general sense, but Rule 5 allows duty-free clearance of jewellery up to specified weight and value limits depending on the passenger's gender and residency status. Annexure-I excludes certain items, including gold or silver in any form other than ornaments, from duty-free allowance.

Key precedents, including the Supreme Court's ruling in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, clarified that jewellery bona fide in personal use cannot be completely excluded from personal effects. The Court emphasized that used personal jewellery worn by passengers is exempt from customs duty and is part of personal effects. The newness or proximity of purchase is irrelevant.

The Division Bench decision in Saba Simran v. Union of India further distinguished "personal jewellery" from "jewellery" and held that personal jewellery worn by passengers is not subject to the monetary caps applicable to newly acquired jewellery under the Rules.

The Supreme Court's dismissal of the Union of India's Special Leave Petition challenging this interpretation reinforced the binding nature of this legal position.

Applying these principles, the Court held that the petitioner's gold bangles, worn during the pilgrimage and clearly used personal effects, fall within the exemption under the Baggage Rules and thus should not have been detained or confiscated.

Issue 3: Validity of the Customs Department's Order-in-Original Confiscating the Gold Bangles and Imposing Penalty

The Customs Department's Order-in-Original dated 1st August 2024 declared the petitioner an "ineligible passenger" under Notification No. 50/2017-Customs and ordered absolute confiscation of the two gold bangles weighing 115 grams, along with a penalty of Rs. 70,000/- under Sections 112(a) and 112(b) of the Customs Act.

The Court noted that the petitioner had opted for the Green Channel but was intercepted after crossing it, and the bangles were recovered during baggage search. The petitioner admitted omission in not declaring the items but also stated willingness to pay duty and penalty.

However, since the detention and confiscation were based on a flawed procedure (no valid SCN and hearing) and the articles were bona fide personal effects exempt under the Baggage Rules, the confiscation order was unsustainable.

The Court set aside the order to the extent of confiscation but upheld the imposition of penalty and directed payment of 50% of warehousing charges, balancing procedural lapses and the petitioner's admission of omission.

Issue 4: Treatment of Competing Arguments

The Customs Department argued that the petitioner violated customs rules by not declaring the gold bangles and that the waiver of SCN and hearing was valid. The Department also contended that the bangles exceeded the duty-free allowance limits and thus were liable for confiscation.

The Court rejected the waiver argument based on binding precedents emphasizing procedural fairness and natural justice. It also rejected the Department's interpretation that all jewellery is excluded from personal effects, relying on the Supreme Court's and Division Bench's rulings that used personal jewellery worn by passengers is exempt.

The petitioner's argument that the bangles were personal effects worn during pilgrimage and thus exempt was accepted. The Court recognized the petitioner's admission of omission but balanced this with the legal protections afforded to bona fide personal effects and procedural safeguards.

Significant Holdings

"The pre-printed standard waiver of SCN is contrary to law as it violates the basic principles of natural justice."

"The printed waiver of SCN and the printed statement made in the request for release of goods cannot be considered or deemed to be an oral SCN, in compliance with Section 124."

"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."

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

"The impugned Order-in-Original dated 1st August, 2024 is set aside to the extent that it orders absolute confiscation."

The Court established core principles that procedural fairness under the Customs Act requires issuance of SCN and personal hearing, which cannot be waived by standard pre-printed forms. It confirmed that used personal jewellery worn by passengers is exempt from customs duty as personal effects under the Baggage Rules. Confiscation orders based on procedural lapses and misclassification of such jewellery are unsustainable.

Accordingly, the Court ordered release of the detained gold bangles to the petitioner, upheld the penalty imposition, and required partial payment of warehousing charges, thus balancing legal protections with regulatory compliance.