2025 (6) TMI 557 - HC - Customs

Seeking a direction to the Respondent-Commissioner of Customs to release the detained goods - It is the case of the Petitioners that no SCN has been issued till date as also that the gold items of the Petitioners are their old personal used gold items and the same ought to be returned - HELD THAT - In the opinion of the Court having considered the facts of the case and the documents placed on record the detained gold items clearly appear to be used personal jewellery of the Petitioners. The issue whether gold items 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 decision of 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 - The detained gold items are the personal effects of the Petitioners exempt from customs duty and must be released. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the detained gold items carried by the Petitioners constitute "used personal jewellery" and thereby fall within the ambit of "personal effects" under the Baggage Rules, 2016, permitting duty-free clearance.
• Whether the Customs Department was justified in detaining the gold items without issuing a Show Cause Notice.
• The interpretation and applicability of the Baggage Rules, 2016, particularly Rules 2(vi), 3, and 5, and Annexure-I, concerning the classification and duty exemption of jewellery brought by passengers arriving from abroad.
• The relevance of prior judicial precedents, including Supreme Court and High Court decisions, on the distinction between "jewellery" and "personal jewellery" and the treatment of used versus newly acquired jewellery under customs regulations.
• The procedural safeguards and obligations of Customs authorities in detaining goods claimed as personal effects, including the requirement of considering the bona fide nature of the jewellery and issuing appropriate notices before detention.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Gold Items as Used Personal Jewellery and Their Exemption Under Baggage Rules

Relevant Legal Framework and Precedents: The Baggage Rules, 2016, particularly Rule 2(vi) defines "personal effects" as items required for daily necessities but excludes jewellery. However, Rule 3 allows duty-free clearance of used personal effects and travel souvenirs up to specified value limits. Rule 5 permits duty-free clearance of jewellery up to specified weight and value caps depending on the gender of the passenger. Annexure-I excludes gold or silver in any form other than ornaments from duty-free clearance.

Supreme Court precedent in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani (2017) clarified that jewellery worn by passengers cannot be completely excluded from "personal effects." The Court emphasized that bona fide jewellery for personal use, whether new or used, is exempt from duty if carried in bona fide baggage and intended to be taken out of India. The Court also rejected the argument that jewellery brought into India for onward travel abroad is liable for import duty.

The Division Bench of the Delhi High Court in Saba Simran v. Union of India (2024) further refined this interpretation by distinguishing "jewellery" as newly acquired articles from "personal jewellery" which is used and borne by the passenger. The Court held that personal jewellery not acquired on the overseas trip and always used by the passenger is not subject to the monetary limits prescribed under Rules 3 and 4 of the 2016 Rules.

This position was upheld by the Supreme Court when it dismissed the Special Leave Petition challenging the Division Bench's ruling in Saba Simran.

The Delhi High Court in Makhinder Chopra v. Commissioner of Customs (2025) reiterated that bona fide jewellery in personal use by tourists falls within personal effects and cannot be detained mechanically by Customs. The Madras High Court in Thanushika v. Principal Commissioner of Customs (2025) also held that the Rules apply to baggage and not to articles carried on the person, reinforcing the protection of personal jewellery from detention.

Court's Interpretation and Reasoning: The Court examined the detained gold items and found them to be used personal jewellery of the Petitioners. It relied on the above precedents to hold that such jewellery falls within the ambit of personal effects under the Rules and is exempt from duty and detention. The Court emphasized that the Customs Department must distinguish between "jewellery" and "personal jewellery" and consider the bona fide nature of the items before detention.

Key Evidence and Findings: The Petitioners filed photographs of the gold items, representing them as personal jewellery. No Show Cause Notice was issued by Customs, and the items were detained without due process. The Court found the detained items to be used personal jewellery, not newly acquired goods or goods intended for import.

Application of Law to Facts: Applying the legal framework and precedents, the Court concluded that the detained gold items are protected personal effects under the Baggage Rules, 2016, and cannot be detained or confiscated without proper procedure. The Petitioners are entitled to the release of their jewellery free of duty.

Treatment of Competing Arguments: The Court considered the Customs Department's detention but found no justification for withholding the items without issuing a Show Cause Notice. Arguments that the jewellery might be new or intended for import were rejected based on the Petitioners' claim and evidence of long-term personal use, consistent with judicial precedents.

Conclusions: The detained gold items are bona fide used personal jewellery exempt from customs duty and must be released to the Petitioners.

Issue 2: Procedural Requirements and Validity of Detention Without Show Cause Notice

Relevant Legal Framework and Precedents: The Customs Act, 1962, and the Baggage Rules require that before detaining or confiscating goods, the Customs authorities must issue a Show Cause Notice to the person concerned, providing an opportunity to respond. The Supreme Court in Pushpa Lekhumal Tolani underscored the importance of procedural fairness and the need for declarations at the green channel, which are deemed implicit declarations facilitating smooth clearance.

Court's Interpretation and Reasoning: The Court noted that no Show Cause Notice was issued to the Petitioners before detaining their gold items. This procedural lapse undermines the validity of the detention. The Court held that mechanical detention without due process is impermissible, especially when the goods are claimed as personal effects exempt under the Rules.

Key Evidence and Findings: The record showed detention receipts but no Show Cause Notice. The Petitioners' assertion of personal use was unchallenged by any formal notice or inquiry.

Application of Law to Facts: The Court applied the procedural safeguards mandated by law and concluded that the detention without notice was unlawful and the goods must be released.

Treatment of Competing Arguments: The Customs Department did not produce any evidence justifying the absence of a Show Cause Notice or the legality of detention. The Court rejected any implied justification for such detention.

Conclusions: Detention of the gold items without issuing a Show Cause Notice was invalid, and the Petitioners are entitled to immediate release of their goods.

3. SIGNIFICANT HOLDINGS

The Court's crucial legal reasoning is encapsulated in the following verbatim excerpts:

"Having considered the facts of the case and the documents placed on record, the detained gold items clearly appear to be used personal jewellery of the Petitioners."

"In terms of Rule 2 (vi) read with Rule 3 of the Baggage Rules, 2016, the Petitioners would be permitted clearance of articles, free of duty in their bona fide baggage, including used personal effects."

"The issue whether gold items 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."

"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."

"Customs Officials are required to consider the facts of each case and apply their mind before detaining the goods of a tourist... personal effects including jewellery of tourists are protected by the law from detention and same cannot be detained in a mechanical manner."

"No warehouse charges shall be payable in this case."

Core principles established include:

• Used personal jewellery worn or carried by passengers constitutes "personal effects" under the Baggage Rules and is exempt from customs duty and detention.
• Newness of jewellery is not determinative; bona fide personal use is the key criterion.
• Customs authorities must differentiate between "jewellery" and "personal jewellery" and apply the Rules accordingly.
• Detention of goods without issuing a Show Cause Notice is procedurally improper and invalid.
• Goods detained as personal effects must be released promptly without imposing warehouse charges.

Final determinations on each issue are:

• The detained gold items are bona fide used personal jewellery exempt from customs duty and must be released.
• The Customs Department's detention without issuing a Show Cause Notice was unlawful.
• The Petitioners are directed to appear before Customs for release of their gold items, and no warehouse charges shall be imposed.