2025 (2) TMI 384 - HC - Customs

Officials falsified records claiming gold jewelry was concealed when worn openly, confiscation orders quashed under Baggage Rules 2016

Arasi Inpamaty Mathiaparanam, Thanushika, Kirushalini Reegan Versus The Assistant Commissioner of Customs (Airport – C Batch), O/o. The Commissioner of Customs, Chennai

Madras HC quashed confiscation orders for gold ornaments worn by petitioners upon arrival, finding officials falsified records by claiming jewelry was ... Smuggling - Direction to respondent to release the Gold ornaments inappropriately seized by the respondent officials - Whether the Baggage Rules, 2016, are ultra vires the Customs Act, 1962, particularly concerning the inclusion of articles 'carried on the person'? - violation of principles of natural justice - HELD THAT:- The real fact is that all the jewels were worn by the petitioners at the time of arrival. But the same not been stated in the confiscation notice, which was issued based on the falsely created Mahazar, wherein it was stated as if it was concealed under the sleeves and brought illegally by the petitioner. Therefore, the falsification of the records, such as preparation of the Mahazar, stands confirmed by virtue of reflecting the false informations in the confiscation orders. Based on their own statement, they had clearly proved that the Mahazar was prepared with false information, in order to, fix the petitioners into the case for ulterior notice for the reasons better known to them. This Court suspects that the officials have orchestrated this entire episode in order to divert the attention of the others for the benefit of somebody else. When the provision of the Rule is beyond the scope of the provisions of the Act, only the provision of the Act will prevail over the Rules. Thus, the word “carried on the person up to Rs. 50,000/-” is clearly beyond the scope of the Act and it cannot be given any effect since it is contrary to the provisions of the Statute. Thus, it has to be construed only for the articles, which have not been mentioned in Annexure-1 and carried in the accompanied baggage of a passenger. In such case, the application of Baggage Rules, 2016, would not arise. Thus, the jewelery worn by the passenger will not fall within the provisions of the Baggage Rules, 2016. The Doctrine of ultra vires states that the Rule making body must function within the purview of the Rule making authority conferred on it by the parent Act. As the body of making rules or regulations, there is no inherent power of its own to make rules, but such power arise only from the Statute and hence, it must necessarily function within the purview of the Statute - In the present case, the Rule making body had made the Baggage Rules as if they are having inherent power of its own to make rules beyond the scope of the Statutes, and they have incorporated the word “carried on the person”. Since this Court has held that the provision “as carried on the person” of the Baggage Rules, 2016 is ultra vires, the detention of gold under the Baggage Rules, 2016, in the present case would not apply, unless and otherwise if it is secreted in person, for which, the proceedings shall be initiated under Section 101 of the Customs Act, 1962, however, that is not the present case, except to the extent of false charges framed by the officials against the petitioner. Conclusion - i) The confiscation orders were passed without issuing the show cause notice; ii) No proper opportunity of personal hearing was provided to the petitioner prior to the passing of confiscation orders; iii) Since the Mahazar was prepared with false information to foist a false case against the petitioners, the confiscation orders were also passed, as an ex parte order, with the false information available in the said Mahazar. iv) The manner, in which the jewellery was brought by the petitioners, as stated in the Mahazar is that it was brought under the sleeve, however, in the affidavit, it was clearly stated that the petitioners worn the jewellery at the time of arrival. Due to the said contradiction of the respondent, it is clear that there was a change in the stand of the respondents with regard to the manner, in which the gold was carried by the petitioners, from proceedings to proceedings. This writ petition is allowed and the confiscation orders dated 24.04.2024 is quashed. The respondents are directed to release the goods of the petitioners within a period of 7 days from the date of receipt of copy of this order. ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this judgment include: Whether the seizure of gold ornaments from the petitioners by customs officials was lawful under the Customs Act, 1962, and the Baggage Rules, 2016. Whether the Baggage Rules, 2016, are ultra vires the Customs Act, 1962, particularly concerning the inclusion of articles 'carried on the person.' Whether the principles of natural justice were violated in the confiscation proceedings against the petitioners. Whether the customs officials acted beyond their jurisdiction and authority in seizing the gold ornaments.ISSUE-WISE DETAILED ANALYSIS1. Legality of the Seizure under the Customs Act and Baggage Rules Relevant Legal Framework: The Customs Act, 1962, particularly Section 79, and the Baggage Rules, 2016, were central to this issue. Section 79 deals with bona fide baggage exempted from duty, while the Baggage Rules outline what constitutes baggage and the conditions for duty exemptions. Court's Interpretation: The Court found that the Baggage Rules, 2016, which include articles 'carried on the person,' extend beyond the scope of the Customs Act, 1962. The Court held that the rules are ultra vires to the extent they include articles worn on the person. Key Evidence and Findings: The Court noted discrepancies in the confiscation orders and the Mahazar prepared by customs officials, indicating false information was used to justify the seizure. Application of Law to Facts: The Court determined that the gold ornaments worn by the petitioners did not fall within the scope of the Baggage Rules, 2016, as they were worn on the person and not in baggage. Treatment of Competing Arguments: The Court rejected the respondent's reliance on the Baggage Rules, 2016, as the rules were found to be ultra vires the Customs Act. Conclusions: The seizure of gold ornaments was deemed unlawful, and the confiscation orders were quashed.2. Violation of Principles of Natural Justice Relevant Legal Framework: The principles of natural justice require that affected parties be given notice and an opportunity to be heard before adverse actions are taken. Court's Interpretation: The Court found that no show cause notice was issued to the petitioners, and the opportunity for a personal hearing was insufficient, especially given the petitioners' status as foreign nationals. Key Evidence and Findings: The Court noted that the confiscation orders were passed without proper notice or hearing, violating principles of natural justice. Application of Law to Facts: The Court determined that the procedural failures in the confiscation process rendered the orders void. Treatment of Competing Arguments: The respondent's claim that the petitioners waived their right to a show cause notice was rejected due to the lack of evidence and the context of the case. Conclusions: The confiscation orders were quashed due to violations of natural justice.3. Jurisdiction and Authority of Customs Officials Relevant Legal Framework: The Customs Act, 1962, defines the scope of customs officials' authority, particularly regarding baggage and personal effects. Court's Interpretation: The Court found that the customs officials exceeded their jurisdiction by applying the Baggage Rules, 2016, to articles worn on the person. Key Evidence and Findings: The Court highlighted inconsistencies in the officials' reports and the lack of specific denial of allegations against them. Application of Law to Facts: The Court ruled that the officials acted beyond their authority, as the rules they relied upon were not applicable to the petitioners' situation. Treatment of Competing Arguments: The Court dismissed the respondent's argument that the Baggage Rules justified the seizure, emphasizing the ultra vires nature of the rules. Conclusions: The actions of the customs officials were deemed unlawful, and the confiscation orders were quashed.SIGNIFICANT HOLDINGS Core Principles Established: The Court established that subordinate legislation, such as the Baggage Rules, must conform to the parent statute, the Customs Act, 1962. Rules that exceed the scope of the statute are ultra vires and unenforceable. Final Determinations: The confiscation orders dated 24.04.2024 were quashed due to procedural violations and the ultra vires nature of the Baggage Rules, 2016. The Court directed the release of the petitioners' gold ornaments within seven days.The judgment underscores the importance of adhering to statutory limits in rule-making and the necessity of observing natural justice principles in administrative actions.