2025 (5) TMI 2110 - HC - Customs

Thai national wins case for seized gold jewellery as worn items qualify as personal effects under Baggage Rules 2016

Varin Mahathanapibal Versus Union Of India And Anr.

Varin Mahathanapibal Versus Union Of India And Anr. - 2025:DHC:4365 - DB The core legal questions considered by the Court include:1. Whether the detained jewellery seized by the Customs Department from a foreign national passenger falls within the ambit of 'personal effects' under the Baggage Rules, 2016, and is thus exempt from customs duty and detention.2. The applicability and scope of the Baggage Rules, 2016, particularly in relation to foreign nationals and tourists of foreign origin.3. The legality and procedural propriety of the Customs Department's disposal of the detained jewellery without prior intimation to the Petitioner.4. The entitlement of the Petitioner to compensation or refund following the disposal of the detained jewellery by the Customs Department.Issue-wise Detailed AnalysisIssue 1: Whether the detained jewellery qualifies as personal effects under the Baggage Rules, 2016The relevant legal framework comprises the Baggage Rules, 2016, particularly Rule 2(vi) defining 'personal effects' and Rule 3 which permits clearance of used personal effects free of duty, subject to certain value and weight limits for jewellery. Annexure-I of the Rules lists prohibited or restricted items, including gold or silver in any form other than ornaments.The Court noted that Rule 2(vi) excludes jewellery from the definition of personal effects, but Rule 3 provides an exemption for jewellery up to specified limits if bona fide carried by passengers. The Court referred extensively to precedents, notably the Supreme Court's decision in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, which clarified that jewellery worn by a passenger cannot be entirely excluded from personal effects. The Supreme Court emphasized that both new and used jewellery intended for personal use and carried out of India are not liable to customs duty.Further, the Division Bench of the Delhi High Court in Saba Simran v. Union of India distinguished between 'jewellery' and 'personal jewellery,' holding that used personal jewellery worn by passengers is exempt from the monetary restrictions in the Rules. This position was upheld by the Supreme Court in dismissing the Union of India's Special Leave Petition challenging the decision.The Court also relied on its own earlier decision in Makhinder Chopra v. Commissioner of Customs, which reiterated that bona fide jewellery in personal use is protected from detention and seizure under the Baggage Rules.Applying these principles to the facts, the Court found that the detained silver-coated metal kada, appearing as gold and weighing 250 grams, constituted used personal jewellery of the Petitioner. Therefore, the detention of the jewellery was contrary to law.Issue 2: Applicability of the Baggage Rules to foreign nationalsThe Court examined the limited applicability of the Baggage Rules to foreign nationals. It referred to the proviso to Rule 3 of the Rules, which allows tourists of foreign origin clearance of duty-free articles in bona fide baggage but limits the value of such articles to Rs. 15,000, as opposed to Rs. 50,000 for Indian residents or foreigners residing in India.The Court relied on the decision in Nathan Narayansamy v. Commissioner of Customs, where a similar issue involving a Malaysian passport holder was considered. The Court held that the Baggage Rules apply with limited scope to foreign nationals and that jewellery and ornaments carried by such tourists are exempt from seizure under Entry 5 of Annexure-I, which prohibits gold or silver in any form other than ornaments.Moreover, Rule 5 of the Baggage Rules, which permits clearance of jewellery up to certain limits for passengers returning to India after residing abroad for over one year, was held inapplicable to foreign nationals like the Petitioner.Thus, the Court concluded that the detained jewellery, being personal effects of a foreign national tourist, fell within the limited exemption under the Rules and should not have been detained.Issue 3: Legality and procedural propriety of disposal of detained jewellery without prior intimationThe Court addressed the issue of the Customs Department disposing of the detained jewellery without prior intimation to the Petitioner. It was noted that the Department had communicated the sale of the jewellery to the Petitioner's Embassy, but the Petitioner was not directly intimated.The Court referenced its earlier decision in Gor Sharian v. Commissioner of Customs, where disposal of detained gold without intimation was held to be unreasonable and arbitrary. The Court emphasized that such disposal without informing the concerned party, especially when the party has succeeded in a legal challenge, is contrary to law.The Court also referred to a Circular dated 6th September, 2022, prescribing procedures for return of seized gold, but held that the Circular's provisions do not apply when the Department fails to provide proper intimation before disposal.Accordingly, the Court found the disposal procedure in the present case to be untenable and contrary to principles of natural justice and statutory requirements.Issue 4: Entitlement to compensation or refund following disposalGiven the illegal detention and improper disposal, the Court considered the Petitioner's entitlement to compensation. It was recorded that the Customs Department realized approximately Rs. 12,66,557/- after deducting processing charges from the sale proceeds of the jewellery.Relying on the Gor Sharian precedent, the Court directed the Customs Department to pay the amount realized from the sale to the Petitioner, with 6% statutory interest from the date of disposal (15th May, 2023). The payment was to be made by 15th July, 2025, failing which the Petitioner could seek payment of the market value of the gold with interest.The Court further directed the Customs Department to ensure future compliance with intimation requirements, including communication via email and mobile, to prevent deprivation of property of parties succeeding in legal proceedings.Significant Holdings'The detained jewellery clearly appear to be used personal gold items of the Petitioner.''Having considered the facts of the case and the documents placed on record, the detained jewellery are the personal effects of the Petitioner.''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.''The Baggage Rules would have limited application to foreign nationals.''The disposal of the detained gold without intimation to the Petitioner is contrary to law.''The Petitioner is entitled to the entire value of the detained gold as on the market rate prevalent today, which would be liable to be paid by the Customs Department with statutory interest.''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.'The Court's final determinations were that the detained jewellery constituted personal effects exempt from customs duty and detention under the Baggage Rules, even for a foreign national tourist. The detention and subsequent disposal by the Customs Department without proper intimation were unlawful. Consequently, the Petitioner was entitled to refund of the sale proceeds with interest, and the Customs Department was directed to comply accordingly.