2025 (8) TMI 658 - HC - Customs

Confiscation of Gold Bangles as Personal Effects Set Aside for Violating Natural Justice and SC Precedent

Shamina Versus Commissioner Of Customs

The HC set aside the absolute confiscation of four gold bangles weighing 100 grams, held as personal effects by the Petitioner. The Adjudicating ... Absolute confiscation - Seeking release of detained four gold bangles of the Petitioner, weighing 100 grams - personal effects - no personal hearing has been granted to the Petitioner in the present case - violation of principles of natural justice - HELD THAT:- Perusal of the impugned order would show that the Adjudicating Authority holds that the Petitioner is an ineligible passenger and has relied under Rule 5 of the Baggage Rules, 2016 to hold that the cap which has been fixed under the said rule is much lower and the value of the gold which the Petitioner was carrying is higher. Further, the Adjudicating Authority records that these are four gold bangles with average purity of 998 and therefore, it is not in the nature of jewellery. The weight of four gold bangles collectively is 100 grams which means that each bangle weighs 25 grams. On the aspect of personal effects and jewellery, the Adjudicating Authority has merely held that because of the purity, the same cannot be considered as personal jewellery as it is prohibited goods. This is contrary to the settled law. The Supreme Court in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, [2017 (8) TMI 684 - SUPREME COURT], has considered whether jewellery being carried by a tourist as part of her baggage would qualify as smuggling under the Customs Act, 1962 read with the Baggage Rules, 1998, that was in force during the relevant period. The Supreme Court clearly holds that it is not permissible to completely exclude jewellery from the ambit of ‘personal effects’. Accordingly, the Court declared that the seized jewellery items therein were the bona fide jewellery of the tourist for her personal use and was intended to be taken out of India. In view of the settled law, absolute confiscation of the four gold bangles without even permitting payment of any duty, redemption fine or penalty seems to be an extreme measure taken by the Adjudicating Authority. Moreover, personal hearing cannot be waived as per the settled law. The detained gold bangles are directed to be released to the Petitioner within four weeks subject to the payment of warehousing charges. The warehousing charges shall be payable in terms of applicable charges on the date of detention - the impugned order is set aside - Petition allowed. 1. ISSUES PRESENTED and CONSIDERED Whether the four gold bangles carried by the passenger qualify as personal jewellery or dutiable/prohibited goods under the Customs Act, 1962 and the Baggage Rules, 2016. Whether the Adjudicating Authority was justified in ordering absolute confiscation of the gold bangles without allowing payment of duty, redemption fine, or penalty. Whether the waiver of issuance of Show Cause Notice (SCN) and personal hearing by the passenger's counsel is valid and in accordance with law. The proper interpretation and application of the terms 'personal effects' and 'jewellery' under the Baggage Rules, 2016, including the distinction between 'jewellery' and 'personal jewellery.' Whether the passenger's failure to declare the gold bangles at customs constitutes a violation warranting confiscation and penalty under the Customs Act. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Classification of the gold bangles as personal jewellery or dutiable/prohibited goods - Legal Framework and Precedents: The Customs Act, 1962 and the Baggage Rules, 2016 govern the import and declaration of goods by passengers. Rule 2(vi) of the Baggage Rules, 2016 defines 'personal effects' but explicitly excludes 'jewellery' from this definition. However, prior case law, including the Supreme Court's judgment in Directorate of Revenue Intelligence v. Pushpa Lekhumal Tolani, establishes that jewellery carried by a tourist as part of their baggage can be bona fide personal effects and not liable to confiscation or duty, provided it is for personal use and not intended for import or sale. - Court's Interpretation and Reasoning: The Adjudicating Authority relied on Rule 5 of the Baggage Rules, 2016 and the high purity (998) of the gold bangles to hold that the items were not personal jewellery but prohibited goods, thus justifying confiscation. The Court found this interpretation contrary to settled law, emphasizing that purity alone cannot exclude jewellery from being considered personal effects. - Key Evidence and Findings: The four gold bangles weighed 100 grams in total (approximately 25 grams each) and were worn by the passenger as personal jewellery. There was no evidence of concealment or intent to evade customs detection. The passenger was an Indian citizen returning from abroad and claimed the bangles as used personal jewellery. - Application of Law to Facts: Applying the Supreme Court precedent, the Court held that the bangles constituted bona fide personal jewellery and thus fell within the ambit of personal effects exempt from duty and confiscation under the Baggage Rules, 2016. - Treatment of Competing Arguments: The Customs Department argued that the high value and purity rendered the bangles liable for confiscation. The Court rejected this, noting that the value or newness of jewellery does not negate its status as personal effects if carried for personal use. - Conclusion: The gold bangles are to be considered personal jewellery and not prohibited or dutiable goods under the relevant Customs Act provisions and Baggage Rules. Issue 2: Validity of absolute confiscation without permitting payment of duty or penalty - Legal Framework and Precedents: The Customs Act, 1962 provides for confiscation and penalties but also contemplates redemption of goods upon payment of duty and penalty in appropriate cases. The Supreme Court and High Court decisions emphasize proportionality and the right to pay duty/redemption fines before confiscation is ordered. - Court's Interpretation and Reasoning: The Court found the absolute confiscation ordered by the Adjudicating Authority to be an extreme and unjustified measure, especially in the absence of personal hearing and without allowing payment of duty or penalty. - Key Evidence and Findings: No evidence suggested smuggling or concealment. The passenger had not declared the bangles but claimed them as used personal jewellery. The impugned order did not consider redemption or payment options. - Application of Law to Facts: The Court applied the principle of proportionality and settled law to hold that confiscation without affording opportunity to pay duty/redemption fine was improper. - Treatment of Competing Arguments: The Customs Department did not dispute the confiscation order but relied on procedural waiver of SCN and personal hearing. The Court held that procedural safeguards could not be waived improperly to justify confiscation. - Conclusion: Absolute confiscation without permitting payment of duty/redemption fine is not justified; the detained gold bangles must be released subject to applicable warehousing charges. Issue 3: Validity of waiver of Show Cause Notice and personal hearing - Legal Framework and Precedents: Principles of natural justice require that a person affected by an adverse order be given an opportunity of personal hearing and issuance of Show Cause Notice except where waiver is knowingly and voluntarily made. The Supreme Court and High Court have held that waiver of personal hearing and SCN must be clear and unequivocal. - Court's Interpretation and Reasoning: The Court noted that no personal hearing was granted. Although the passenger's counsel purportedly waived the SCN and personal hearing, the Court found such waiver contrary to settled law and procedural fairness. - Key Evidence and Findings: Two lawyers engaged by the passenger appeared before Customs; one waived the SCN issuance. However, the Court emphasized that such waiver cannot substitute for mandatory procedural safeguards. - Application of Law to Facts: The Court held that the Adjudicating Authority erred in proceeding without granting personal hearing and relying on the waiver by counsel, which was not in accordance with law. - Treatment of Competing Arguments: The Customs Department argued that the waiver was valid and the oral SCN was received. The Court rejected this, underscoring the mandatory nature of personal hearing and SCN issuance. - Conclusion: Waiver of SCN and personal hearing by counsel was improper; the procedural requirements under the Customs Act and principles of natural justice were not complied with. Issue 4: Interpretation of 'personal effects' and 'jewellery' under the Baggage Rules, 2016 - Legal Framework and Precedents: Rule 2(vi) of the Baggage Rules, 2016 defines 'personal effects' excluding 'jewellery.' However, prior versions of the Rules and clarificatory Circulars distinguish between 'personal jewellery' (used jewellery worn by the passenger) and 'jewellery' (newly acquired or dutiable items). The Supreme Court and Delhi High Court decisions have clarified that bona fide personal jewellery worn or carried by a passenger is part of personal effects and exempt from duty. - Court's Interpretation and Reasoning: The Court analyzed the distinction between 'jewellery' and 'personal jewellery,' emphasizing that used personal jewellery worn by the passenger is exempt from duty and not subject to the monetary caps in Rules 3 and 4 of the Baggage Rules. The Court relied on the Division Bench judgment in Saba Simran and the Supreme Court's dismissal of the challenge to that judgment. - Key Evidence and Findings: The gold bangles were worn by the passenger, were used jewellery, and formed part of her personal effects. There was no evidence they were newly acquired or intended for import. - Application of Law to Facts: The Court applied the settled interpretation to hold that the bangles qualify as personal jewellery exempt from duty and confiscation. - Treatment of Competing Arguments: The Customs Department's reliance on the exclusion of jewellery from 'personal effects' was countered by the distinction between 'jewellery' and 'personal jewellery' as clarified by the Circular and judicial precedents. - Conclusion: The gold bangles fall within the category of 'personal jewellery' and are exempt from customs duty and confiscation under the Baggage Rules, 2016. Issue 5: Whether failure to declare the gold bangles amounts to violation warranting confiscation and penalty - Legal Framework and Precedents: Section 111(d), 111(i), 111(j), and 111(m) of the Customs Act, 1962 provide for confiscation of goods in cases of non-declaration or misdeclaration. However, the Supreme Court in Pushpa Lekhumal Tolani held that a passenger passing through the Green Channel implicitly declares absence of dutiable goods and bona fide personal jewellery carried is not liable to confiscation. - Court's Interpretation and Reasoning: The Court noted the passenger chose the Green Channel and did not conceal the bangles. There was no violation of declaration requirements as the jewellery was bona fide personal effects. - Key Evidence and Findings: No concealment or attempt to evade customs was found. The passenger's failure to declare was due to the belief that the bangles were personal jewellery exempt from declaration. - Application of Law to Facts: The Court held that the non-declaration did not amount to smuggling or violation warranting confiscation and penalty. - Treatment of Competing Arguments: The Customs Department argued for penalty and confiscation based on non-declaration. The Court rejected this, relying on the principle that bona fide personal jewellery carried by a passenger is exempt. - Conclusion: Non-declaration of the gold bangles does not constitute a violation justifying confiscation or penalty under the Customs Act. Final Orders and Directions - The impugned order of absolute confiscation and penalty is set aside. - The four gold bangles are to be released to the passenger within four weeks, subject only to payment of applicable warehousing charges. - Personal hearing and procedural safeguards are mandatory and cannot be waived by counsel without clear and lawful consent. - The principles and distinctions laid down in precedent cases and the Baggage Rules, 2016 must be adhered to in future cases involving personal jewellery carried by passengers.