2025 (9) TMI 881 - HC - Customs

Customs unlawfully seized and disposed of over 400 grams of gold jewellery and failed to account or refund owners

HC held that Customs at I.G.I. Airport unlawfully seized and disposed of over 400 grams of gold jewellery and failed to account for proceeds or record ... Functioning of the Customs Department at I.G.I. Airport - seeking release of the gold jewellery seized by the Customs Department, I.G.I. Airport - denial of free allowance as admissible to the to the Pax(s) on account of various omission and commission - confiscation - redemption fine - penalty - HELD THAT:- The total weight of the gold items, which were seized, was to the tune of more than 400 grams. The refund order does not mention as to what was the amount recovered from the disposal of the gold jewellery. It is pertinent to note that only the appraised value is discussed in the refund order. Additionally, the OIO also did not record that the goods were disposed of and redemption was permitted - Under these circumstances, despite repeated representations, it is inexplicable as to why the seized gold jewellery was disposed of in this manner. The Customs Department has, in fact, seized the gold jewellery, and disposed of the same, and refused to pay any amounts to the Petitioners, despite the OIO having attained finality. Such conduct on behalf of the Customs Department reveals an extremely disturbing situation where passengers are being deprived of their property without authority of law - List on 22nd September 2025 in Supplementary List. ISSUES PRESENTED AND CONSIDERED 1. Whether the offer of redemption under Section 125 of the Customs Act lapsed for goods confiscated by the Customs, resulting in absolute confiscation and vesting of goods (and proceeds) in the Central Government. 2. Whether Section 150 of the Customs Act (refund of sale proceeds) applies to goods that have been confiscated and redeemed/not redeemed, and whether a refund claim filed after the redemption period is maintainable. 3. Whether the Customs authorities lawfully disposed of the seized gold jewellery and whether disposal without recording and without payment/settlement of sale proceeds to the affected persons is permissible. 4. Whether the administrative/departmental handling (failure to record disposal, delay, and refusal to refund) warrants judicial directions for explanation, accountability, and institutional remedial measures. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework: The Court construed Section 125 of the Customs Act which permits redemption of confiscated goods on payment of a redemption fine within a statutory period (120 days as provided in the Order-in-Original). The statutory effect of non-acceptance of the offer of redemption within the prescribed time is that confiscation becomes absolute and the goods vest in the Central Government. Issue 1 - Precedent Treatment: No prior authority was cited or followed in the judgment; the Court applied the statutory provision directly to the facts. Issue 1 - Interpretation and reasoning: The Court examined the chronology - OIO dated 28.04.2023 (operative 01.05.2023), the 120 day redemption window, and the fact that the Petitioners sought re-export/refund after the 120 day period. The Court accepted the administrative construction that Section 125 affords a time-bound option; failure to exercise it converts the confiscation into an absolute vesting in the Government. Issue 1 - Ratio vs. Obiter: Ratio - Where redemption under Section 125 is not availed within the stipulated period, confiscation becomes absolute and the goods (and sale proceeds on disposal) vest in the Central Government. This principle is applied to dismiss contentions based on belated redemption requests. Issue 1 - Conclusion: The Court endorsed that the offer of redemption had lapsed and that, in law, the goods had become vested with the Government pursuant to Section 125. Issue 2 - Legal framework: Section 150 (refund provisions) applies to goods which are not confiscated; the legal distinction between non-confiscated goods (refund under Section 150) and confiscated goods (redemption under Section 125) is determinative of entitlements to sale proceeds. Issue 2 - Precedent Treatment: No specific precedents were relied upon; the Court applied the statutory delineation between Sections 125 and 150. Issue 2 - Interpretation and reasoning: The Court accepted the Assistant Commissioner (Refund)'s reasoning that Section 150 does not apply to confiscated goods. Since the redemption offer under Section 125 had lapsed, the Petitioners could not claim refund under Section 150; upon absolute confiscation the sale proceeds vest with the Government. Issue 2 - Ratio vs. Obiter: Ratio - Refund claims under Section 150 are not available for goods that have been confiscated and for which the redemption option has lapsed under Section 125; sale proceeds of disposed confiscated goods vest with the Central Government. Issue 2 - Conclusion: The refund claim based on Section 150 was rightly rejected to the extent it sought recovery for confiscated goods after the lapse of the statutory redemption period. Issue 3 - Legal framework: Administrative obligations of Customs authorities include maintaining records of seizure, adjudication orders, offers of redemption, acceptance/receipt of redemption fines, and lawful disposal procedures; transparency as to disposal and accounting of sale proceeds is integral to lawful exercise of custodial and disposal powers. Issue 3 - Precedent Treatment: The Court did not cite precedent but treated Directorate/Commissionerate record-keeping and accounting obligations as essential statutory-administrative functions. Issue 3 - Interpretation and reasoning: The Court found factual deficiencies: (a) the OIO did not record that goods were disposed of or redemption permitted; (b) the refund order did not indicate amounts actually recovered from disposal (only appraised values were discussed); and (c) Petitioners repeatedly represented for re-export/redemption and produced documents (e.g., cancelled cheques) yet were informed that goods had been disposed of. The Court characterized disposal without appropriate recording and failure to account for sale proceeds as inexplicable and indicative of deprivation of property without authority of law. Issue 3 - Ratio vs. Obiter: Ratio - Administrative disposal of seized articles must be recorded and accompanied by proper accounting of sale proceeds; absent such record, disposal that deprives affected persons of their entitlement is impermissible. Obiter - The Court's strong disapproval of the departmental conduct and characterisation of the situation as 'extremely disturbing' serves as admonition but is not a rule of law. Issue 3 - Conclusion: While the statutory scheme could render confiscation absolute on lapse of redemption, the departmental practice of disposing goods without recording and without informing/accounting to the affected persons is unlawful/irregular and requires explanation and corrective action. Issue 4 - Legal framework: The Court has power under Articles 226/227 (constitutional supervisory jurisdiction) to call for explanations, issue directions for accountability, and direct institutional measures to prevent recurrence of maladministration. Issue 4 - Precedent Treatment: No specific judicial authorities were relied upon; the Court exercised its supervisory jurisdiction based on the established duty to ensure lawful administration and protection of property rights. Issue 4 - Interpretation and reasoning: Given the non-recording of disposal, absence of disclosure of sale proceeds, and repeated unaddressed representations, the Court directed personal attendance of the Assistant Commissioner (Refund) and ordered that senior executive authorities (Secretary, Department of Revenue; Chairman, CBIC) be informed and hold a meeting with Customs authorities to prevent recurrence. The direction to notify higher officials and to require departmental explanation stems from the need for institutional oversight and remedial action. Issue 4 - Ratio vs. Obiter: Ratio - Where administrative action discloses potential arbitrary deprivation or systemic lapse in record-keeping/accounting, the Court may require personal appearance of responsible officers and direct communication to supervisory authorities for remedial measures. Obiter - Specific mail ids and meeting directives are administrative implementation measures tailored to the facts. Issue 4 - Conclusion: The Court ordered departmental accountability and institutional intervention: the concerned Assistant Commissioner to appear, and the Secretary (Dept. of Revenue) and Chairman (CBIC) to be informed and to hold a meeting with Customs authorities to take appropriate measures to prevent recurrence.