Gold medallions treated as articles of gold, not coins, exemption under Notification 46/2011-Cus; seizure under Section 110 invalid

CESTAT Bangalore held that the imported 22 karat gold medallions (purity 91.60%) are classifiable under CTI 7114 1910 as "articles of gold" and not under CTI 7118 9000 as "gold coins," following the precedent that non-legal-tender coins are excluded from CTH 7118 under the HSN Explanatory Notes. Consequently, the benefit of exemption under Sl. No. 966 of Notification No. 46/2011-Cus was held to be available. The Tribunal further held that the seizure under Section 110 of the Customs Act, 1962 was unsustainable, as the goods were neither confiscated nor liable to confiscation under Section 111, and directed their release.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the imported 22 carat gold medallions are classifiable under Customs Tariff Item 7114 1910 as "Articles of gold" or under Customs Tariff Item 7118 9000 as "Gold coins".

1.2 Whether, consequent on the correct classification, the goods are eligible for exemption at Sl. No. 966 of Notification No. 46/2011-Cus dated 01.06.2011 under the ASEAN-India Free Trade Agreement.

1.3 Whether the imported goods fall in the "restricted" import category requiring a licence from DGFT and are liable to confiscation under Section 111 of the Customs Act, 1962.

1.4 Whether the seizure of the goods under Section 110 of the Customs Act, 1962 can be sustained and whether the goods are liable to be released in terms of Section 110(2) in the absence of confiscation proceedings under Section 124.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification - CTI 7114 1910 vs CTI 7118 9000

Legal framework

2.1 The Tribunal considered the scope of Customs Tariff Headings 7114 and 7118, the HSN Explanatory Notes to Heading 71.18 and Heading 71.14, and the General Rules for the Interpretation of the Tariff. The Tribunal relied on prior decisions interpreting these provisions, including detailed extracts from earlier appellate decisions and High Court rulings, specifically on the classification of gold articles struck in coin form but not being legal tender.

Interpretation and reasoning

2.2 The Tribunal noted that the imported goods are round, of 22 carat gold, with embossing/striking on both sides depicting flowers and the swastika, and that they are not, and have never been, legal tender, nor issued under government control, nor intended to be so.

2.3 Referring to the HSN Explanatory Notes to Heading 71.18, the Tribunal observed that Heading 7118 applies to coins of any metal (including precious metals) of officially prescribed weight and design, issued under government control for use as legal tender, including coins which were legal tender or are intended to be legal tender. Medals and medallions, even if struck in the same way as coins, are specifically excluded from Heading 7118 and directed to Heading 7114.

2.4 The Tribunal referred to prior detailed reasoning holding that:

• Non-legal-tender "coins" of gold do not fall under Heading 7118 in view of the HSN Explanatory Notes; and
• Gold articles struck in coin form but not legal tender are "articles of gold" under Heading 7114, not coins under Heading 7118.

2.5 The Tribunal relied upon prior appellate and High Court decisions which:

• Rejected the assumption that all "gold coins" necessarily fall under CTI 7118 90 00.
• Held that coins which are not legal tender are excluded from Heading 7118 and fall under Heading 7114.
• Emphasised that description in the Bill of Entry is not conclusive for classification; the actual nature and legal tender status must be examined.

2.6 Applying these principles, the Tribunal found that the impugned goods, being non-legal tender gold medallions, are not classifiable under CTI 7118 9000. Consistent with the HSN Explanatory Notes and the cited precedents, such medallions/medals, although round and struck like coins, are properly treated as "articles of gold" under CTI 7114 1910.

Conclusions

2.7 The classification of the goods under CTI 7118 9000 by the lower authorities is unsustainable. The correct classification is under Customs Tariff Item 7114 1910 as "Articles of gold".

Issue 2: Eligibility for exemption under Notification No. 46/2011-Cus (AIFTA)

Legal framework

2.8 The Tribunal examined Sl. No. 966 of Notification No. 46/2011-Cus dated 01.06.2011 granting 'Nil' rate of Basic Customs Duty for eligible goods, subject to classification under specified tariff headings and compliance with origin conditions under the ASEAN-India Free Trade Agreement. The Country of Origin certificate classified the goods under Heading 7114.

Interpretation and reasoning

2.9 Since the Tribunal held that the impugned goods are classifiable under CTI 7114 1910, it followed that they fall within the scope of the exemption entry relied upon. The contrary view of the lower authorities was based solely on misclassification under Heading 7118; once classification is corrected, the basis for denial of exemption disappears.

2.10 The Tribunal also referred to prior decisions wherein similar gold medallions, classified under Heading 7114, were held eligible for analogous exemption benefits, and where it was held that mere office memoranda or clarificatory communications cannot override the tariff classification or exemption notification.

Conclusions

2.11 The imported gold medallions, classifiable under CTI 7114 1910 and originating in an AIFTA partner country with supporting COO, are eligible for the benefit of exemption at Sl. No. 966 of Notification No. 46/2011-Cus.

Issue 3: Import restrictions, requirement of DGFT licence and confiscation under Section 111

Legal framework

2.12 The Tribunal considered:

• Notification No. 49/2015-2020 dated 05.01.2022 issued by DGFT, governing import policy for goods under Heading 7118.
• Import policy under ITC (HS) for Heading 7114 and Heading 7118, including prior DGFT notifications and policy conditions discussed in earlier binding precedents.
• Sections 111 and 124 of the Customs Act, 1962 dealing with liability to confiscation and adjudication procedure.
• Prior judicial pronouncements, including those holding that RBI communications and office memoranda or letters cannot operate as "regulations" or impose import restrictions in the absence of a proper DGFT notification.

Interpretation and reasoning

2.13 Earlier decisions, extensively quoted by the Tribunal, had clarified that:

• Heading 7114 goods were "free" under the import policy, with no conditions; any restriction related only to Heading 7118 items and, even there, had to be supported by valid regulatory instruments.
• Gold coins other than legal tender are treated as falling under Heading 7114; no import prohibition or restriction existed for such goods, and such restriction cannot be introduced merely through communications or office memoranda.
• RBI has no power to regulate imports per se; its power under FEMA is limited to foreign exchange regulation, while import restrictions fall within DGFT's domain and must be imposed through notifications under the relevant statutory provisions.

2.14 Applying this reasoning, the Tribunal held:

• Once the impugned goods are classified under CTI 7114 1910, they do not fall under the restricted heading 7118 covered by DGFT Notification No. 49/2015-2020.
• No DGFT regulation or valid legal instrument has been shown that restricts import of gold medallions/articles under Heading 7114; as such, the goods are freely importable and do not require a licence from DGFT.
• The conclusion of the lower authorities that the goods were "restricted" and hence liable to confiscation under Section 111, solely based on treating them as Heading 7118 goods, is erroneous.

Conclusions

2.15 The imported goods, correctly classifiable under CTI 7114 1910, are not covered by the restricted category applicable to Heading 7118 and do not require any import licence from DGFT. Consequently, there is no violation of import policy and the goods are not liable to confiscation under Section 111 of the Customs Act, 1962.

Issue 4: Validity of seizure under Section 110 and effect of non-initiation of confiscation proceedings under Section 124 / Section 110(2)

Legal framework

2.16 The Tribunal considered:

• Section 110 of the Customs Act, 1962 relating to seizure of goods liable to confiscation.
• Section 110(2) requiring that, where goods are seized, notice under Section 124 must be issued within six months from the date of seizure, failing which the goods shall be returned to the person from whose possession they were seized unless the period is extended.
• Section 124 governing the issue of show cause notice before confiscation.

Interpretation and reasoning

2.17 The Tribunal noted the factual position placed on record:

• The goods were seized under Mahazar dated 08.08.2023 under Section 110 on the allegation that they were liable to confiscation under Section 111.
• There was no show cause notice proposing confiscation issued under Section 124 within six months from the date of seizure.
• No confiscation order had been passed; the letter dated 25.08.2023 referred to in the appellate order was not a confiscation order.

2.18 The Tribunal accepted the appellant's contention that, in the absence of a notice under Section 124 within the statutory period, the seizure lapses and the goods must be released in terms of Section 110(2). Additionally, on merits, the Tribunal had already held that the goods were not restricted and were not liable to confiscation at all.

2.19 The Tribunal further held that, since the goods are correctly classifiable under CTI 7114 1910 and not under a restricted heading, there was no legal basis to treat them as liable to confiscation; therefore, the very foundation for seizure under Section 110 failed.

Conclusions

2.20 The seizure of the goods under Section 110 is not sustainable both because:

• No proceedings for confiscation were initiated within the time prescribed by Section 110(2), and
• On merits, the goods are not liable to confiscation under Section 111.

Accordingly, the seized goods are liable to be released to the importer.

Overall Dispositive Conclusions

2.21 The Tribunal set aside the impugned order, held that:

• The goods are classifiable under Customs Tariff Item 7114 1910 as "Articles of gold".
• The goods are eligible for exemption at Sl. No. 966 of Notification No. 46/2011-Cus dated 01.06.2011 under AIFTA.
• The goods do not fall under the restricted import category; no DGFT licence was required and the goods are not liable to confiscation under Section 111.
• The seizure under Section 110 is invalid and, in any event, has lapsed under Section 110(2) due to non-issuance of notice under Section 124; the goods must be released with consequential relief as per law.

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