2026 (2) TMI 54 - HC - Customs

Confiscation and preservation of seized gold jewellery: court orders market-value compensation where statutory procedure was breached

Confiscation of seized goods without issuance of statutorily required notices and without following seizure, inventory and disposal procedure violated ... Confiscation without issuance of show-cause notice - Failure to follow procedure for seizure, inventory and disposal of seized goods - Temporary detention of baggage and re-export - Duty to preserve seized property pending final adjudication and appellate/revisional remedies - Violation of constitutional guarantees of reasonableness, non-arbitrariness and protection of property - HELD THAT:- It is a settled principle of law that when the order of a customs officer is not final and is subject to an appeal, and if the appellate authority finds later that there was no good ground for the exercise of that power, the property could no longer be retained and under the Act and has to be returned to the owner. In such a situation there is a legal obligation on the part of the department to preserve the property intact and also return it in the same condition in which it was seized, inasmuch as in such a situation the State Government would be a bailee of the seized property until the order became final. Neither a notice was issued under Section 124 nor the provisions of Section 110 and Section 111 were followed and the Petitioner was subjected to the fine as contemplated under Section 125 of the Act and further under Sections 112 and 114AA of the Act. The fact that the gold jewellery had been sent in the year 2019 to the mint and thereafter the Revision Order was passed in 2021, allowing for the re-export of the gold reeks of further abuse of the process of law, inasmuch as, now there is no gold available with the customs authorities to allow re-export as stipulated by such order. In the present case, the Petitioner had sought to redeem the gold pursuant to the order of the Revisional Authority giving them an option to redeem the confiscated goods on paying a redemption fine and penalty. However, in facts of the present case the very basis of confiscation and seizure of the gold jewellery itself is bad in law and made without following the due process of law. Hence the Petitioner is entitled to the value of the gold jewellery as per the present market value. Further, in the facts of the present case, the Revisional Authority has ordered the re-export of the gold jewellery when the same is itself not available for re-export. For such reason, we are not persuaded to accept the Revenue’s contention that the petitioner be granted the value of the gold as on the date of seizure. This would be contrary to the decision of the Division Bench in Leyla Mahmoodi and Anr. Vs. Additional Commissioner of Customs and Ors. [2023 (12) TMI 967 - BOMBAY HIGH COURT], which is accepted by the Respondents. It is for such reason, we do not accept the Revenue’s contention relying on the decision in the case of Division Bench in Ramesh Shamji Patel Vs. Union of India [2025 (9) TMI 1420 - BOMBAY HIGH COURT], the fact of the said case being totally different wherein the Petitioner had written to the authorities to redeem the gold and therefore there was no challenge to the confiscation or seizure of the gold. When the gold jewellery was confiscated from the Petitioner the detention memo was issued under Section 80 of the Act, is the case of the Petitioner. Hence, the confiscation of the said gold jewellery without following the provisions of law is itself bad in law. Therefore, the contention of the Respondent that the Petitioner cannot approbate and reprobate deserves to be rejected, as also the decisions relied upon by the Respondents in such context will not assist the Respondents. Thus, it is eminently in interest of justice that the Petition be allowed in terms. Issues: Whether the confiscation, disposal and imposition of redemption fine and penalties in respect of the petitioner's detained gold jewellery were lawful having regard to the requirements of Sections 80, 110, 111, 124 and 125 of the Customs Act, 1962 and constitutional protections.Analysis: The Court examined the statutory scheme governing temporary detention (Section 80), seizure (Section 110), confiscation (Section 111), the mandatory issue of a show-cause notice prior to confiscation (Section 124) and the option to pay a fine in lieu of confiscation (Section 125). The Court analysed whether the procedural safeguards in Sections 110 and 124 were complied with before confiscation and before disposal of seized gold, and considered constitutional protections under Article 14 and Article 300A regarding preservation and deprivation of property. The Court found that the authorities failed to follow the statutory procedure: no show-cause notice as required by Section 124 was issued within the statutory period, the safeguards and magistrate/Commissioner (Appeals) steps under Section 110(1A)-(1D) were not complied with for valuable non-perishable goods, and the seized gold was sent to the mint and disposed of while appeal/revision proceedings were pending. Prior case-law and Board instructions requiring notice and fair procedure before disposal of seized/confiscated goods were applied to the facts, and the Court held that the department had an obligation to preserve seized property and could not lawfully dispose of it in the absence of cogent reasons and compliance with the statutory and constitutional requirements.Conclusion: The confiscation and subsequent disposal/sale of the petitioner's gold jewellery and the imposition of redemption fine and penalties without following the statutory procedure were unlawful; the petition is allowed and the respondents are directed to restore to the petitioner equivalent quantity of gold (373.700 grams) or compensate the petitioner by payment of the market value of that quantity as on date within three weeks.