Bombay High Court Quashes Proceedings Initiated By Customs Authorities For Seizing Jewellery

The Bombay High Court has quashed the proceedings initiated by the customs authorities for seizing the jewelry.The bench of Justice K. R. Shriram and Justice Jitendra Jain has relied on the decision of the Supreme Court in the case of Directorate of Revenue Intelligence vs. . Pushpa Lekhumal Tolani, in which it was held that foreign tourists are allowed to bring into India jewelry even of substantial value, provided it is meant to be taken out of India with them and it is a prerequisite at the time of making endorsements on the passport. The petitioner, a USA citizen of Indian origin and USA passport holder, arrived by Delta Airlines flight from New York to Mumbai. The petitioner did not have any check-in baggage but was carrying a handbag. The petitioner declared two bottles of whiskey as the value of goods imported by him and passed through the green channel.A customs officer stopped the petitioner and searched his handbag. On a personal search of the petitioner, he was found wearing a gold chain with a gold pendant embedded with 12 diamonds. On questioning, the petitioner stated that the gold chain was purchased in 1989 by him from a jeweler in the US for around USD 25,000, which, at the exchange rate prevailing on the date of his arrival, i.e., May 6, 2007, would work out to about Rs. 10,02,500/-.The Customs Officer seized the chain along with diamonds on the basis that the petitioner had attempted to smuggle the diamonds into India and, therefore, it was liable for confiscation.A show cause notice was issued by the Commissioner of Customs proposing the confiscation of 12 diamonds under Section 111(d), (l), and (m) and further to show cause as to why a penalty should not be imposed upon the petitioner under Section 112. The show cause notice also invoked Rule 6 of the Baggage Rules, 1998, which prescribes that a person residing abroad for over a year and returning to India is allowed to import free-of-duty jewelry up to an aggregate value of Rs. 10,000/- in the case of a male passenger.The petitioner replied to the aforesaid show cause notice, inter alia, stating that the petitioner was entitled to carry the used gold chain with the gold pendant embedded with diamonds as per baggage rules without payment of any duty. The petitioner also submitted that Rule 6 of the Baggage Rules is not applicable, and the correct Rule applicable is Rule 7, and since the gold chain with pendant was his “used personal effect," there is no violation of any provision of any law in wearing the said chain with pendant and bringing it into India without payment of any duty.The Commissioner of Customs rejected the petitioner's contentions and passed an order confiscating the gold chain with a pendant valued at Rs. 1,20,35,000/- under Section 111 of the Act, read with provisions of the Foreign Trade Policy and Rules 11 and 14 of the Foreign Trade (Regulation) Rules, 1993. The Commissioner also imposed a penalty of Rs. 1,20,00,000 on the petitioner under Section 112(a).The order was challenged by the petitioner by filing an appeal to the Customs, Excise, and Service Tax Appellate Tribunal. The Tribunal observed that Rule 7 would apply to the petitioner's case; however, neither in the show cause notice nor in the Commissioner's order was the said Rule invoked. The Tribunal observed that Petitioner, in his reply to the show cause notice, has pleaded his case based on Rule 7, but there was no finding by the Commissioner of Customs.The petitioner contended that the gold chain with pendant in which diamonds were embedded was purchased more than 25 years ago, and at the time of disembarking from flight, he was wearing the same. Petitioner submits that he had provided an invoice in support of proof that the same was purchased from a US jeweler in 1989 and that respondents were not justified in rejecting the said evidence merely on the solitary ground that the invoice was not signed by the seller. The petitioner argued that the department is not justified in relying upon Rule 3 of the Baggage Rules, 1998, to justify the impugned action. The petitioner contended that the order confirming the redemption fine and personal penalty of Rs. 20,00,000 and Rs. 15,00,000, respectively, be quashed and the department be directed to refund the sum of Rs. 35,00,000.The department contended that the petitioner is in the business of jewelry and, therefore, he has brought this chain with a pendant in which diamonds are embedded for sale in India. The chain with pendant cannot be treated as “personal effects” so as to permit import of the same into India without payment of duty. The phrase “personal effect” has to be construed in context and cannot be interpreted outside the facts of a particular case, particularly when what is being considered is the value of the article. The court noted that one cannot lose sight of the fact that Petitioner has been engaged in the business of jewellery in the U.S.A. for the last 25 years and has been declaring income...

Bombay High Court Quashes Proceedings Initiated By Customs Authorities For Seizing Jewellery

Mariya Paliwala

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