Court’s Decision
The Delhi High Court, while hearing a writ petition, directed the Chairman of the Central Board of Indirect Taxes & Customs (CBIC) to reconsider the Baggage Rules, 2016, particularly regarding the seizure of jewellery worn by travellers at Indian airports.
The court emphasized that while curbing gold smuggling is important, it should not lead to the undue harassment of genuine passengers, including Overseas Citizen of India (OCI) cardholders and Persons of Indian Origin (PIOs), who frequently travel to India for social events like weddings and family functions.
The court ordered the CBIC to undertake a comprehensive review of the rules and submit a report detailing the reconsideration process before the next hearing on March 27, 2025. It also directed the Customs Department to ensure that its policies do not inconvenience genuine travellers while effectively preventing gold smuggling.
The court also issued a notice to the Union of India and the Customs Department to file their replies within four weeks. The matter has been scheduled as a part-heard case, meaning it will continue to be heard in future proceedings.
Facts of the Case
- The petitioner challenged the confiscation of two gold kadas and one gold chain by the Customs Department.
- The jewellery was confiscated through an Order-in-Original dated February 6, 2024, and the Commissioner of Customs (Appeals) upheld the order on September 23, 2024.
- The Customs authorities imposed a redemption fine of ₹75,000 and a personal penalty of ₹1,10,000 under the Customs Act, 1962.
- The petitioner argued that the seized jewellery was personal and worn at the time of travel, making it a “personal effect” rather than dutiable baggage.
On January 9, 2025, the court had directed that a competent Customs official familiar with the relevant circulars on seizure of personal effects and jewellery be present at the next hearing.
Issues
- Whether jewellery worn by passengers should be considered “personal effects” under the Baggage Rules, 2016.
- Whether the Customs Department has been arbitrarily seizing jewellery from travellers without clear guidelines.
- Whether the value limits imposed under the Baggage Rules (₹50,000 for men and ₹1,00,000 for women) are outdated given the current market price of gold.
- Whether passengers carrying gold above the prescribed limits should be required to declare it and provide an undertaking for re-exportation.
- Whether frequent travellers abusing duty exemptions should be distinguished from genuine passengers carrying jewellery for social events.
Petitioner’s Arguments
- The seized jewellery was personal and was worn by the petitioner, making it a “personal effect” rather than dutiable baggage.
- The Baggage Rules are outdated and do not reflect the present market value of gold, making compliance practically impossible.
- The Customs Department’s actions were arbitrary and caused undue harassment to travellers who were neither attempting to smuggle gold nor had any mala fide intent.
- The redemption fine and penalty imposed were excessive and disproportionate to the value of the seized items.
- The petitioner had no prior violations or intent to evade customs duty and was unfairly penalized.
Respondent’s Arguments
- The Baggage Rules, 2016, explicitly exclude jewellery from the definition of “personal effects” under Rule 2(vi).
- As per Rule 5 of the Baggage Rules, passengers returning to India after residing abroad for more than a year are permitted to carry only 20 grams (₹50,000) for men and 40 grams (₹1,00,000) for women free of duty.
- Any jewellery exceeding this limit must be declared at customs, and duty must be paid or an undertaking must be provided for re-exportation.
- The petitioner failed to declare the jewellery and passed through the “Green Channel”, which is meant for passengers not carrying dutiable goods.
- The Customs Department has observed an increase in frequent travellers attempting to smuggle gold under the guise of personal effects, making stricter enforcement necessary.
Analysis of the Law
Customs Act, 1962
- Provides for confiscation of goods and imposition of penalties on passengers who fail to declare dutiable items.
Baggage Rules, 2016
- Rule 2(vi): Excludes jewellery from the definition of “personal effects.”
- Rule 5:
- Passengers returning after more than one year abroad can bring duty-free:
- Men: 20 grams of jewellery (maximum value ₹50,000).
- Women: 40 grams of jewellery (maximum value ₹1,00,000).
- Passengers returning after more than one year abroad can bring duty-free:
CBIC’s Guide for Travellers
- If a traveller brings jewellery beyond these limits, they must declare it and pay applicable duty or provide an undertaking for re-exportation.
Precedent Analysis
The court noted several past cases where jewellery worn by passengers was confiscated, leading to unnecessary litigation.
Key observations:
- “Even small quantities of jewellery are sometimes seized from passengers walking through the Green Channel.”
- The value caps of ₹50,000/₹1,00,000 are not realistic, considering the current gold prices.
- The lack of clarity on declaration requirements leads to confusion and potential harassment.
Court’s Reasoning
- Need for Clarity on Jewellery Seizure
- The court queried the Customs officials on applicable rules and circulars regarding seizure of jewellery worn by travellers.
- It found that jewellery beyond the prescribed limits must be declared, but this is not clearly communicated to passengers.
- Balancing Smuggling Prevention with Passenger Rights
- Gold smuggling must be curbed, but the court stressed that genuine travellers should not face undue hardships.
- Outdated Baggage Rules
- 40 grams of gold today is worth much more than ₹1,00,000, making the prescribed limits unrealistic.
- A revision of the Baggage Rules is necessary to align with the current gold market value.
- Necessity for Policy Review by CBIC
- The court directed the CBIC to reconsider the Baggage Rules and submit a report by March 27, 2025.
- The policy must balance preventing smuggling while ensuring fair treatment of genuine passengers.
Conclusion
The Delhi High Court expressed serious concerns over the arbitrary confiscation of jewellery and directed the CBIC to review and reconsider the Baggage Rules, 2016. The CBIC must submit a report on the reconsideration process before the next hearing on March 27, 2025.
Implications
- Potential Amendment to Baggage Rules: The CBIC may revise duty-free limits to reflect current gold prices.
- Clearer Guidelines on Jewellery Declaration: The Customs Department may introduce transparent protocols to prevent arbitrary seizures.
- Impact on Frequent Travellers: Individuals frequently bringing gold into India may face stricter scrutiny.
- Legal Precedent for Future Cases: The case may set a precedent for challenging unjustified jewellery confiscations at airports.
The matter will now be heard on March 27, 2025, following the CBIC’s report on the reconsideration of the Baggage Rules.