The Bombay High Court ordered the customs department to refund Rs.35 lakh to an Indian-origin US citizen for a seized gold chain with diamond pendant he claimed to have purchased in 1989 (evidenced by an invoice), quashing the confiscation proceedings.
The petitioner arrived at the Mumbai airport from New York wearing the gold chain. Customs officials, suspecting he intended to sell it and evade duty, seized the jewelry and demanded duty based on a valuation of Rs.1.2 crore ($1.6 million). They further imposed a fine for not declaring the item.
The petitioner challenged the customs action, arguing that the chain was a “used personal effect” exempt from duty under the Baggage Rules, 1998. He contended that the exemption applied to him under Rule 7 for tourists, and alternatively under Rule 3 for returning residents with Appendix A, even if the diamond pendant caused the value to exceed the limit.
He had presented an invoice as proof of purchase dated 1989 and cited government circulars clarifying that used jewelry fell within the definition of “personal effects” for tourists.
However, the customs department argued that the petitioner, being a person engaged in the jewelry business, intended to sell the chain. They maintained that the diamond pendant couldn’t be considered a “personal effect” under the Rules and that the petitioner should have declared it and paid duty as per a combined interpretation of Rules 3, 4, and 7 with Appendix A and E.
The High Court bench comprising Justices Jitendra Jain and K.R. Shriram delved into the applicability of the exemption under the relevant rule to the specific jewelry considering the diamond pendant.
The court considered the government circulars submitted by the petitioner, which clarified that used jewelry could be included within the meaning of “personal effects” for tourists under Appendix E. The court also evaluated the unsigned invoice (presented as proof of purchase) and the petitioner wearing the chain against the customs department’s suspicion of selling intent.
Finding inconsistencies in the panchnama (arrival document) regarding timestamps and the use of unqualified experts for valuation by the customs department, the court raised doubts about the accuracy of the seizure process and the valuation itself.
Additionally, the court pointed out the department’s misapplication of rules and highlighted the government circulars that supported the petitioner’s claim about jewelry being considered a “personal effect” for tourists.
The court ruled in favor of the petitioner, quashing the Confiscation Order issued by the customs department, the demand for duty on the gold chain with diamond pendant, and the imposition of penalty under the Customs Act. The court directed the authorities to refund the Rs.20 lakh redemption fine and Rs.15 lakh penalty deposited by the petitioner within four weeks
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