The Bombay High Court has delivered a landmark ruling affirming that customs authorities cannot confiscate personal property without issuing a statutory show-cause notice under Section 124 of the Customs Act, 1962. The judgment underscores that procedural compliance is not optional but a constitutional imperative under Article 300A, and the destruction of seized goods during pending appeals renders any subsequent order unenforceable.
Background & Facts
The Dispute
The petitioner, a Mauritian national and businessman, arrived at Mumbai’s Chhatrapati Shivaji International Airport on 16 May 2014 wearing personal gold jewellery weighing 373.700 grams, including a kada, two chains, and a small coin. He declared no goods and passed through the Green Channel. Customs officers intercepted him, detained the jewellery, and informed him it would be returned upon departure. The jewellery was formally detained under Detention Memo No. A44486, but no seizure memo was issued.
Procedural History
- 16 May 2014: Gold detained under Section 80; oral hearing conducted; no show-cause notice issued.
- 20 May 2014: Order-in-Original passed by Respondent No. 2 confiscating the gold under Sections 111(d), (l), (m) and imposing redemption fine and penalties under Sections 125(1), 112(a), and 114AA.
- 23 January 2015: Appeal by Petitioner allowed by Respondent No. 3; redemption fine reduced to Rs. 3,00,000 and penalty under Section 112(a) reduced to Rs. 50,000; Section 114AA penalty deleted.
- 28 May 2021: Revisional order by Respondent No. 4 upheld the penalty under Section 112(a) but allowed re-export of the gold, acknowledging its personal nature and absence of concealment.
- 6 February 2019: While revision proceedings were pending, Respondent No. 2 sent the gold to the Government Mint for melting, without notice to the petitioner or any adjudicating authority.
- 8 January 2024: Refund order issued by Deputy Commissioner of Customs (Refund), refunding Rs. 5,12,877 after adjusting penalties and warehouse charges.
Relief Sought
The petitioner sought a writ of mandamus to set aside the confiscation, direct the return of equivalent gold or its market value, and declare the disposal of the jewellery as illegal and unconstitutional.
The Legal Issue
The central question was whether Section 124 of the Customs Act, 1962 mandates a show-cause notice before confiscation, and whether the destruction of seized goods during pending appellate proceedings violates Article 300A of the Constitution and the principle of natural justice.
Arguments Presented
For the Petitioner
The petitioner argued that the gold was detained under Section 80 as personal baggage meant for re-export, not seized under Section 110. No show-cause notice under Section 124 was issued prior to confiscation, rendering the entire proceeding void ab initio. The disposal of the gold in 2019, while revision was pending, violated the statutory obligation to preserve property until finality. He relied on Leyla Mahmoodi v. Additional Commissioner of Customs and State of Gujarat v. Memon Mahomed Haji Hasam to establish that the state becomes a bailee of seized goods and cannot dispose of them without due process.
For the Respondent
The respondents contended that the gold was seized under Section 111 for non-declaration under Section 77, and that disposal followed internal circulars and audit requirements. They argued that the petitioner had filed a refund application, thereby acquiescing to the disposal, and that the petition was barred by approbation and reprobation. They relied on Union of India v. Shambhunath Karmakar to assert that melting gold merely changes its form, not its ownership status.
The Court's Analysis
The Court conducted a meticulous analysis of Sections 80, 110, 111, and 124 of the Customs Act, emphasizing that Section 124 is mandatory: "No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner... is given a notice in writing... and an opportunity of being heard."
The Court found that the detention under Section 80 was inconsistent with subsequent confiscation under Section 111. The absence of a seizure memo and show-cause notice rendered the confiscation legally invalid. The Court further held that Section 110(2) mandates return of seized goods if no notice is issued within six months - a condition clearly violated here.
"The action of the Customs authorities to dispose off the gold jewellery hurriedly in 2019 was not in consonance with the aforesaid principles of law."
The Court distinguished Leyla Mahmoodi, where disposal occurred before even a show-cause notice, and found the present case even more egregious: the gold was destroyed while revision proceedings were pending, and the revision order granting re-export became impossible to execute. The Court rejected the respondents’ reliance on Ramesh Shamji Patel, noting that case involved voluntary redemption, not illegal destruction.
The Court affirmed that Article 300A protects property rights against arbitrary deprivation, and that the state, as a custodian of seized goods, cannot unilaterally destroy them. The melting of gold did not extinguish ownership; the state remained obligated to return equivalent value.
The Verdict
The petitioner won. The Court held that confiscation without a Section 124 show-cause notice is illegal, and destruction of seized goods during pending appeals violates Article 300A and the principle of natural justice. The respondents were directed to restore 373.700 grams of gold or its equivalent market value to the petitioner within three weeks.
What This Means For Similar Cases
Show-Cause Notice Is Non-Negotiable
- Practitioners must challenge any confiscation order issued without a written Section 124 notice, regardless of whether the goods are perishable or valuable.
- Oral hearings alone do not satisfy statutory requirements; written notice with prior approval of Assistant Commissioner is mandatory.
- Failure to issue notice renders the entire confiscation void, not merely procedural.
Disposal During Pendency Is a Grave Violation
- Customs authorities cannot dispose of seized goods - even gold - while appeals or revisions are pending.
- Melting, auctioning, or recycling seized property without final adjudication constitutes unconstitutional deprivation under Article 300A.
- Petitioners may now claim not just the original value, but the current market value of the property, as established in Leyla Mahmoodi.
Bailee Doctrine Applies to All Seized Property
- The state is a bailee of seized goods until final order; it must preserve them in original condition.
- Even if goods are converted into bars or ingots, the obligation to return equivalent value persists.
- Refund applications do not waive rights to challenge legality of seizure; suppression allegations fail where the core violation is jurisdictional.
