Importation Of Gold Is ‘Prohibited Item’ Under Customs Act, Owner Or Importer Not Entitled To Automatic Release: Delhi High Court

The Delhi High Court has ruled that the importation of gold is a “prohibited item” within the meaning of Section 2(33) of the Customs Act, 1962.

A division bench of Justice Yashwant Varma and Justice Dharmesh Sharma also observed that the redemption in case of importation of gold which is brought into India illegally in the form of smuggling does not entitle the owner or importer for automatic release of such item.

Section 2(33) of the Act defines a prohibited item as any goods whose import or export is subject to any prohibition under the enactment or any other law. Such item does not include any goods in respect of which the conditions, subject to which they are permitted to be imported or exported, have been complied with.

The bench said that the decision to allow release or redemption of the goods confiscated, with or without imposition of fine in addition to payment of requisite duty, is vested in the discretion of the Adjudicating Officer.

It added that the Adjudicating Officer is duty bound to exercise the discretionary powers not only after considering the facts and circumstances of each case but also in a transparent, fair and judicious manner under Section 125 of the Act.

The court made the observations while deciding a batch of petitions raising the question as to whether bringing of gold into India falls within the ambit of a “prohibited article” under Section 2(33) read with Section 11 of the Act and what will be the effect as to the release or redemption of such goods on payment of fine or penalty under Section 125 of the Act.

Observing that gold has always been symbolized in India as a pious material embracing the powers of the divine, the court said that bringing gold in an unauthorised or illegal manner causes a cascading effect on the economy of the country.

Noting that the customs authorities have been dealing with the issues of the importation of gold in a manner that does not inspire confidence, the bench said:

“It is our experience that at times the authorities concerned have manifestly exercised their powers arbitrarily in matters of assessment and levy of duty, imposition of fine and/or penalty besides release/redemption of the confiscated gold. Such arbitrariness leaves much to be desired in terms of transparency, equity and fair play in action, which does not augur well to realize the constitutional aim of maintaining rule of law in the country.”

The bench observed that the rate of customs duty on import of gold has been modified from time to time under Customs Tariff Act,1975, and that smuggling of gold is undertaken not only to profit from the price difference in gold items but also to avoid payment of customs duty.

“We further have no hesitation in holding that the importation of the gold is a prohibited item within the meaning of Section 2(33) of the Act; and that redemption in case of importation of gold which is brought into India illegally in the form of ―smuggling‖ does not entitle the owner or importer for automatic release/redemption of such item,” the court said.

In his concurring judgment, Justice Varma ruled that the expression “prohibited goods” under Section 2(33) and the concept of “prohibition” must draw colour and meaning from specific exclusion of goods which have been imported or exported upon due compliance with the conditions prescribed.

“If compliance with conditions for import or export were irrelevant and the expression ̳prohibition‘ were to be understood in absolute terms, there clearly does not appear to be any justification for the definition clause to also deal with those goods which enter the territory of India after complying with the various conditions for import that may have been prescribed. In our considered opinion, this is the first aspect which appears to indicate that the word prohibition is intended to also extend to a restriction or regulation under the Act,” the court said.

It added that a prohibition could be either in absolutist terms or subject to a regime of restriction or regulation.

“The Court holds that an infraction of a condition for import of goods would also fall within the ambit of Section 2(33) of the Act and thus their redemption and release would become subject to the discretionary power of the Adjudging Officer,” the court said.

Senior Advocate Tarun Gulati along with Advocates Kishore Kunal and Kumar Sambhav were amicus curiae in the matter.

Case Title: NIDHI KAPOOR v. PRINCIPAL COMMISSIONER AND ADDITIONAL SECRETARY TO THE GOVERNMENT OF INDIA & ORS. and other connected matters

Citation: 2023 LiveLaw (Del) 724

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