Indian Currency as "Thing" Under Section 110(3) of Customs Act, 1962: Madras High Court Rules in Favour of Customs Department

Background and Context

A significant ruling has emerged from the Madras High Court in the matter of Principal Commissioner of Customs Vs Vikram Jain, where a Division Bench overturned a Single Judge's direction to return seized Indian currency amounting to ₹21,55,000. The central legal question addressed by the Court was whether Indian currency seized in the course of an investigation into fraudulent activity under a DGFT scheme would fall within the scope of Section 110(1) read with Section 110(2) of the Customs Act, 1962, or whether it would instead qualify as a "thing" capable of being retained under Section 110(3) of the same Act. The Division Bench concluded that Section 110(3) was the correct and applicable provision on the facts before it.

The Factual Matrix

Origin of the Investigation

The Special Intelligence and Investigation Branch (SIIB), Chennai Preventive Commissionerate received an incident report from the Chennai-II Import Commissionerate on 25.04.2024 concerning alleged misuse of the DGFT Amnesty Scheme — a one-time settlement mechanism available to Advance Licence and Export Promotion Capital Goods (EPCG) authorization holders who had defaulted on their export obligations. Under this scheme, eligible authorization holders could obtain an Export Obligation Discharge Certificate (EODC) upon payment of exempted customs duties, with the additional benefit of exemption from interest on Additional Customs Duty and Special Additional Customs Duty.

Preliminary investigation and material verification indicated that certain importers had allegedly obtained closure letters from the DGFT fraudulently, purportedly by bribing officials. Searches conducted at the premises of suspected individuals revealed that entries in the EODC section register had been forged — fictitious signatures were found, as though departmental officers had verified and closed the cases after reviewing relevant documents.

Disclosure by Key Accused

One Thiru D. Manikandan, described as a representative of one of the suspected importer companies, reportedly disclosed that he had paid ₹50 lakhs as a bribe to Shri Sandeep Kumar Chaurasia, an Appraiser posted in the Legal Section, Chennai-III Commissionerate. This payment was allegedly made to induce Shri Chaurasia to forge letters addressed to the DGFT, falsely indicating that challan payments of approximately ₹1.66 crores had been made toward closure of cases under the Amnesty Scheme. The amount paid under the pseudonym Ravindra Sethu was cross-verified and confirmed. Thiru D. Manikandan was subsequently arrested. The mobile phone associated with Shri Sandeep Kumar Chaurasia was also seized, and it reportedly disclosed the identities of other individuals involved in the alleged fraud.

Search at Globe Opticals and Seizure

Pursuing investigative leads further, the Customs authorities searched the premises of M/s. Globe Opticals, Shop No. 2, Ganguraman Street, Kamdhenu Complex, Sowcarpet, Chennai – 600 001 on 08.05.2024. The proprietor of the shop was identified as Shri Vikram Jain, though the Department's position was that his father Shri Mittalal and another individual, Shri Ramalal, were actually in control of the shop and were allegedly operating as hawala agents — serving as conduits between Shri Sandeep Kumar Chaurasia and other hawala operators.

A sum of ₹21,55,000 in cash, along with a mobile phone, was seized under a mahazar. The seizure was effected on the reasonable belief that the cash represented unaccounted money linked to illegal gratification and hawala transactions connected with the fraudulent closure of EPCG licences. A statement was recorded from Shri Mittalal under Section 108 of the Customs Act, 1962, in which he allegedly admitted his role in hawala transactions alongside Shri Ramlal, and this statement formed the basis for the seizure.

The Writ Petition Before the Single Judge

Contention of the Assessee

Shri Vikram Jain, son of Shri Mittalal, filed a writ petition before the Madras High Court challenging the seizure memo dated 08.05.2024, praying that the records be called for, the seizure memo be quashed as unreasonable, illegal and violative of the principles of natural justice, and that the seized items be released.