Gold Smuggling, Prohibited Goods & Redemption Discretion: Delhi High Court Rules on Section 125 of the Customs Act, 1962

Background and Context

Few commodities carry the cultural weight that gold does in India. Its allure has long prompted individuals — both Indian nationals and foreign visitors — to attempt its illegal importation, often employing concealed or undeclared means. This not only places such persons in direct conflict with Indian law but also has broader economic consequences for the country. Against this backdrop, a batch of five writ petitions was placed before the Delhi High Court, raising fundamental questions about how gold brought into India in violation of applicable conditions is to be treated under the Customs Act, 1962, and what remedies — if any — are available to the persons from whom such gold is seized and confiscated.

The lead petition, Nidhi Kapoor Vs Principal Commissioner & Additional Secretary to the Government of India & Ors. (Delhi High Court), W.P.(C) 8902/2021, decided on 21 August 2024, became the vehicle through which the Court examined and settled several contested legal propositions that had produced conflicting outcomes across adjudicating forums.

The Delhi High Court identified three principal questions requiring determination:

  1. Scope of "prohibited goods" under Section 2(33) of the Customs Act, 1962:

    • Does the definition encompass goods that are subject to regulatory conditions?
    • Which category of goods remains non-prohibited yet liable to confiscation?

  2. Whether gold constitutes a prohibited item under the applicable statutory and regulatory framework.

  3. The scope of redemption under Section 125 of the Customs Act, 1962, and whether the adjudicating officer retains discretion in the case of prohibited goods.

Factual Background of the Individual Petitions

W.P.(C) 8902/2021 — Nidhi Kapoor

The petitioner arrived on 1 July 2015 at Indira Gandhi International Airport, New Delhi, on Flight No. 9W 545 from Dubai, UAE. While attempting to pass through the Customs Green Channel, she was found carrying three gold metal bars and two gold cut pieces, collectively weighing 3100 grams of 995.0 purity, valued at Rs. 76,44,011/- as recorded in the panchnama. During investigation, a statement was recorded under Section 108 of the Act in which she allegedly stated that the goods had been gifted to her by a family friend, Deepak Bajaj, and produced a Gift Deed dated 30.06.2015 in support.

A Show Cause Notice dated 18 December 2015 was issued calling upon her to explain why the subject goods should not be confiscated under Section 111 and why penalties should not be imposed under Section 112 read with Section 114AA. The adjudicating order dated 16 September 2016 directed confiscation of the subject goods and imposed a penalty of Rs. 15,00,000/- under Section 112 read with Section 114AA. The appeal before the Commissioner of Customs (Appeals) was dismissed on 19 February 2018. The Revision Petition before the Revisional Authority was dismissed by order dated 2 January 2020 (issued 8 January 2020), though the penalty under Section 114AA was set aside.

W.P.(C) 9561/2021

The petitioner landed at T-3, IGI Airport on 15 May 2015 from Dubai, UAE, by Flight No. EK 512, and was found in possession of two gold metal bars and two gold pieces recovered from her body and clothing, weighing approximately 3000 grams of 995.0 purity, valued at Rs. 75,86,865/-, with a market value estimated at Rs. 83,67,000/- by the jeweler appraiser. She stated that she had purchased the jewelry from M/s. Motiwala Jewellers, Dubai, on 13 May 2015, and also claimed the goods were gifted by a family friend.

A Show Cause Notice dated 3 November 2015 was issued. The adjudicating order dated 15 November 2017 directed confiscation and imposed a penalty of Rs. 15,00,000/- under Section 112 and Section 114AA. On appeal, the Commissioner of Customs (Appeals) allowed the appeal and directed release of the subject goods under Section 125 on payment of a redemption fine of Rs. 19,00,000/-, reducing the penalty under Section 112 read with Section 114AA to Rs. 8,00,000/-. The department thereafter challenged this, and the Revisional Authority by order dated 9 July 2021 restored the original order, upholding absolute confiscation and refusing redemption.

W.P.(C) 13131/2022 — Sudha Murthy v. Jt. Commissioner of Customs, IGI Airport, T-3, Delhi

The petitioner had travelled to Canada on 7 December 2019 and returned to India on 29 September 2020 via Air India Flight AI-188 from Toronto. On search, she was found carrying 420 grams of assorted gold jewellery. She maintained that the items had originally been purchased in India prior to her departure and were being brought back. She was detained vide a memo dated 30 September 2020. The sealed goods were opened at CWC Warehouse on 7 October 2020 for valuation. During those proceedings, the petitioner allegedly removed two gold bangles weighing approximately 48 grams, which were subsequently recovered. FIR No. 213/2020 was lodged against her under Section 379 of the Indian Penal Code, 1860. She was produced before the learned ACMM, Patiala House Courts Complex, New Delhi, and by order dated 21 January 2021, pleaded guilty and was sentenced to pay a fine of Rs. 15,000/- along with imprisonment for one day "till rising of the court."

The petitioner claimed the goods were ancestral/family jewelry. Without issuing a formal Show Cause Notice and without conducting a public hearing, an order dated 1 January 2021 was passed. She subsequently preferred an appeal before the Commissioner of Customs (Appeals) on 2 March 2021, which was dismissed. The subject goods were confiscated and redemption was rejected.

W.P.(C) 531/2022 — Jasmeet Singh Chadha v. Commissioner of Customs, IGI Airport, New Delhi

The petitioner visited Dubai on 7 September 2014 for a family visit and purchased approximately 2000 grams of gold on 8 September 2014 from savings and borrowed funds, evidence of which was provided. On arriving at T-3, IGI Airport on 9 September 2014 by Flight No. 6E-024, he was detained at the Aerobridge. He maintained that he had declared the gold at Dubai Airport before boarding and had intended to declare it at the Indian Customs counter. He was allegedly made to sign multiple documents on an assurance of release.