Undeclared Gold Concealed in Clothing Qualifies as Prohibited Goods Under Customs Act: Telangana High Court

Background and Overview

The Telangana High Court recently delivered a significant ruling in Shaikh Mohammad Sadiq Vs Principal Commissioner of Customs, dismissing two writ petitions filed by passengers who had gold seized from them upon arrival at Hyderabad's Rajiv Gandhi International Airport. The Court's decision reinforces the legal position that gold imported in violation of statutory requirements under the Customs Act, 1962 can be classified as "prohibited goods," even though gold is not among the items that are absolutely prohibited from import.

The two petitioners — both young students in their early twenties — had arrived from Bangkok aboard Thai Airlines Flight No. TG-329 on 12.08.2023. Upon interception by officers of the Area Intelligence Unit posted at the airport, gold bars weighing 2,000 grams and 1,793.500 grams were recovered from the front and back pockets of their trousers. The gold was valued at Rs. 1,21,34,000 and Rs. 1,08,82,165 respectively. No purchase invoices, no customs declaration forms, and no sufficient funds for duty payment were found in their possession.

Facts of the Case

The Customs authorities, acting on suspicion, intercepted the two petitioners as they arrived at the airport. During a frisking exercise, officers discovered solid bar-shaped objects wrapped in black adhesive tape — one each in the front and back pockets of each petitioner's trousers. On removal of the tape, the objects were confirmed to be 24-karat gold bars.

Key facts established from the record were as follows:

  • The petitioners did not possess purchase vouchers, invoices, or bills evidencing acquisition of the gold.
  • They had not submitted any Indian Customs Declaration Form disclosing possession of dutiable or restricted goods.
  • When directly questioned by Customs officers about whether they were carrying dutiable or prohibited goods, both petitioners replied in the negative.
  • They had not proceeded toward the Red Channel counter designated for declaring dutiable goods and instead moved through the Green Channel.
  • They did not carry sufficient funds to discharge the applicable customs duty.
  • During interrogation, both petitioners stated that the gold had been handed to them by unknown persons in Bangkok for delivery to unknown persons upon exit from the Hyderabad airport — a statement that significantly undermined their credibility.

These facts were undisputed and formed the central basis of the Court's analysis.

Contentions Raised by the Petitioners

The learned counsel appearing for both petitioners advanced the following arguments:

  1. Pre-emptive interception: The petitioners were intercepted before they could reach the declaration counter in the arrival hall. Since they had not yet had the opportunity to formally declare the gold, the seizure was premature and illegal.

  2. Availability of funds outside: Although the petitioners did not carry cash themselves, they claimed that associates waiting outside the airport terminal were ready to provide the money needed for customs duty payment.

  3. Violation of natural justice: After seizure, notices for disposal of the gold were issued on 24.08.2023, while the petitioners were in judicial custody. They were granted bail by the High Court only on 21.09.2023. Issuance of notices when the petitioners could not respond was characterized as an empty formality and a violation of principles of natural justice.

  4. Statutory non-compliance: The proceedings were said to be contrary to Section 110(b) of the Customs Act, 1962, and notices for disposal before finalization of confiscation proceedings were argued to violate Section 126 of the Act.

  5. Right to redemption: Under Section 125 of the Customs Act, the adjudicating authority possessed the option of releasing the seized goods on payment of duty and redemption fine, which had allegedly not been considered.

  6. Right to re-export: The petitioners claimed a right to seek re-export of the gold under Section 80 of the Customs Act.

Department's Stand

The learned Standing Counsel for the Customs Department opposed the petitions on the following grounds: