Personal jewelry worn by travelers qualifies as personal effects exempt from customs duties, regardless of its value, unless explicitly defined otherwise in customs regulations.

JUDGMENT :

JITENDRA JAIN, J.

1. By this petition under Article 226 of the Constitution of India, the Petitioner seeks to challenge an order dated 21st February 2012 passed by Revisional Authority (Joint Secretary to the Government of India), whereby the said authority did not give full relief but reduced redemption fine from Rs. 25,00,000/- to Rs. 20,00,000/- and personal penalty under Section 112 (1) of the CUSTOMS ACT , 1962 (“the Act”) was reduced from Rs. 20,00,000/- to Rs. 15,00,000/-.

2. Brief Facts:

(i) On 6th May 2007, Petitioner a USA citizen of Indian origin and USA passport holder arrived by Delta Airlines flight from New York to Mumbai. The said flight by landed at about 22:04 hours.

(ii) Petitioner did not have any check-in-baggage, but was carrying a handbag. Petitioner declared two bottles of whiskey as the value of good imported by him and passed through green channel.

(iii) A Customs Officer for some reason stopped Petitioner and searched his handbag. On a personal search of Petitioner, he was found wearing a gold chain with a gold pendant embedded with 12 diamonds. On questioning, Petitioner stated that the said gold chain was purchased in the year 1989 by him from a Jeweller in US for around USD 25,000/- which, at the exchange rate prevailing on date of his arrival i.e. 6th May 2007 would work out to about Rs. 10,02,500/-.

(iv) On 7th May 2007, statement of Petitioner was recorded under Section 108 of the CUSTOMS ACT . It is recorded that Petitioner stated that he was a resident of New York, U.S.A and staying with his family. His parents and sisters were staying in Mumbai. He further stated that he was carrying on jewellery business and used to visit India regularly to meet his parents and siblings living in India and also for business purpose. He further stated that he was living in U.S.A. since 25 years and had an annual income of USD 1,50,000/-.

(v) On 7th May 2007, a panchnama was drawn in the presence of two witnesses namely, one Pradeep Sawant and one Mukesh Khanna. The Customs Officer, thereafter, introduced the panchas to one Prashant Sangvi and one Sarju Shah who, as per the Customs Officer, were experts in diamonds trade from “SEEPZ.” What he meant by “experts” is not clear. Mr. Sangvi and Mr. Shah, as trade representatives, ascertained the value of diamonds embedded in the pendant at Rs. 1,20,35,000/-. These trade representatives have further opined that the finishing of prongs were not upto the mark and, therefore, the diamonds could be removed easily. The Customs Officer, thereafter, seized the chain alongwith diamonds on the basis that Petitioner has attempted to smuggle the said diamonds into India and, therefore, same was liable for confiscation.

(vi) On 12th October 2007, a show cause notice was issued by the Commissioner of Customs proposing confiscation of 12 diamonds under Section 111 (d), (l) and (m) of the Act and further to show cause as to why penalty should not be imposed upon Petitioner under Section 112 of the Act. The show cause notice also invoked Rule 6 of the BAGGAGE RULES , 1998 which prescribes that a person residing abroad for over a year and returning to India is allowed to import free of duty jewellery upto an aggregate value of Rs. 10,000/- in case of a male passenger.

(vii) On 15th April 2008, Petitioner replied to the aforesaid show cause notice inter-alia stating therein that Petitioner was entitled to carry the used gold chain with the gold pendant embedded with diamonds as per BAGGAGE RULES without payment of any duty. Petitioner also submitted that Rule 6 of the BAGGAGE