Indian Currency is ‘Goods’ Under Customs Act, Seizure without issuing SCN within Six Months is Illegal: Madras HC [Read Order]

In a recent ruling, the Madras High Court held that Indian currency is treated as “goods” under the Customs Act, 1962, and that when such currency is seized under Section 110, the Customs Department must issue a show-cause notice within six months, as mandated by law. The court held that failure to follow this procedure renders the seizure illegal.

Vikram Jain, the petitioner, filed a writ petition before the Madras High Court challenging a seizure memo dated 8 May 2024 issued by the Customs Department, under which Indian currency was seized. The petitioner sought the quashing of the seizure memo and the return of the seized currency.

The petitioner stated that the seized currency belonged to him and was duly disclosed in his income tax returns and balance sheet. The seizure was effected from the premises of his father, Mittalal, during an investigation by the Customs Department.

According to the department, the investigation related to alleged corruption involving a Customs appraiser who had collected bribes from exporters and issued fabricated documents. The department alleged that Mittalal had acted as an agent aiding the appraiser.

The petitioner’s counsel argued that the seizure was carried out under Section 110 of the Customs Act and that Indian currency falls within the definition of “goods” under Section 2(22) of the Act. It was argued that Section 110(2) mandates issuance of a show cause notice within six months of seizure, failing which the seized goods must be returned.

The counsel argued that no show cause notice was issued to either the petitioner or his father within the prescribed period, nor was any extension granted by the Commissioner. It was also pointed out that no criminal complaint had been filed against the petitioner or Mittalal.

The Customs Department argued that the seizure was effected under Section 110(3) of the Customs Act and not under Section 110(1). The department claimed that the seized currency fell under the category of “things” useful for investigation, for which no statutory time limit for issuing a show cause notice is prescribed. They also argued that the seizure was not connected with any direct export or import activity by the petitioner.

Justice Abdul Quddhose observed that there is a clear distinction between Section 110(2) and Section 110(3) of the Customs Act. The court explained that Section 110(3) applies to documents and items similar in nature, such as records or contracts, and not to currency.

The court observed that Indian currency is expressly included in the definition of “goods” under the Customs Act. The court pointed out that once currency is seized under Section 110, the procedure under Section 110(2) must be strictly followed, irrespective of whether the seizure occurred from a passenger or from premises.

Section 110(2) [For Reference]

“(2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:

[Provided that the Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform the person from whom such goods were seized before the expiry of the period so specified: Provided further that where any order for provisional release of the seized goods has been passed under section 110A, the specified period of six months shall not apply.”

The court held that since no show-cause notice was issued within the prescribed period, the seizure could not be sustained in law. The court quashed the seizure memo dated 8 May 2024 and directed the Customs Department to return the seized currency to the petitioner within eight weeks. Liberty was granted to the department to initiate fresh action in accordance with law, if warranted. The writ petition was allowed.

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