Gujarat High Court Rebukes Customs Department for Unauthorized Gold Disposal
The Gujarat High Court has delivered a stern rebuke to the Customs Department for its handling of a case involving 200 grams of seized gold. The court expressed strong disapproval over the department's decision to dispose of the valuable metal without providing any prior notice to the rightful owner, a lapse that has raised serious questions about procedural integrity.
Case Background and Judicial Intervention
This legal matter originated on October 13, 2021, when officers from the Air Intelligence Unit of Customs intercepted a passenger arriving at Ahmedabad's Sardar Vallabhbhai Patel International Airport from Abu Dhabi. During inspection, authorities discovered the individual was carrying two bars of gold, each weighing 100 grams, with a purity of 24 carats and 999 fineness.
The Customs Department proceeded to seize the gold bars, which at that time carried an approximate market valuation of Rs 9.75 lakh. Following standard procedure, a show-cause notice was issued to the petitioner on March 26, 2022. However, in a controversial move on November 29, 2022, the deputy commissioner of Customs in Ahmedabad ordered what was termed as "absolute confiscation" of the gold bars, assigning them a tariff value of Rs 8.47 lakh alongside the established market price.
Appellate Proceedings and Departmental Non-Compliance
In January 2024, the petitioner challenged this confiscation order before the appellate authority, specifically the commissioner of Customs (Appeals) in Ahmedabad. The appellate authority delivered a significant ruling, setting aside the original confiscation order and directing the release of the seized gold bars to the petitioner. This release was conditional upon payment of a redemption fine amounting to Rs 2.25 lakh, in addition to applicable duty charges and other statutory payments.
The petitioner demonstrated compliance by paying a penalty of Rs 1 lakh as levied by the appellate authority. Subsequently, he made multiple representations to the Customs Department, expressing his willingness to settle all outstanding dues and requesting the release of his gold in accordance with the appellate order.
Revelation of Gold Disposal and Judicial Response
During recent proceedings before a Division Bench comprising Justice AS Supehia and Justice Pranav Trivedi, a startling revelation emerged. The Customs Department disclosed through an affidavit that the seized gold had already been disposed of on November 29, 2022—the very same date as the confiscation order—without any prior intimation to the petitioner.
The court noted with concern that not only was the petitioner kept uninformed about this disposal, but even the appellate authority remained unaware of this development during the adjudication process. This created a situation where, as the court observed, "the appellate authority is also kept in the dark by the concerned authority, who was holding the entire episode."
Court's Directives and Warning to Officials
In an oral order delivered on January 30, 2026, the Gujarat High Court issued specific directives to address this procedural failure. The court ordered the Customs Department to deposit an amount equivalent to the value of the seized gold as of November 29, 2022. This deposit must be made before any further determination of the actual valuation can proceed.
More significantly, the court issued a stern warning to departmental officials. The bench explicitly stated that failure to comply with this directive would leave the court "constrained to impose a personal cost of Rs 2 lakhs upon the erring officer and to make an adverse opinion" regarding their conduct. This represents a substantial escalation in judicial oversight, holding individual officers personally accountable for departmental lapses.
Legal Arguments and Petitioner's Position
The petitioner's legal representative, advocate Shubham Jhajharia, argued forcefully that his client was entitled to either the current market value of the seized gold or an equivalent quantity of gold of identical purity. With current market prices placing 10 grams of 24-carat gold at approximately Rs 1.5 lakh, the 200 grams in question would now be valued significantly higher than at the time of seizure.
The petitioner's contention centered on the department's "illegal and arbitrary" actions in disposing of the gold while his application was still pending. He emphasized that the appellate authority had already established his ownership of the gold, determining he was "the owner of the gold and not a carrier." The authority had further ruled that the "absolute confiscation of impugned gold, leading to dispossession of the gold in the instant case, is therefore, harsh and not reasonable."
Departmental Defense and Judicial Rejection
The Customs Department attempted to justify its actions by referencing a September 2022 departmental instruction regarding valuation procedures. However, the court firmly rejected this argument, noting that the fundamental issue was not valuation methodology but procedural propriety.
The bench observed that authorities "were required to return the gold or to pay an equivalent amount of gold, which was not done despite having been paid the penalty and making a representation. It is pertinent to note that before disposing of the gold, no notice has been issued to the petitioner..." This highlights the court's emphasis on due process and transparency in governmental actions affecting citizen property rights.
Ongoing Proceedings and Future Directions
The court has scheduled the next hearing for February 6, 2026, granting the matter priority status. During this proceeding, respondent authorities have been directed to file an affidavit specifically "disclosing the name of the officer, who has disposed of the gold." This requirement indicates the court's determination to establish individual accountability for what it views as a serious procedural violation.
The case has been filed against multiple respondents, including the deputy commissioner of Customs (Ahmedabad), the commissioner (Appeal), the principal commissioner, and the Union of India. This broad respondent list reflects the systemic nature of the issues being examined by the judiciary.
Broader Implications for Customs Procedures
This ruling carries significant implications for Customs Department procedures across India. The court's insistence on proper notice before disposal of seized assets establishes an important precedent for transparency in confiscation processes. The threat of personal financial penalties against individual officers represents a new level of accountability that may influence departmental practices nationwide.
The case also highlights the complex interplay between different levels of authority within the Customs framework, revealing potential communication gaps between field officers, adjudicating authorities, and appellate bodies. As gold smuggling and customs violations remain persistent challenges, this judicial intervention may prompt procedural reforms to ensure greater fairness and transparency in asset seizure and disposal processes.
