Indian currency seized as evidence in hawala probe need not be returned after six months, Madras High Court rules under Customs Act Section 110(3)

The Special Intelligence and Investigation Branch received information concerning alleged fraudulent availment of the DGFT Amnesty Scheme by importers who obtained Export Obligation Discharge Certificates through forged documents and alleged bribery of Customs officials.

During the investigation, the premises of M/s. Globe Opticals, owned by the respondent, Shri Vikram Jain, were searched on 8 May 2024.

The Customs authorities seized ₹21,55,000 in cash and a mobile phone, allegedly on the reasonable belief that the cash was connected with hawala transactions and illegal gratification relating to fraudulent closure of EPCG licences.

The respondent challenged the seizure under Article 226 of the Constitution, contending that the cash belonged to him, was duly accounted for, and could not be retained because no show-cause notice had been issued within six months as required by Section 110(2) of the Customs Act, 1962.

The learned Single Judge accepted this contention, directed return of the seized cash, and granted liberty to the Department to initiate fresh proceedings if warranted.

The Principal Commissioner of Customs preferred the present intra-court appeal, contending that the cash and mobile phone had been seized as evidentiary “things” under Section 110(3), and not as “goods” liable to confiscation under Section 110(1).

1. Whether the Indian currency seized during an investigation into alleged hawala transactions, bribery, forgery, and fraudulent availment of the DGFT Amnesty Scheme constituted “goods” seized under Section 110(1), or “things” seized as material evidence under Section 110(3) of the Customs Act, 1962?

2. Whether the six-month period for issuance of a show-cause notice under Section 110(2) applied to the seized currency, requiring its return in the absence of such notice?

3. Whether the High Court could direct release of the seized cash and mobile phone while the investigation into connected economic offences remained pending?

The Court applied Section 110(1) of the Customs Act, 1962, which permits seizure where the proper officer has reason to believe that goods are liable to confiscation; Section 110(2), which requires return of goods seized under Section 110(1) if no notice under Section 124(a) is issued within six months, subject to statutory extension; and Section 110(3), which authorises seizure of documents or “things” useful for or relevant to proceedings under the Customs Act.

The Court held that the limitation under Section 110(2) applies only to goods seized for confiscation under Section 110(1), and not to documents or things seized as evidence under Section 110(3).

It also relied on the principle stated in Rohit Kumar v. Union of India, decided by the Calcutta High Court on 21 December 2001, that “things” under Section 110(3) receive a wide interpretation and may include money relevant to an investigation.

The Court further applied the principle that constitutional writ jurisdiction should not be used to prematurely obstruct an ongoing investigation into serious economic offences where the seizure is supported by investigative material.

The Court distinguished between currency that is itself the subject of a customs offence—such as undeclared currency being transported across the customs frontier—and currency seized during an investigation as evidence of an offence.

In the former situation, the currency may be treated as “goods” under Section 110(1), attracting the six-month requirement under Section 110(2).

In the present case, however, the cash was seized from the premises of persons allegedly facilitating hawala transactions and was connected with an investigation into forged EPCG-related documents, bribery, and fraudulent customs-duty relief.

It was therefore treated as a “thing” relevant to proceedings under Section 110(3), rather than as goods seized for confiscation.

The Court also considered the statements recorded under Section 108, the alleged hawala role of the respondent’s father, the cash seizure, and the pending forensic examination of the mobile phone as sufficient reasons not to order release during the investigation.

The Single Judge had consequently erred by mechanically applying Section 110(2) without determining the true purpose and circumstances of the seizure.

The Court held that the currency and other seized material were properly retainable as evidentiary “things” under Section 110(3) of the Customs Act, 1962, and that the six-month limitation under Section 110(2) did not apply.

The Customs Department was directed to proceed with the investigation to its logical conclusion and to deposit the seized currency in an interest-bearing scheme of a nationalised bank until completion of the investigation.

No order as to costs was made, and the connected miscellaneous petition was closed.