2013 (9) TMI 781 - HC - Customs

Interim Order for Attachment of Bank Account - Held that - Power to pass an interim order of attachment of the bank account was not contemplated under Section 121 of the Customs Act and, therefore, the account of the authorities in suspending the operation of the bank account pending investigation was not sustainable. It was further echoed in the case of Raghuram Grah Private Limited versus Commissioner of Central Exercise of Service Tax; 2004 (12) TMI 99 - HIGH COURT OF JUDICATURE AT ALLAHABAD - that there was no provision under the Act which conferred power on the authority to freeze the bank account in the pending investigation. The words smuggled goods were used in Section 121 of the Central Excise Act of 1944 and the Rules made thereunder, the provision relating to the smuggled goods shall be deemed to be in reference to the excisable goods and, therefore, there was no ambiguity in interpreting Section 121 that it applies also in case of excisable goods - Sections 122 and 122A of the Customs Act require the adjudication and the procedure for the adjudication relating to the confiscations and the penalties - The adjudication had not been done but the authorities have proceeded to prevent the operation of the bank account, in this regard. However, the authorities were free to take appropriate steps as provided under the law against the petitioners as the consideration in this writ petition was restricted only to the point whether or not Section 121 of the Customs Act, 1962 empowers the authority to pass an interim order of attachment of the bank account.

Summary

Issues:
- Whether the authorities have the power to pass an interim order of attachment of bank accounts pending investigation under Section 121 of the Customs Act, 1962?

Analysis:
The petitioners challenged the order of the Director General of Central Excise Intelligence, Zonal Unit, which temporarily suspended the operation of their bank accounts due to alleged manufacturing activities of chewing tobacco without proper registration. The petitioners argued that there was no legal authority for the interim attachment of bank accounts without issuing a show cause notice, citing previous judgments. On the other hand, the respondent authorities contended that Section 121 of the Customs Act empowers them to confiscate sale proceeds related to excisable goods, justifying the bank account suspension. They emphasized that the power to attach bank accounts is inherent in Section 121 when excisable goods are sold. The respondents also highlighted that Sections 122 and 122A of the Customs Act outline the adjudication process for confiscations and penalties.

The Court acknowledged that Section 121 of the Customs Act allows for the confiscation of sale proceeds of excisable goods when sold by individuals with knowledge of their excisable nature. While the respondents argued that this provision extends to attaching bank accounts to safeguard revenue interests, the Court noted that no adjudication had taken place in this case. The Court referred to an unreported judgment emphasizing that there is no provision in the Customs Act for interim attachment of bank accounts pending investigation. Relying on this legal stance, the Court concluded that the power to pass an interim order of attachment of bank accounts is not envisaged under Section 121 of the Customs Act. Therefore, the suspension of bank account operations by the authorities was deemed unsustainable.

The Court clarified that its decision was limited to the issue of whether Section 121 empowered the authorities to attach bank accounts temporarily. It directed the authorities to take appropriate legal actions against the petitioners within the bounds of the law. Consequently, the writ petition succeeded, with no costs imposed on either party.