2013 (12) TMI 1196 - HC - Customs

Confiscation of goods - Freezing of accounts - Held that - Respondents in the counter affidavit have stated the chain as to how the misdeclared goods were imported by M/s. VVK Traders, M/s. Mehta Overseas, M/s. Chopra Overseas and M/s. Umesh Impex and other firms and were shown to be sold to individuals against the fake cash bills and imported chemicals with correct description were shown to be supplied by another set of fake front firms to several firms located mainly at Sambha, Jammu & Kashmir and the Petitioner s firm was found to be one of such firms - since the freezing of the bank account, was not seizure of the goods as envisaged under Section 110 of the Act, the Petitioner is not entitled to de-freezing of the bank account unconditionally - It is therefore, directed that the amount deposited in Bank Account after the date of freezing the account shall be released, subject to furnishing of a Bank guarantee to Respondent No.2 in respect of the amount credited in the account from the date of freezing of the account - Conditionally decided in favour of assessee.

Issues Involved:
1. Legality of freezing the petitioner's bank account.
2. Applicability of Sections 110(1) and 124 of the Customs Act, 1962.
3. Requirement of notice under Section 110(2) of the Customs Act.
4. Distinction between Sections 110 and 124 of the Customs Act.
5. Conditions for de-freezing the bank account.

Detailed Analysis:

1. Legality of Freezing the Petitioner's Bank Account:
The petitioner approached the court under Article 226 of the Constitution of India to de-freeze its account held in Citibank, which was frozen by the Directorate of Revenue Intelligence (DRI). The petitioner argued that it was not indicted or arraigned as a Noticee in the show cause notice issued pursuant to the investigation into the alleged import of high-value pesticides/insecticides disguised as Sodium Bi-Carbonate. Despite this, the petitioner's bank account was frozen.

2. Applicability of Sections 110(1) and 124 of the Customs Act, 1962:
The petitioner contended that under Section 110(1) of the Customs Act, if goods liable for confiscation are seized and a show cause notice under Section 124 is not issued within six months, the goods must be restored to the person from whom they were seized. The petitioner argued that since the bank account was frozen in July 2011, it should be de-frozen.

3. Requirement of Notice under Section 110(2) of the Customs Act:
The petitioner relied on the Supreme Court judgment in Harbans Lal v. Collector of Central Excise & Customs, asserting that if a notice under Section 110(2) is not given within six months, the seized goods must be restored to the person from whom they were seized. The petitioner argued that even if an extension is granted, it would be invalid unless the affected person is given notice before the extension.

4. Distinction Between Sections 110 and 124 of the Customs Act:
The court examined the distinction and scope of Sections 110(2) and 124, referencing the Supreme Court judgment in Harbans Lal, which clarified that Sections 110 and 124 are independent and exclusive of each other. Even if seized goods are returnable under Section 110, proceedings for confiscation under Section 124 may continue. The court noted that the absence of a notice under Section 110(2) affects only the seizure of goods, not the validity of the notice under Section 124.

5. Conditions for De-freezing the Bank Account:
The court considered the respondents' argument that the freezing of the bank account was not covered under Section 110(2) but under Section 110(3), which does not require notice for the seizure of documents or things. The court concluded that freezing the bank account was not a seizure of goods or documents relevant to proceedings under the Act but was intended to prevent the petitioner from withdrawing proceeds from alleged violations.

The court referenced the Supreme Court judgment in Euroasia Global, which held that unconditional release of seized currency should not be allowed. The court also cited the Division Bench judgment in Director General, DRI & Ors. v. Sajjan Kumar & Ors., which permitted the operation of bank accounts subject to certain conditions.

Conclusion:
The court concluded that the petitioner was not entitled to the unconditional de-freezing of the bank account. It directed that the amount deposited in the bank account after the date of freezing should be released, subject to the petitioner furnishing a bank guarantee to the respondent for the amount credited after the account was frozen. The writ petition was disposed of accordingly.

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