2016 (4) TMI 1064 - HC - Customs

Seeking direction for release of bank accounts - Export of imitation jewellery - Petitioner indulged in fraudulent exports by inflating the Prevailing Market value and Free On Board value in order to claim duty drawback and other benefits - Held that - We are not denying to the Revenue an opportunity of investigating or unearthing huge fraud. We are also not denying them their powers, but surely if drastic powers have to be exercised by public bodies, they must be exercised reasonably and fairly. We fail to understand if a huge and systematic fraud is alleged and perpetrated not only on the Revenue but on the public as a whole resulting in a voluntary deposit from the petitioner, then, why the investigations could not be concluded nor a show cause notice issued nor any steps taken till date. When such petitions are filed, it is our experience that detailed affidavits are filed in order to justify the act, but there is not a word about the delay. On 21st April, 2016, the deponent has time to file a very detailed affidavit-in-reply and file it in Court, but it is surprising that the Directorate and whole of it does not have time to proceed against those indulging in fraud on the public. A justification of this nature comes promptly only when parties like the petitioner complain of a freezing or attachment of their bank accounts and refusal to release them even if bona fides are shown. This is not a case of an admitted fraud or a liability which is undisputed. Once there are allegations of fraud the Revenue has a larger responsibility and duty to the public. It cannot refuse to take all steps and rest only on freezing of bank accounts of the alleged defaulters. That such an act and which is to be found traceable to different powers and of the nature conferred in the Customs Act, 1962, will not permit the respondents to deprive parties like the petitioner of their source of livelihood. They cannot stop their business by continued freezing of their bank accounts. It is further very clear and requires no reiteration that what is prohibited directly cannot be achieved indirectly or in an oblique manner. A refusal to carry out a duty in accordance with law cannot be justified by such a continued attachment and freezing of the bank accounts. In the given facts and circumstances, we do not see any justification for the same. Therefore, we direct that the bank accounts shall be released and this direction shall apply to all such accounts which are bearing the name of the petitioner in HDFC Bank and other banks whose names are also notified to the Revenue. The release shall become effective within 48 hours from today. - Decided in favour of petitioner

Summary

Issues Involved:
1. Legality, propriety, and validity of communications addressed to banks by respondents.
2. Legality, propriety, and validity of the action of freezing the petitioner’s bank accounts.

Issue-wise Detailed Analysis:

1. Legality, Propriety, and Validity of Communications Addressed to Banks:

The petitioner, a proprietor of M/s. Infinity Trading Company, challenged the communications addressed to banks by the respondents under Article 226 of the Constitution of India. The petitioner argued that the communications lacked legality, propriety, and validity. The respondents initiated investigations based on intelligence suggesting fraudulent duty drawback claims by exporters, including the petitioner. Summons were issued, and the petitioner cooperated by appearing before the Investigating Officer and addressing letters to the banks to transfer the balance to the Department. Despite this cooperation, the respondents directed the banks to freeze the petitioner’s accounts. The petitioner contended that the allegations of fraud were not conclusively established, and the respondents' unilateral actions were unjustified.

2. Legality, Propriety, and Validity of Freezing the Petitioner’s Bank Accounts:

The petitioner claimed that the freezing of bank accounts adversely affected his business and livelihood. He argued that the respondents' actions were based on alleged, not proven, fraud. The petitioner had deposited ?16,62,792.18 to show bona fides and requested the release of his accounts. The respondents, however, maintained that the petitioner was involved in fraudulent exports and had failed to appear before the Directorate of Revenue Intelligence officers. They justified the freezing of accounts by citing the need to investigate the fraudulent duty drawback claims.

The court scrutinized the respondents' actions and found that the unilateral freezing of accounts was unjustified without conclusive proof of fraud. The court emphasized that public bodies must exercise their powers reasonably and fairly. The court noted that despite the allegations, the respondents had not concluded their investigations or issued a show-cause notice. The court criticized the respondents for delaying the investigation while promptly justifying the freezing of accounts.

Judgment:

The court allowed the petition, directing the release of the petitioner’s bank accounts within 48 hours. The court clarified that the investigation could continue, and further steps could be taken in accordance with the law. The court's order did not limit the respondents' powers or influence the adjudicating authority's decision. The court underscored that the respondents could not deprive the petitioner of his livelihood by indefinitely freezing his accounts without conclusive evidence of fraud.