2017 (10) TMI 577 - HC - Customs

Freezing of Bank Account of petitioner - non-issuance of SCN - Held that - Without there being any authority in law to justify the freezing of the bank accounts, requiring the Petitioners to furnish security for de-freezing such bank accounts would be unjustified. It is always open to the DRI to conclude the investigation and issue a SCN in accordance with law. Statutory authorities have to exercise their powers strictly according to the Act under which they function - the Court directs that the bank accounts of all the Petitioners, shall be defreezed forthwith - petition allowed - decided in favor of petitioner.

Summary

Issues:
Freezing of bank accounts by Directorate of Revenue Intelligence without issuance of Show Cause Notice (SCN) and justification under Customs Act, 1962.

Analysis:
The High Court addressed the grievance of the Petitioners regarding the freezing of their bank accounts by the Directorate of Revenue Intelligence (DRI) without the issuance of a Show Cause Notice (SCN). The court examined two writ petitions concerning the actions of the DRI in freezing the accounts pending the issuance of an SCN. The Petitioners in both cases had their bank accounts frozen following searches conducted by DRI officers at their premises. The freezing of the accounts had continued for an extended period without any SCN being issued to the Petitioners, despite their cooperation with providing information and documents to the DRI.

The DRI justified the freezing of the bank accounts by alleging that the accounts were being used to route money through various entities and for preventing the diversion of funds to other dummy companies. The DRI claimed that significant amounts of money had been transferred and withdrawn in cash, ultimately benefiting specific individuals and entities. However, the DRI failed to initiate proceedings under Section 110 of the Customs Act, 1962, as there was no stock of goods with the Petitioners' firms.

The court considered previous legal precedents where similar freezing of bank accounts was deemed illegal. The Petitioners cited cases where courts had ordered the defreezing of bank accounts in similar circumstances. The court emphasized that statutory authorities must act strictly within the provisions of the law and cannot freeze accounts without proper justification. The court rejected the DRI's request for the Petitioners to furnish security for defreezing the accounts, stating that such a requirement would be unjustified.

In its final judgment, the High Court directed the immediate defreezing of all the Petitioners' bank accounts and instructed the DRI to communicate with the banks to allow the Petitioners to operate their accounts without delay. The court emphasized the importance of conducting investigations in accordance with the law and highlighted the need for statutory authorities to fulfill their duties responsibly. The Petitioners were instructed to continue cooperating with the investigation, and the petitions were disposed of accordingly.