2020 (9) TMI 395 - HC - Customs

Jurisdiction - power of Deputy Commissioner (Customs) to freeze the Bank Accounts of petitioner - it is also claimed that no power to issue orders for freezing of bank account was available under the Customs Act, 1962 and the said power had only been introduced by way of amendment to Section 110(5) inserted by the Finance (No.2) Act, 2019, dated 1.8.2019 - HELD THAT - Admittedly, investigation under Central Goods and Service Tax Act is pending against the petitioner company. However, the impugned order has been passed by Deputy Commissioner of Customs (Preventive), in view of the investigation initiated against the petitioner company by Anti Evasion Wing of Central Goods and Service Tax, Commissionerate, Jaipur. Vide impugned order, the bank account of the petitioner company was frozen. The impugned order was passed before the amendment in Section 110(5) of the Customs Act, 1962 had come in operation. Moreover, as per the amendment also, the account cannot be frozen beyond the period of one year. The bank account of the petitioner be allowed to be operated by the petitioner company - Petition allowed.

Summary

Issues:
Challenge to freezing of bank account under Customs Act, 1962 before the amendment in Section 110(5)
Validity of freezing bank account under Customs Act, 1962
Comparison of freezing bank account cases
Admission of guilt by the petitioner
Justification for continued freezing of bank accounts
Responsibility of statutory authorities in fraud cases

Analysis:

The petitioner challenged the freezing of their bank account under the Customs Act, 1962, before the amendment in Section 110(5). The petitioner argued that the power to freeze bank accounts was not available under the Customs Act, 1962, and was introduced later through an amendment. The court noted that the impugned order was passed before the relevant amendment came into operation, indicating that freezing the account was not permissible under the law at that time. The amendment also limited the duration of freezing to one year.

In a comparative analysis, the court referred to various cases where freezing of bank accounts was deemed illegal. The court highlighted the need for statutory authorities to strictly adhere to the powers granted by the law under which they function. It emphasized that freezing bank accounts without proper authority could unjustly impact the affected parties' livelihoods and business operations.

Regarding the admission of guilt by the petitioner, the court scrutinized the allegations of fraud and the justifications provided by the Revenue. Despite the Revenue's claims of an admitted fraud, the court found that the circumstances did not conclusively establish guilt. The court emphasized the need for fair and reasonable exercise of powers by public bodies, especially in cases involving significant allegations of fraud.

The judgment underscored the statutory authorities' responsibility in cases of alleged fraud, emphasizing that freezing bank accounts should not be the sole recourse. The court highlighted that depriving individuals of their livelihood through continued freezing of bank accounts was unjustified. It reiterated that actions prohibited directly should not be achieved indirectly, emphasizing the importance of upholding duties in accordance with the law.

In conclusion, the court allowed the petition, quashing the impugned order and directing the unfreezing of the petitioner's bank account. The judgment emphasized the importance of adhering to legal procedures and protecting individuals' rights in cases involving freezing of bank accounts.