2021 (1) TMI 871 - HC - Customs

Seeking debit-freeze of one account of the petitioners - time limitation - whether a provisional attachment of bank account can be continued beyond the period of one year? - HELD THAT - Section 110 of the Customs Act deals with seizure of goods, documents and things. Sub-section (5) was inserted in the said provision by Finance (No.2) Act, 2019 with effect from 01.08.2019 - Sub-section (5) of section 110 states that provisional attachment of bank account can be for a period of six months but the said period can be extended for a further period not exceeding six months for reasons to be recorded in writing and communicated to the affected person before expiry of the initial period of six months. There are no justification to continue with the provisional attachment of the bank accounts of the petitioner - The initial period of six months had expired in November, 2019. Even assuming and giving benefit of further six months to the respondents, the outer limit of one year expired in May, 2020. That apart, Finance (No.2) Act, 2019 was given prospective application with effect from 01.08.2019. The provisional attachment was made on 08.05.2019 when the said provision was not available in the statute book. The petitioner's accounts are allowed to be released/unfrozen - petition allowed.

Summary

Issues:
Provisional attachment of bank account exceeding one year.

Analysis:
The writ petition challenges a letter issued by the Directorate of Revenue Intelligence requesting the debit-freeze of the petitioners' bank account in connection with an investigation into the import of precious stones. The respondents allege that the petitioners engaged in over-invoicing of rough precious stones to evade customs duty, with imports amounting to ?2000 crores. Despite summonses and non-cooperation from the petitioners, the investigation remained inconclusive. The petitioners deny the allegations. The main issue raised is whether a provisional attachment of a bank account can be continued beyond one year.

The judgment refers to Section 110 of the Customs Act, which allows provisional attachment of bank accounts for a maximum of one year, extendable for another six months with reasons recorded in writing. Citing previous cases, the court emphasizes strict compliance with the procedural requirements for such attachments. The court in M/s. Boxster Impex Pvt. Ltd. Vs. Union of India held that the provision has prospective application from 01.08.2019 and outlined the necessary pre-conditions for invoking the provision. Similarly, in Samyak Jewels Pvt. Ltd. Vs. Union of India, it was clarified that provisional attachment is temporary, and the statute provides a definite timeline for such attachments.

The court found no justification to continue the provisional attachment beyond the permissible period. It noted the absence of any order extending the attachment period and highlighted the unlawful nature of the continued attachment post the one-year limit. The judgment set aside and quashed the impugned letter, directing the immediate unfreezing of the petitioners' bank accounts. The decision emphasized the legality and validity of the attachment, refraining from commenting on the investigation itself, and urged cooperation from the petitioners.

In conclusion, the writ petition was allowed, and the provisional attachment of the bank accounts was deemed unlawful and set aside. The judgment underscored the importance of adherence to statutory timelines for provisional attachments and highlighted the necessity for proper orders and compliance with procedural requirements in such cases.