2021 (5) TMI 190 - HC - FEMA

Search and seizure operation carried out by the officers of the Enforcement Directorate under FEMA - excess jewellery seized - HELD THAT - With regard to the search and seizure of the excess jewellery that has been seized by the Enforcement Directorate, it is to be noted that in the writ petition, the petitioner has relied on several documents to indicate that this excess jewellery was duly accounted for and had been sent for job work. In my view, the Enforcement Directorate should look into the documents filed in the writ petition and pass a reasoned order on whether these goods are stock-in-trade or not. In the event, the Enforcement Directorate finds that the same are duly accounted for, the same should be released in favour of the petitioner in accordance with law. The above enquiry and the reasoned order should be passed within a period of eight weeks from date. The authorities are also directed to allow the authorized representative of the petitioner-company to have a lawyer of his choice to be present during the summons at an inaudible distance as per the guidelines laid down by the Supreme Court. The petitioner shall cooperate with the authorities. We further hasten to clarify that I have not gone into the merits of this case.With these above observations and directions, this writ petition stands disposed of

Summary

Issues:
Challenge to search and seizure operation under FEMA, seizure of gold jewellery as part of stock-in-trade, jurisdiction of High Court, maintainability of writ petition, cooperation with authorities, excess jewellery seized, authority to pass reasoned order, presence of lawyer during summons.

Analysis:
The writ petitioner challenged a search and seizure operation conducted by the Enforcement Directorate under FEMA, specifically objecting to the seizure of gold jewellery claimed to be part of the stock-in-trade. The petitioner's counsel argued that as per Section 37 of FEMA and proviso (2) of Section 132(1)(iii) of the Income Tax Act, bullion or jewellery forming part of business inventory cannot be seized by authorities. Additionally, the petitioner requested the presence of a lawyer during the enquiry, citing Supreme Court guidelines on the matter.

The Enforcement Directorate justified the search and seizure, stating it was based on information about jewellers in Jaipur purchasing smuggled goods from Kolkata and other locations. They contended that the seized stock exceeded the recorded stock-in-trade of the petitioner. Moreover, they highlighted the petitioner's lack of cooperation with authorities and missed summon dates.

A preliminary objection was raised regarding the maintainability of the writ petition, questioning the jurisdiction of the High Court as the coordinating authority for the search and seizure was located in Jaipur, not Kolkata. However, the High Court ruled that as part of the cause of action arose in West Bengal where the search took place and the petitioner was based, the writ petition was maintainable before them.

Regarding the excess jewellery seized, the High Court directed the Enforcement Directorate to examine the documents provided by the petitioner showing the items were duly accounted for and sent for job work. The authorities were instructed to issue a reasoned order determining whether the goods were part of the stock-in-trade within eight weeks. If deemed legitimate, the jewellery should be released to the petitioner as per the law.

Furthermore, the High Court ordered that the authorized representative of the petitioner-company should be allowed to have a lawyer present during the summons, adhering to Supreme Court guidelines. Emphasizing the necessity of cooperation with authorities, the court clarified that it did not delve into the merits of the case. The writ petition was disposed of with these directions, and no costs were awarded.