2008 (7) TMI 414 - HC - Customs

Seizure of bank account - Investigation - Held that - Taking into consideration that the respondent has neither issued any show cause notice to the petitioner nor any formal order has been passed by virtue of which the bank account of the petitioner has been seized except a communication issued to respondent No. 3 bank by virtue of which the bank account of the petitioner stands seized in August 2007. Petition is allowed and petitioner is directed to file an undertaking with respect to the said property 65-66 Guru Ram Dass Nagar Main Bazar Laxmi Nagar Delhi within three days to the effect that the said property will not be sold alienated or transferred (however he is allowed to give the same on rent) till further orders and till the conclusion of the adjudication proceedings if any by respondent No. 2.Copy of the affidavit will also be given to counsel for respondent No. 2. Upon filing of the undertaking respondent No. 2 is directed to de-freeze the bank account of the petitioner within two days thereafter.

Issues:
1. Freezing of bank account without formal notice or order.
2. Legality of the action of customs authorities.
3. Constitutional rights and restrictions.
4. Interpretation of Section 110(3) of the Customs Act.
5. Compliance with legal procedures in seizing assets.
6. Necessity of security for the authorities.

Issue 1: Freezing of bank account without formal notice or order

The petitioner, a sole proprietor of an export business, had his bank account frozen by customs authorities without any show cause notice or formal communication of violation. The petitioner contended that this action was unauthorized and restrictive. The respondent argued that such actions were within the government's power to impose reasonable restrictions. The court noted the lack of any formal order for seizing the account, only a communication to the bank, which was deemed insufficient.

Issue 2: Legality of the action of customs authorities

The petitioner's grievance centered on the customs authorities detaining export consignments and seizing documents without issuing any violation notice. The respondent argued that the actions were justified under the Customs Act, specifically Section 110(3), which allows the seizure of relevant documents or things for proceedings under the Act. However, the court observed a lack of evidence or formal communication justifying the freezing of the bank account, questioning the legality of the authorities' actions.

Issue 3: Constitutional rights and restrictions

The petitioner's counsel argued that the freezing of the bank account was an unnecessary restriction on the petitioner's rights and cited judgments from other High Courts to support their case. The respondent contended that the government had the power to impose restrictions, emphasizing the need for security in case of any future demands. The court considered the balance between individual rights and government powers, ultimately directing the petitioner to provide an undertaking regarding property instead of freezing the bank account.

Issue 4: Interpretation of Section 110(3) of the Customs Act

The respondent relied on Section 110(3) of the Customs Act to justify the actions of seizing documents and assets. The court analyzed the provision in light of previous judgments and observed that the respondent failed to demonstrate a direct link between the petitioner's actions and the need for seizing the bank account. The court emphasized the importance of adhering to legal procedures and justifying such drastic actions.

Issue 5: Compliance with legal procedures in seizing assets

The court highlighted the lack of formal orders or communication regarding the freezing of the bank account, indicating a procedural lapse on the part of the customs authorities. The petitioner had not been informed or served with any notice of violation, raising concerns about the legality and procedural correctness of the actions taken by the authorities.

Issue 6: Necessity of security for the authorities

The respondent argued that freezing the bank account provided security in case of any future demands against the petitioner. However, the court directed the petitioner to provide an undertaking regarding property instead of continuing to freeze the bank account, balancing the need for security with the petitioner's rights. The court emphasized the importance of following due process and ensuring that actions taken by authorities are legally justified.

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