2025 (4) TMI 1250 - HC - Customs

Maintainability of petition - availability of alternative remedy - Validity of Provisional Attachment under section 110(5) r/w section 28BA of the customs act at a stage which is anterior to finalization of an assessment or raising of the Demand - basic order on the basis of which impugned intimation dated 03.12.2024 has been issued not challenged - Jurisdiction to issue impugned intimation/attachment order - alternative remedy under Section 110A of Customs Act 1962 - Colourable exercise of power by Respondents in provisionally attaching the bank accounts of the petitioners - time barred attachment order. Basic order on the basis of which impugned intimation dated 03.12.2024 has been issued not challenged - HELD THAT - A bare perusal of so called basic order dated 02.12.2024 would reveal that it is merely a note-sheet wherein approval has been obtained for issuing the intimation under Section 110(5) of Customs Act 1962 and the same was not even communicated to the Petitioners for them to be able to challenge the same. Even otherwise in the considered opinion of this court there is no need for separate challenge to the note-sheet dated 02.12.2024 as the same stood merged with impugned intimation dated 03.12.2024. Maintainability of the petition in view of availability of alternative efficacious remedy - HELD THAT - It has been settled by catena of decisions that the availability of alternative remedy is not an absolute bar for granting relief in the exercise of power under Article 226 of the Constitution of India as the same is a rule of convenience and self imposed restriction and there are certain exceptions to the said rule. In the case at hand learned counsel for the petitioners has tried to persuade this court that the present petition is maintainable as the availability of alternative remedy provided under Section 110A of Customs Act is only available during the pendency of adjudication and not during the pendency of investigation - If this court comes to conclusion that the impugned intimation dated 03.12.2024 is without jurisdiction as the same has been issued during investigation and not during any proceedings which is impermissible in accordance with provisions of law then certainly this petition would be maintainable and liable to be entertained by this court . Whether the impugned intimation/attachment order dated 03.12.2024 issued under Section 110(5) of Customs Act 1962 has been issued without jurisdiction or not? - HELD THAT - A bare reading of Section 28 or Section 28AAA or Section 28B would reveal that the proceedings under the said Sections would commence only after issuance of Show Cause Notice as provided under the said Sections. Furthermore as per Circular No. 10/2008-Customs and F.No.401/7/2004-Cus.III(Pt.) dated 30.06.2008 issued by the Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs also it has been specifically instructed that the proceedings for provisional attachment can be initiated only after issuance of SCN under Section 28 28AAA or 28B of Customs Act 1962. In the case at hand it is an admitted fact that investigation is still pending and no show cause notice has been issued to the petitioners under the aforesaid provisions. Hence in the considered opinion of this court when there is no proceeding pending against the petitioners within the meaning attached to the said word under the provisions of Customs Act 1962 Respondents had no jurisdiction/authority in law to pass an order of provisional attachment under Section 110(5) of Customs Act 1962 pending investigation. Whether the petitioners have alternative remedy under Section 110A of Customs Act 1962 or not? - HELD THAT - The remedy under Section 110A is not available to the petitioners during the stage of investigation but is only available after the proceedings are initiated before the adjudicating authority. Therefore in view of the above this court is of the considered opinion that the present petition challenging impugned intimation is maintainable as no alternative remedy is available to the petitioners under Section 110A of Customs Act 1962 against impugned intimation dated 03.12.2024. Colourable exercise of power by Respondents in provisionally attaching the bank accounts of the petitioners - HELD THAT - The said question does not require consideration for the adjudication of the present petition and the same is left open in peculiar facts and circumstances of the present case. Whether the impugned attachment order is time barred? - HELD THAT - The petitioner has neither pleaded specifically nor established as to what is the relevant date from which the limitation would start to run in terms of Section 28. Even otherwise the said question also does not warrant consideration for the adjudication of the present petition as the said limitation has been provided for initiation of proceedings under Section 28 by issuance of Show Cause Notice and in the case at hand no proceedings have been initiated as no show cause notice has been issued to petitioners and since this court has already held that the provisional attachment during investigation is itself without jurisdiction the said question is also left open in peculiar facts and circumstances of the present case. Ex Consequenti impugned intimation dated 03.12.2024 issued under Section 110(5) of Customs Act 1962 is hereby quashed for it being issued without jurisdiction and Respondents are directed to defreeze the bank accounts of the petitioners which have been provisionally attached vide impugned intimation dated 03.12.2024 with immediate effect - This court is constrained to observe that though the impugned intimation dated 03.12.2024 had been stayed by this court vide interim order dated 16.01.2025 but the Respondents have not defreezed the bank accounts of the petitioners which is a clear cut case of contempt of this court s interim order. However since the petition is being allowed and disposed off finally it is expected from Respondents to comply with this order immediately and any non-compliance thereof would be viewed seriously by this court. Conclusion - i) The impugned provisional attachment order dated 03.12.2024 was issued without jurisdiction as no adjudication proceedings were pending. ii) The petitioners had no alternative remedy under Section 110A at the investigation stage; hence the writ petition was maintainable. iii) The attachment order dated 03.12.2024 is quashed and Respondents are directed to defreeze the petitioners bank accounts immediately. iv) The Court refrained from deciding the question of colourable exercise of power and limitation under Section 28 leaving those issues open. This petition deserves to be allowed and is hereby allowed.

Summary

Issues Presented and Considered

The core legal questions considered by the Court in this matter are:

1. Whether the provisional attachment of the petitioners' bank accounts under Section 110(5) of the Customs Act, 1962 is valid and within jurisdiction when issued during the pendency of investigation but prior to the initiation of adjudication proceedings (i.e., before issuance of any Show Cause Notice under Sections 28, 28AAA or 28B of the Customs Act)?

2. Whether the petitioners have an alternative efficacious remedy available under Section 110A of the Customs Act, 1962 to challenge the provisional attachment at the investigation stage?

3. Whether the extension or re-attachment of the bank accounts beyond the statutory limitation period under Section 110(5) of the Customs Act amounts to a colourable exercise of power or is otherwise impermissible?

4. Whether the impugned provisional attachment order dated 03.12.2024 is time-barred under the limitation provisions of Section 28 of the Customs Act, 1962?

5. Whether the petition is maintainable despite the Respondents' contention of non-challenge to the basic approval note dated 02.12.2024 and availability of alternative remedies?

Issue-wise Detailed Analysis

Issue 1: Validity and Jurisdiction of Provisional Attachment under Section 110(5) during Investigation Stage

Legal Framework and Precedents: Section 110(5) of the Customs Act, 1962 empowers the proper officer, with prior approval, to provisionally attach any bank account during "any proceedings" under the Act for protecting revenue interests. The term "proceedings" is not explicitly defined in the Act. Section 28 and related provisions (28AAA, 28B) govern the initiation and conduct of adjudication proceedings, which commence only after issuance of a Show Cause Notice (SCN). Section 28BA allows provisional attachment during pendency of proceedings under Sections 28, 28AAA or 28B. Circular No. 10/2008-Customs dated 30.06.2008 explicitly instructs that provisional attachment can only be initiated after issuance of SCN under these sections.

The Supreme Court's ruling in M/s Radha Krishan Industries v. State of H.P. emphasized that provisional attachment is a draconian power that must be exercised strictly in accordance with statutory provisions and only after formation of a tangible opinion that attachment is necessary to protect government revenue during pending proceedings.

Court's Interpretation and Reasoning: The Court interpreted "proceedings" in Section 110(5) to mean proceedings initiated under Sections 28, 28AAA or 28B, i.e., post issuance of SCN. Since no SCN was issued to the petitioners and the matter was under investigation only, the Court held that no "proceedings" were pending within the meaning of the statute. Consequently, the provisional attachment order dated 03.12.2024 issued during investigation was without jurisdiction.

The Court relied on the Circular No. 10/2008 and the Calcutta High Court's decision in Mineral Metal Centre v. DGCEI, which held that freezing bank accounts during investigation without statutory authority is impermissible.

Application of Law to Facts: The petitioners' bank accounts were provisionally attached without any SCN having been issued, and the investigation was ongoing. This did not satisfy the statutory precondition of "pending proceedings" for attachment under Section 110(5). Therefore, the attachment was illegal.

Treatment of Competing Arguments: Respondents argued that the note-sheet dated 02.12.2024 recording approval for attachment constituted a valid order and that the petitioners failed to challenge it separately. The Court rejected this, holding that the note-sheet was merely an internal approval and not communicated to petitioners, thus merged with the impugned intimation and challengeable as such.

Conclusion: Provisional attachment under Section 110(5) during investigation stage without pending adjudication proceedings is without jurisdiction and void.

Issue 2: Availability of Alternative Remedy under Section 110A

Legal Framework: Section 110A provides for provisional release of seized goods or provisionally attached bank accounts pending adjudication, allowing the affected person to seek release by furnishing security and bond. This remedy is available during pendency of adjudication proceedings.

Court's Interpretation: Since no adjudication proceedings had commenced (no SCN issued), Section 110A remedy was not available at the investigation stage. Hence, the petitioners had no alternative efficacious remedy to challenge the attachment at this stage.

Application: The Court held that the writ petition under Article 226 was maintainable as no alternative remedy existed during investigation, especially since the attachment was without jurisdiction.

Conclusion: Absence of alternative remedy under Section 110A during investigation stage justified entertaining the writ petition.

Issue 3: Alleged Colourable Exercise of Power by Respondents

Arguments: Petitioners contended that Respondents circumvented statutory limitation of one year for attachment under Section 110(5) by re-attaching accounts under a new file number, amounting to colourable exercise of power.

Court's Analysis: Since the Court held the attachment itself was without jurisdiction (issue 1), it declined to consider this question in detail, leaving it open for future adjudication.

Issue 4: Time Bar under Section 28

Arguments: Petitioners argued that proceedings were time-barred as the Respondents exceeded the two-year limitation under Section 28.

Court's Analysis: The Court noted that petitioners had not pleaded or established the "relevant date" from which limitation would run. Moreover, since no proceedings under Section 28 had been initiated (no SCN issued), the limitation question did not arise for adjudication in this petition.

Issue 5: Maintainability of Petition Despite Non-challenge to Basic Approval Note and Availability of Alternative Remedies

Legal Framework: The doctrine of alternative remedy generally restricts writ jurisdiction if effective alternative remedies exist. However, exceptions include cases where fundamental rights are involved, orders are without jurisdiction, or principles of natural justice are violated.

Court's Reasoning: The Court relied on the Supreme Court's decision in M/s Radha Krishan Industries and other precedents to hold that the present petition was maintainable as the impugned order was without jurisdiction and violated principles of natural justice by not communicating the approval note to the petitioners.

The Court also rejected Respondents' contention that non-challenge to the approval note barred the petition, holding the note-sheet merged with the impugned intimation and was challengeable.

Significant Holdings

"The word 'proceedings' which finds mention in Section 110(5) of Customs Act, 1962 is referrable to proceedings initiated under 'Section 28, or Section 28AAA or Section 28B'."

"When there is no 'proceeding' pending against the petitioners within the meaning attached to the said word under the provisions of Customs Act, 1962, Respondents had no jurisdiction/authority in law to pass an order of provisional attachment under Section 110(5) of Customs Act, 1962 pending investigation."

"The remedy under Section 110A is not available to the petitioners during the stage of investigation but is only available after the proceedings are initiated before the adjudicating authority."

"Availability of alternative remedy is not an absolute bar for granting relief in the exercise of power under Article 226 of the Constitution of India, and exceptions include where orders are wholly without jurisdiction or violate principles of natural justice."

"The note-sheet dated 02.12.2024 is merely a record of internal approval and was not communicated to the petitioners; hence, it merged with the impugned intimation dated 03.12.2024 and is challengeable."

"Provisional attachment under Section 110(5) of Customs Act, 1962 during investigation stage without pending adjudication proceedings is without jurisdiction and liable to be quashed."

Final Determinations:

- The impugned provisional attachment order dated 03.12.2024 was issued without jurisdiction as no adjudication proceedings were pending.

- The petitioners had no alternative remedy under Section 110A at the investigation stage; hence, the writ petition was maintainable.

- The attachment order dated 03.12.2024 is quashed, and Respondents are directed to defreeze the petitioners' bank accounts immediately.

- The Court refrained from deciding the question of colourable exercise of power and limitation under Section 28, leaving those issues open.

- Non-compliance with the Court's interim order to defreeze accounts was noted as contempt, with expectation of immediate compliance of the final order.