2018 (3) TMI 1444 - HC - Customs

Attachment/freezing of Bank Account - Section 142 of the Customs Act, 1962 - smuggling of Gold - petitioner states that no show cause notice as yet has been issued. There is no crystalization of the amount due and payable to the Government - Held that - If it is a serious allegation and made on oath before us, then, least we expected that by now a show cause notice to be issued, the petitioner s reply called for, an opportunity of personal hearing and an order of adjudication. Leave alone any adjudication order till date, no show cause notice is also issued to the petitioner. The Revenue prays for time to issue such a notice. We do not see how in these circumstances the Revenue justifies this act and prayed that bank account may be continued under attachment and then within a time frame show cause notice will be issued. Petition allowed - decided against Revenue.

Summary

Issues:
Challenging communication from banker regarding stopping debits from the account; Freezing bank account under Section 142 of Customs Act, 1962; Allegations of smuggling gold bars; Legal protection of communication to bank; Justification for freezing bank account without show cause notice; Quashing of impugned communication.

Detailed Analysis:

1. Communication Challenged:
The petitioner challenged a communication from his banker instructing to stop debits from the account, citing summons from Directorate of Revenue Intelligence under Section 108 of Customs Act, 1962. The petitioner, a trader in electronic items, claimed no show cause notice was issued, and the amount due to the government was not crystallized.

2. Freezing Bank Account:
The respondents alleged the petitioner was involved in smuggling gold bars concealed in air conditioners, justifying the freezing of the bank account under Section 142 of the Customs Act, 1962. The authority aimed to prevent the money generated from smuggling activities from entering the banking channel through cheque discounting.

3. Legal Protection of Communication:
The respondents argued that the communication to the bank was protected by law, citing powers under Sections 110, 120, and 121 of the Customs Act, 1962 to seize goods, documents, and proceeds of smuggled goods. They contended that the action was necessary to curb the practice of pumping smuggling proceeds into the banking system.

4. Justification for Freezing Account:
The court noted that drastic action was taken based on mere allegations of smuggling gold bars, without issuing a show cause notice, providing an opportunity for a reply or adjudication. The court questioned the justification for freezing the bank account without a formal legal process and emphasized the importance of following due procedure.

5. Quashing of Impugned Communication:
The court found that the impugned communication could not be sustained without proper legal proceedings and due process. Consequently, the court quashed the communication and allowed the writ petition, clarifying that the Revenue could proceed to recover the amount and attach the bank account in the future, but strictly in accordance with the law.

In conclusion, the judgment highlighted the importance of following due process and legal procedures, emphasizing the need for formal notices and adjudication before taking drastic actions such as freezing bank accounts. The court's decision to quash the communication underscored the significance of upholding individual rights and ensuring that government actions are conducted within the bounds of the law.