2019 (4) TMI 1714 - HC - Customs

Freezing of Bank Accounts - bogus addresses for the purposes of claiming IGST refunds - HELD THAT - The issue is decided in the case of S.B. INTERNATIONAL VERSUS THE ASSISTANT DIRECTOR, DIRECTORATE OF REVENUE INTELLIGENCE AND ORS. 2018 (2) TMI 588 - DELHI HIGH COURT , where after considering the provisions of the Customs Act and other similar enactments, it was held that the power to freeze or suspend operations of a bank account cannot legally be exercised. Petition allowed.

Summary

Issues:
Bank accounts frozen by Customs Authorities for alleged bogus addresses for claiming IGST refunds.

Analysis:
The judgment dealt with the issue of Customs Authorities freezing bank accounts based on allegations of bogus addresses for claiming IGST refunds. The petitioner cited the judgment in S.B. International case, where it was held that the power to freeze bank accounts cannot be legally exercised under the Customs Act. The Court emphasized that while proceeds of smuggled goods can be confiscated or seized, there is no provision allowing for freezing of bank accounts. The judgment highlighted the distinction between seizing an asset and freezing a bank account, noting that freezing deprives the account holder of banking facilities without legal sanction. The Court also referenced other cases such as Shakuntala Singh and Raghuram Grah Pvt. Ltd., where similar actions of freezing bank accounts were deemed unjustified without specific orders under the Customs Act.

The Court found the impugned notices issued by Customs Authorities to be identical to those in the S.B. International case, and therefore quashed and set them aside. Additionally, the petitioner was directed to participate in the investigation proceedings and provide an undertaking to do so within a week. The judgment emphasized the importance of joining the investigation while also asserting that the freezing of bank accounts without proper legal authority is unsustainable. The Court's decision to set aside the impugned communication directing the freezing of accounts was based on the lack of legal provision empowering Customs Authorities to freeze bank accounts during investigations.

In conclusion, the judgment clarified that while Customs Authorities have the power to confiscate or seize proceeds of smuggled goods, freezing bank accounts is not within their legal authority. The decision reaffirmed the principle that freezing a bank account is not equivalent to seizing an asset and highlighted the need for specific orders under the Customs Act to justify such actions. The Court's ruling in this case set a precedent for future instances where Customs Authorities attempt to freeze bank accounts without proper legal basis.