2020 (9) TMI 562 - HC - Customs

Defreezing of Bank Accounts of petitioner (third party) - freezing of account on the ground of illegally availed Integrated Goods and Services Tax (IGST) refund of an exporter was deposited in the bank account of the petitioner - section 110(5) of the Customs Act, 1962 - HELD THAT - Section 110(5) of the Customs Act, 1962 was inserted in the Customs Act by the Finance (No.2) Act, 2019 with effect from 01.08.2019 - Evidently, the action of freezing the bank account i.e., on 07.12.2018 was undertaken prior to insertion of the aforesaid provision w.e.f. 01.08.2019. Prima-facie this provision may not be applicable to the case of the petitioner. Additionally, as per the condition mentioned in sub-section (5) of section 110, the initial period of freezing the bank account i.e., not exceeding six months has expired long back. That apart, even if as per the proviso such period was extended by the Principal Commissioner of Customs or Commissioner of Customs for a further period not exceeding six months, that extended period has also elapsed. In such circumstances, continuing with the freezing of the bank account of the petitioner would be oppressive and without any sanction of law. The respondents, more particularly respondent Nos.2 and 3, are directed to forthwith unfreeze the seized bank account of the petitioner - petition allowed.

Summary

Issues:
1. Freezing of bank account under section 110(5) of the Customs Act, 1962.

Analysis:
The petitioner filed a petition seeking the unfreezing of their bank account, which was frozen on 07.12.2018 on the instructions of the respondents. The respondents alleged that an amount representing illegally availed IGST refund of an exporter was deposited in the petitioner's account, leading to the freeze. The respondents relied on section 110(5) of the Customs Act, 1962 to justify their actions. However, the Court noted that the provision was inserted in the Act with effect from 01.08.2019, while the account was frozen prior to this date. The Court found that the initial period of freezing the account had expired, and any extension would have also lapsed, making the continued freeze unjustified and oppressive without legal sanction.

The Court, after considering the submissions, directed the respondents to immediately unfreeze the petitioner's bank account. The Court highlighted that the freezing of the account was not in line with the provisions of the Customs Act and ordered the release of the account. The writ petition was allowed without any costs, and the order was to be digitally signed for immediate action by all concerned parties.