2023 (8) TMI 1005 - HC - Customs

Jurisdiction - Freezing of Bank Accounts of the purchaser of the Imported Goods - power to the seal the godown premises of the Petitioner - whether in the facts and circumstances of the present case, the respondents would have authority and jurisdiction to detain the goods and documents and attach the bank accounts? - HELD THAT - Once the goods are cleared for home consumption and enter the domestic market for sale, such goods cannot be seized from the subsequent purchasers and that too if the third person against whom action is initiated has already sold the goods in open market and when there was no demand or proceedings pending for recovery of duty etc. against such third person. In the present case, the goods imported by M/s ST Electricals were initially cleared for home consumption by the said importer and the said goods have changed hands in open market and is also out of the possession of the petitioner. The respondents in their affidavit in reply have referred to the communication from Jodhpur Customs authorities dated 8 July 2023 and 12 July 2023 wherein the Jodhpur authorities have directed the respondents to seize the very goods imported by M/s ST Electricals. In the said reply, the respondents have stated that these very goods have been sold by the petitioner to Narayan Power Solutions. The situation would have been different if the Customs were to bring some materials to show that the goods in question were being allegedly dealt by M/s. ST Electricals in connivance with the petitioner or that the petitioner was not a bonafide third party purchaser. If this be the case, then the action of detaining the goods of the petitioner was contrary to the revenues own stand and this would hold good for attachment of the bank account. Thus, on the facts of the present case, the impugned action in detaining the goods in question (some other goods of the petitioner) is contrary to the provisions of the Act as noted by us moreso when same is not pursuant to any recovery of pending dues of the petitioner or proceedings pending against the petitioner under the Act. The respondents have tried to justify their action by stating that they have acted upon communication from the Authorities at Jaipur and they themselves have not taken the action independently but at the behest of the Commissioner, Jaipur. The respondents in the affidavit-in-reply had referred to a communication from Jaipur authority but same is not annexed to the reply nor shown to us. We have not been shown by the respondents any other communication which supports their contentions that the action is taken at the behest of the communication which even otherwise the respondents could not have acted upon without applying their mind. During the course of the hearing, the respondents have contended that they have not seized the goods but they have only detained the goods. On a query as to whether the department would have the powers to detain the goods in the facts of the present case, It is not pointed out any such provision which would empower the respondents in the facts of present case, to detain the goods. The impugned action of the respondents in detaining the goods in question and attaching the bank account of the petitioner without there being any demand due from the petitioner or any proceedings pending is without jurisdiction and without any authority of law - the detention of goods declared illegal - petition allowed.

Summary

Issues Involved:
1. Legality of freezing the Petitioner's bank accounts.
2. Authority of Respondent to seal the Petitioner's godown premises.
3. Jurisdiction and authority to detain goods and documents.

Summary of Judgment:

Issue 1: Legality of Freezing the Petitioner's Bank Accounts
The petitioner challenged the freezing of his Savings Account No. 809510264 and Current Account No. 6010527667 by the respondents. The court referred to previous judgments, including M/s. Sargam Foods Pvt. Ltd. vs. State of Maharashtra, which held that freezing a cash credit account is illegal. Consequently, the court ordered the defreezing of the Current Account No. 6010527667 and later, the Savings Account No. 809510264, stating that the respondents' actions were without jurisdiction and authority of law.

Issue 2: Authority of Respondent to Seal the Petitioner's Godown Premises
The petitioner argued that the respondents had no authority to seal his godown premises, which contained various materials not all relevant to the investigation. The court agreed, noting that the blanket action of sealing the godown was highly prejudicial and violated the petitioner's rights under Article 19(1)(g) and Article 300A of the Constitution. The court ordered the unsealing of the godown and directed the respondents to inspect and identify relevant materials only.

Issue 3: Jurisdiction and Authority to Detain Goods and Documents
The respondents contended they had the power to seize goods and documents under Sections 110(1), 28, and 135 of the Customs Act. However, the court found that the goods detained were not the same as those imported by M/s ST Electricals, and the petitioner was a bona fide third-party purchaser. The court held that the respondents' action of detaining goods and attaching the bank account was without jurisdiction and contrary to the provisions of the Customs Act. The court concluded that the respondents failed to justify their actions under any relevant provisions of the Act.

Conclusion
The court declared the detention of goods and the attachment of the bank account as illegal and without jurisdiction. It ordered the revocation of the detention of goods, the return of detained documents, and the defreezing of the petitioner's bank accounts. The court emphasized that the petitioner should cooperate with ongoing proceedings against M/s ST Electricals and clarified that its observations were specific to the present proceedings.