2025 (2) TMI 756 - HC - Customs

Entitlement to exemption under N/N. 50/2017 dated 30th June 2017 - Challenge to provisional attachment order of the bank account of the Petitioner - certain parts of CNG kits in 2017 - subsequant withdrawal of the exemption - HELD THAT - This Court holds the view that the Customs Department ought to take a decision as to whether there is adequate material before it or not and if they wish to issue a show cause notice the same sought to be done at the earliest. Therefore the Department is directed to complete the investigation and issue a show cause notice within a period of three months from now. In the meantime since the demand which is yet to be computed seems to be only in the range of Rs. 30 crores and considering the amount of business that the Petitioner is doing it is directed that the Petitioner shall deposit a sum of Rs. 3 crores as an ad hoc deposit with the Department within a week. The HSBC bank accounts shall be defrozen immediately to enable the Petitioner to deposit within a week a sum of Rs. 3 crores with the Department. Petition disposed off.

Summary

The High Court considered a petition challenging the provisional attachment order of a bank account under Article 226 of the Constitution of India. The petitioner, engaged in the development of CNG/LPG conversion systems, imported certain parts of CNG kits in 2017, availing exemption under notification 50/2017. The exemption was later withdrawn on 31st March, 2022. The petitioner alleged unnecessary harassment through repeated summons, arrests, and bank account attachments without initiation of adjudication proceedings. The Department claimed non-cooperation from the petitioner and its directors, justifying the provisional attachment.The Court noted the Department's repeated coercive measures without initiating adjudication proceedings and emphasized the need to balance investigations with the rights of businesses and individuals. It highlighted the potential disruption freezing bank accounts could cause to business operations, especially concerning overdraft facilities for imports and trade. The central question was whether the petitioner was entitled to the exemption under notification 50/2017.The Court directed the Customs Department to promptly decide on the adequacy of evidence and issue a show cause notice within three months. Considering the potential demand of around Rs. 30 crores and the petitioner's business scale, the Court ordered the petitioner to deposit Rs. 3 crores with the Department within a week, allowing immediate defreezing of the HSBC bank accounts for the deposit. The deposited amount was to be considered under protest.In conclusion, the petition was disposed of with the above directives, and all pending applications were also resolved.