2025 (4) TMI 711 - HC - Customs

Provisional attachment of the Petitioners bank accounts under Section 110(5) of the Customs Act 1962 - HELD THAT - The provisional attachment under Section 110 (5) cannot continue beyond the period of one year. Section 110A would come into effect only when a party seeks to raise the provisional attachment of the bank account while the attachments still subsists. Section 110A would have no application where the attachment has ceased to exist because of the provisions of the Section 110 (5) read with its proviso. To put it in other words once the period of one year has expired as stipulated under Section 110 (5) then one cannot resort to Section 110A to extend the provisional attachment. Once we are of this opinion we find that the reliefs sought for raising the attachment of the bank accounts of the Petitioners ought to be granted. Conclusion - The provisional attachment of the bank accounts of the Petitioners hereby stands raised. Petition allowed.

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether the provisional attachment of the Petitioners' bank accounts under Section 110(5) of the Customs Act, 1962, was valid. Specifically, the Court examined the legality of the attachment given that more than one year had elapsed since the attachment, and no formal order had been communicated to the Petitioners. Additionally, the Court considered whether Section 110A of the Customs Act could be invoked to justify the continuation of the attachment beyond the one-year period.

ISSUE-WISE DETAILED ANALYSIS

1. Legality of Provisional Attachment under Section 110(5) of the Customs Act, 1962

Relevant legal framework and precedents: Section 110(5) of the Customs Act allows for the provisional attachment of bank accounts during proceedings under the Act if deemed necessary to protect the revenue or prevent smuggling. This attachment can initially last for six months and may be extended for an additional six months with written approval and reasons recorded by the Principal Commissioner or Commissioner of Customs.

Court's interpretation and reasoning: The Court interpreted Section 110(5) as clearly limiting the duration of a provisional attachment to a maximum of one year. The Court noted that the statutory language was explicit in requiring an order in writing for both the initial attachment and any extension, and that the affected party must be informed of such extensions before the expiry of the specified period.

Key evidence and findings: The Court found that no formal order had been communicated to the Petitioners regarding the attachment of their bank accounts. Furthermore, more than one year had passed since the attachment, and no valid extension had been recorded or communicated.

Application of law to facts: Given the lapse of the one-year period without a valid extension, the Court concluded that the provisional attachment could not legally continue. As such, the attachment of the Petitioners' bank accounts was deemed unlawful under the provisions of Section 110(5).

Treatment of competing arguments: The Customs Authorities argued that the issuance of a show cause notice justified the continued attachment of the bank accounts. However, the Court rejected this argument, emphasizing that the statutory limitation of one year could not be circumvented by the mere issuance of a show cause notice.

Conclusions: The Court concluded that the provisional attachment of the Petitioners' bank accounts was invalid as it exceeded the statutory period allowed under Section 110(5) without proper extension.

2. Applicability of Section 110A of the Customs Act, 1962

Relevant legal framework and precedents: Section 110A provides for the release of provisionally attached assets upon the execution of a bond and provision of security as required by the Adjudicating Authority.

Court's interpretation and reasoning: The Court held that Section 110A could not be invoked to extend the duration of a provisional attachment that had already expired under Section 110(5). The provision only applies when the attachment is still legally subsisting.

Key evidence and findings: The Court found that the reliance on Section 110A by the Customs Authorities was misplaced, as the attachment had already ceased to exist due to the expiration of the one-year period under Section 110(5).

Application of law to facts: Since the attachment had lapsed, Section 110A was deemed inapplicable, and the Court determined that the relief sought by the Petitioners to lift the attachment should be granted.

Treatment of competing arguments: The Customs Authorities contended that conditions could be imposed under Section 110A for releasing the attachment. The Court, however, clarified that such conditions could not be applied once the attachment was no longer valid under Section 110(5).

Conclusions: The Court concluded that Section 110A could not be used to justify the continuation of an expired attachment, and thus, the Petitioners' bank accounts should be released from provisional attachment.

SIGNIFICANT HOLDINGS

The Court held that the provisional attachment of the Petitioners' bank accounts was unlawful as it exceeded the permissible duration under Section 110(5) of the Customs Act, 1962, without a valid extension. The Court emphasized that the statutory framework did not allow for the continuation of an attachment beyond one year without proper procedural compliance.

Core principles established:

The Court established the principle that the duration of a provisional attachment under Section 110(5) is strictly limited to one year, and any extension must be properly recorded and communicated. Additionally, Section 110A cannot be used to extend an attachment that has already expired under Section 110(5).

Final determinations on each issue:

(A) The provisional attachment of the Petitioners' bank accounts was lifted, and the accounts were released from attachment.

(B) The Petitioners were granted the freedom to operate their bank accounts.

(C) The Court noted that the Customs Authorities could pursue recovery actions, including reattachment of the bank accounts, if legally permissible, following the adjudication of the show cause notice.

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