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TMI Blog2024 (11) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... communication and not an order in writing, which is mandated under the law. Though, the petitioner terms it as an order, in our considered opinion, it does not fulfill any legal requirements of an order. It is merely a communication addressed to the bank. The order was required to be in writing and that too recording opinion, as envisaged under the law. In the absence of all those things, communication is merely a communication and not an order at all. We are unable to accept the submission of custom department that while passing the order of provisionally freezing the bank account at the first instance, there is no legal requirement of passing an order. This argument is completely against not only the letter but also spirit of law. The expression order in writing preceding the expression provisionally attach any bank account for a period not exceeding six months clearly shows that the order of provisional attachment has to be by an order in writing and not by other mode. It is well settled principles of law that when power is required to be exercised in a particular manner, as provided under the law, it has to be exercised in that manner alone and not otherwise. The argument that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Customs (Preventive) Jaipur on 22.03.2024 under Section 108 of the Act. 4. Thereafter, the petitioner did not receive/or communicate with any order. It is the case of the petitioner that later on, when the petitioner approached his bank for making banking transaction through his bank account held with the Axis Bank, Sanganeri Gate Branch, Jaipur, bank declined the transaction and informed him that his account has been frozen on the instructions issued by the Custom Authorities. Thereafter, on petitioner s request, the bank vide letter dated 07.05.2024 informed the petitioner regarding freezing of the bank account. A copy of order dated 14.03.2024 addressed to the bank was also provided. Aggrieved by the action of the respondents in freezing the account, the petitioner has approached this Court by filing the instant petition under Article 226 of the Constitution of India. 5. Learned counsel for the petitioner assailed the action of the respondents in freezing his account on submissions primarily based and confined to the provisions contained under Section 110 of the Act alleging statutory violation of the provisions and that the order of the authority was in excess of jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d substantial compliance of law and there is no legality. He refers to the extension order passed on 13.09.2024, annexed along with return as also the impugned notice, which has been given to the petitioner. 7. We have heard learned counsel for the parties and gone through the pleadings as also bestowed our consideration on respective submissions made by learned counsel for the parties in the light of provisions contained under Section 110(5) of the Act. 8. Power of search, seizure and arrest that may be exercised under the Act has been provided in Chapter XIII, under Sections 100, 102 and 110(AA) which deals with power of search of suspected persons, power to arrest, power to search premises, power to stop and search conveyances, power to examine persons, power to summon persons to give evidence and produce documents and to require production of order permitting clearance of goods imported by land. 9. Section 110 of the Act provide for seizure of goods, documents and things. In addition to the power of seizure of goods and documents, it also inter alia provides for attachment of any bank account for a certain period of time on provisional basis. Aforesaid provision being relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotographs as true; or (c) allowing to draw representative samples of such goods, in the presence of the Magistrate, and certifying the correctness of any list of samples so drawn.] [(1C) Where an application is made under subsection (1B), the Magistrate shall, as soon as may be, allow the application.] [(1D) Where the goods seized under sub-section (1) is gold in any form as notified under subsection (1A), then, the proper officer shall, instead of making an application under sub-section (1B) to the Magistrate, make such application to the Commissioner (Appeals) having jurisdiction, who shall, as soon as may be, allow the application and thereafter, the proper officer shall dispose of such goods in such manner as the Central Government may determine.] (2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: [Provided that the Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal Commissioner, Customs or Commissioner Customs is obtained. 12. Under Sub-section 5 thereof, the aforesaid conditions are required to be fulfilled. 13. In addition, what is importantly provided under the law to keep fetter on the exercise of power and to avoid misuse and abuse of power, is that an order is required to be passed in writing. 14. The entire provision read in this manner leads to conclusion that before the original attachment is made, an order in writing is required to be passed which must contain an opinion based on relevant and tangible material that a necessity had arisen to attach bank account for the purpose of protecting the interest of revenue or preventing smuggling. Unless all these requirements stated under the law are fulfilled, the power to freeze bank account, which by its very nature results in serious consequences, could not be invoked. 15. Proviso to Sub-section 5 of the Act provides for extension for a further period of six months. 16. In the present case, the exercise of power, if we may say so, is in violation of the statutory mandate, as referred under subsection 5 of Section 110 of the Act. The petitioner has assailed validity of communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not required by law while passing an order of freezing the bank account. The provisions seek to regulate exercise of power by imposing certain fetter and rider in exercise of power. It is also well settled principle and canon of interpretation statue that where certain pre-conditions for exercise of power are provided, ordinarily they are not directly but mandatory. In Haridwar Singh vs. Bhgun Sumbrui Ors. [1973 (3) SCC 889], it has been held that powers are normally held to be mandatory. 20. Even if for the argument sake, communication dated 14.03.2024 addressed to the bank is treated as an order, its validity must be judged on the basis of the reasons which have been recorded in the order and not the reasons which are supplied by filing a reply to justify exercise of power. This legal position of law was considered by the Hon'ble Supreme Court in the case of Mohinder Singh Gill vs. Chief Election Commissioner, New Delhi [1978 (1) SCC 405] wherein their Lordships in the Supreme Court pertinently observed as under: 8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1). 40. The marginal note to Section 83 provides some indication of Parliamentary intent. Section 83 provides for provisional attachment to protect revenue in certain cases . The first point to note is that the attachment is provisional provisional in the sense that it is in aid of something else. The second point to note is that the purpose is to protect the revenue. The third point is the expression in certain cases which shows that in order to effect a provisional attachment, the conditions which have been spelt out in the statute must be fulfilled. Marginal notes, it is well-settled, do not control a statutory provision but provide some guidance in regard to content. Put differentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisional attachment ceases to have effect upon the expiry of a period of one year of the order being passed under sub- Section (1). The power to levy a provisional attachment has been entrusted to the Commissioner during the pendency of proceedings under Sections 62, 63, 64, 67, 73 or as the case may be, Section 74. Section 62 contains provisions for assessment for non-filing of returns. Section 63 provides for assessment of unregistered persons. Section 64 contains provisions for summary assessment. Section 67 elucidates provisions for inspection, search and seizure. 43. to 48. xxxxxxx 49. Now in this backdrop, it becomes necessary to emphasize that before the Commissioner can levy a provisional attachment, there must be a formation of the opinion and that it is necessary so to do for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency of the proceedings under the stipulated statutory provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make preemptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. 51. These expressions in regard to both the purpose and necessity of provisional attachment implicate the doctrine of proportionality. Proportionality mandates the existence of a proximate or live link between the need for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the powers under Section 45 of the VAT Act. (emphasis supplied) 52. We adopt the test of the existence of tangible material . In this context, reference may be made to the decision of this Court in the Commissioner of Income Tax v Kelvinator of India Limited [(2010) 2 SCC 723]. Mr Justice SH Kapadia (as the learned Chief Justice then was) while considering the expression reason to believe in Section 147 of the Income Tax Act 1961 that income chargeable to tax has escaped assessment inter alia by the omission or failure of the assessee to disclose fully and truly all material facts necessary for the assessment of that year, held that the power to reopen an assessment must be conditioned on the existence of tangible material and that reasons must have a live link with the formation of the belief . This principle was followed subsequently in a two judge Bench decision in Income Tax Officer, Ward No. 162 (2) v Techspan India Private Limited [(2018) 6 SCC 685]. While adverting to these decisions we have noticed that Section 83 of the HPGST Act uses the expression opinion as distinguished from reasons to believe . However for the reasons that we have indicated earlier we are clearly o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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