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TMI Blog2025 (1) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... s coercive as it is used to carry out the investigation/inquiry into the affairs if violation of a statutory provision is suspected. The search and seizure is a well known tool in the investigation which enables the law enforcement agencies to come to a conclusion. Though the Constitutional Courts are the sentinels of justice, however, this power is required to be exercised with due care and caution and interference at the stage of investigation is made in rare and exceptional cases. It is evident that while carrying out search, proper information was supplied to the petitioner. Moreover, the petitioner has not attached the ECIR. The petitioner has attached the search and seizure memos and freezing orders sent by the ED to the various banks. In the freezing orders, it has been stated that the Assistant Director, Unit-III (2) ED has reasons to believe from the documents in his possession that the proceeds of crime might have been diverted to the above said bank account maintained with that particular bank. Moreover, as already noticed, these orders were passed on 26.11.2024, whereas on the date when the arguments are heard, 30 days are yet to be completed. Section 5 (5) of the 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cially the search and seizure proceedings conducted by the ED on 26.11.2024 and the quashing of the illegal act of freezing of the bank account of the petitioner company have been sought. 1.4 In order to comprehend the issues involved in the present case, the relevant facts, in brief, are required to be noticed. The ED initiated inquiries/investigation under the 1999 Act in respect of the group companies, namely Ms/ Vuenow Infotech Pvt. Ltd. (M/s VIPL), M/s Vuenow Marketing Services Ltd. (M/s VMSL), M/s Zebyte Infotech Pvt. Ltd. (M/s ZIPL) and M/s Zebyte Rental Planet Pvt. Ltd. (M/s ZRPPL). Initial inquiries/investigations reveal that the above mentioned entities received foreign inward remittance. It was found from the financial statements that the aforesaid foreign inward remittances have not been declared by VIPL and VMSL in the financial year 2021-22 and 2022-23. Similarly, the GSTR-I return of M/s ZRPPL was analyzed for the relevant period i.e. from February 2023 to July 2023 and it was found that M/s ZRPPL has not mentioned any export of service in their statutory GSTR-I return. Through discreet inquiry, it was found that M/s ZRPPL has shown nine export invoices valuing Rs.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment opportunities to buy data center assets or cloud particles (servers) through sale and lease back model whereby once a customer buys a data center asset or cloud particle, it will immediately lease back on the long term basis by M/s VMSL marketing affiliates such as M/s ZIPL, M/s ZRPPL for a minimum guaranteed rent. It was revealed that the total storage capacity of currently active servers at Mota Data Center is 553 TB out of which only 1.9 TB space is presently consumed and the storage capacity of 551.1 TB is available or empty. The consumed 1.9 TB data pertains to Test Open Stat cloud data and no data pertaining to any customer is available in these working servers. As many as 1119 servers at the premises were not connected with any power source (active) and therefore, these servers were not in working condition. It was found that a show cause notice has been issued by SGST raising a demand for inadmissible ITC taken by M/s ZRPPL by purchasing goods/services from google suppliers. The total invoice value of such purchase transaction is Rs.66,23,58,209/-. During the course of inquiry, the balance sheets pertaining to M/s VMSL found that the company has received an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representing the parties, at length and with their able assistance, perused the paper-book. 2.2 The learned counsels representing the petitioners submit that while carrying out search and seizure, the ED has not followed the procedure and no prior notice before conducting search and seizure was issued to the petitioner company. It is further submitted that no intimation notice or opportunity was given to the petitioner to explain their position and seizure memos failed to disclose the reasons behind the search and seizure. The learned counsel representing the petitioners relies upon the judgment passed in Opto Circuits (India) Limited v. Axis Bank (2021) 6 SCC 707, Arvind Kejriwal v. Directorate Enforcement (2024) SCConline SC 1703 and Radha Krishan Industries v. State of Himachal Pradesh (2021) 6 SCC 771 and contends that this Court should not only quash the ECIR but also grant declaration that the search and seizure was illegal. It was also contended that the reasons to believe which are sine qua non for initiating proceedings have not been disclosed in the search and seizure memos. 2.3 Per contra, the learned counsel representing the ED contends that the investigation is in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner claims that the prior notice before conducting search and seizure has not been issued to the petitioner. Section 37 of the 1999 Act does not envisage any prior notice before conducting the search and seizure. The ED under Section 37 (1) and (2) of the 1999 Act is entitled to take up for investigation the contravention referred to in Section 13. Whereas Section 37 (3) of the 1999 Act authorizes the officers to exercise the like powers which are conferred on the income tax authorities under the Income Tax Act, 1961. Section 13 of the 1999 Act provides for the imposition of penalties upon any person who contravenes any provision of this Act, or contravenes any rule, regulation, notification or direction. As per Section 13 (1A) of the 1999 Act if any person is found to have acquired any foreign exchange, foreign security or immovable property, situated outside India, of the aggregate value exceeding the threshold prescribed under the proviso to sub-section (1) of section 37A, penalty to the extent of three times the sum involved in the contravention and confiscation of the value equivalent is permissible. 3.4 Similarly, under Section 5 of the 2002 Act the attachment of the pr ..... 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