2011 (11) TMI 422 - HC - Customs

High Court orders Enforcement Directorate to pay interest on delayed refund, sets guidelines for future compliance

The High Court held that the Enforcement Directorate's prolonged withholding of the petitioner's money was unlawful. The court invoked its authority under ... Search and seizure of foreign currency and Indian currency - Time limitation - The adjudicating authority, however, held that there was no concrete material evidence on the record to establish that the Indian currency in the amount of Rs. 5.90 lakhs represented the proceeds of foreign currency - The Petitioner’s Advocate addressed a notice dated 13 August 2010 in response to which he was informed by a letter dated 18 August 2010 that he may contact the Assistant Director (Administration) for the release of the Indian currency - The Enforcement Directorate was duty bound to refund the amount which was seized from the premises of the Petitioner after adjusting the personal penalty in terms of the order passed by the adjudicating authority - The Enforcement Directorate was duty bound to refund the amount which was seized from the premises of the Petitioner after adjusting the personal penalty in terms of the order passed by the adjudicating authority - Petition is disposed of Issues:1. Seizure of foreign and Indian currency during a search of petitioner's premises.2. Confiscation of foreign currency and imposition of penalty by adjudicating authority.3. Delay in releasing Indian currency to the petitioner after adjustment of penalty.4. Failure of the Enforcement Directorate to refund the amount for nearly 12 years.5. Petitioner's entitlement to interest on the delayed refund amount.Analysis:1. The search of the petitioner's premises led to the seizure of foreign and Indian currency. The adjudicating authority confiscated the foreign currency and imposed a penalty of Rs. 1 lakh. However, there was no concrete evidence linking the Indian currency to the foreign currency proceeds. The Indian currency was ordered to be released to the petitioner after obtaining no objection from the Income Tax authorities.2. The order of the adjudicating authority became final in 1998. The petitioner was entitled to the release of the Indian currency after adjusting the penalty, but the Enforcement Directorate failed to refund the amount for nearly 12 years. The Directorate suggested the petitioner file a suit for the refund, citing the Foreign Exchange Regulation Act, 1973, which allegedly does not provide for interest payment in such cases.3. The High Court held that the conduct of the Enforcement Directorate was against the law. Detaining a citizen's money for such a long period was deemed a violation of the rule of law. The court, under Article 226 of the Constitution, had the power to award interest in such cases. The court directed the respondents to pay interest on the delayed amount of Rs. 4.90 lakhs at a rate of 9% per annum from the expiry of the appeal period in 1998 until October 2010 when a Pay Order was ready.4. The court ordered the Enforcement Directorate to pay the interest to the petitioner within two months. Additionally, an inquiry was to be conducted to determine the reasons for the delay in disbursing the amount and any negligence found would result in necessary legal action. Clear guidelines were to be established to prevent such delays in the future.5. The petition was disposed of with the direction for the payment of interest and the enforcement of administrative actions to prevent similar lapses in the future.