2010 (1) TMI 34 - HC - Customs

Court orders immediate unfreezing of bank accounts, emphasizing reasonable investigation and evidence requirements

The Court directed the Respondents to de-freeze the petitioner's bank accounts immediately, finding the continued freezing unjustified after a prolonged ... Import – Evasion of Custom Duty – allegation of smuggling – bank accounts freezed – non issuance of SCN - held that - To justify the continued freezing of a bank account on this basis, the authorities must show that there is some material on record, which has been put to the person in whose name the account stands, which shows the causal link between the monies in the accounts and the sale proceeds of goods which are believed to be smuggled. This can happen only if a show cause notice is issued to the person whose goods and things including bank accounts have been seized and such person is afforded an opportunity of giving an explanation. - The undisputed fact is that for over four years now the investigation is still incomplete. Till date there is no show cause notice issued, no criminal case filed and no arrest made. In the circumstances, this Court finds, even with reference to Sections 110 (3) and 121 of the Act, no legal justification for the continued freezing of the Petitioner’s accounts. – order of de-freeze the banks accounts given Issues involved:Challenge to freezing of bank accounts under Customs Act, 1962.Analysis:1. The writ petition challenged the Directorate Revenue Intelligence's action in continuing to freeze the petitioner's bank accounts under the Customs Act, 1962, based on alleged smuggling activities involving high-value computer parts.2. The Respondents justified the freezing of bank accounts under Sections 110(3) and 121 of the Act, alleging the petitioner's involvement in exporting junk goods as high-value goods, leading to the seizure of bank accounts under Section 110(3) and potential confiscation under Section 121.3. The petitioner argued that the freezing of bank accounts for over four years without a show cause notice, criminal case, or arrest was unjustified, especially after the return of seized goods following the quashing of preventive detention.4. The Court analyzed Sections 110(3) and 121 of the Act, emphasizing the need for a reasonable investigation period, issuance of show cause notices, and a causal link between seized goods and alleged offenses before continuing to freeze bank accounts.5. The Respondents admitted the prolonged investigation period but failed to provide a definite timeline for completion, leading the Court to deem the continued freezing of bank accounts unreasonable and unjustified.6. Despite allegations of evading duties and dishonoring legal processes, the Court found no legal basis for the continued freezing of bank accounts, especially without concrete evidence or actions taken after four years of investigation.7. Consequently, the Court directed the Respondents to de-freeze the petitioner's bank accounts immediately, allowing the writ petition with costs to be paid by the Respondents to the Petitioner within four weeks.