Court orders immediate bank account unfreezing, sets 3-month probe deadline for IEC, IGST refunds

The court allowed the writ petitions, directing the unfreezing of the petitioner's bank account immediately. The court mandated the completion of the investigation within three months, with the alert on the petitioner's Import Export Code (IEC) and the claim for Integrated Goods and Services Tax (IGST) refunds contingent on the investigation's outcome. The court cautioned against making baseless allegations, noting the absence of evidence to support the respondents' characterization of the petitioner as a "hardened criminal."

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Issues Involved:
1. Freezing of the petitioner's bank account.
2. Placing an alert on the petitioner's Import Export Code (IEC).
3. Withholding of Integrated Goods and Services Tax (IGST) refund.

Detailed Analysis:

1. Freezing of the Petitioner's Bank Account:
The petitioner challenged the freezing of its bank account, which was done through a letter dated 1st March 2019 from the Principal Commissioner of Customs to IDFC Bank. The letter requested the bank to not allow any withdrawals from the petitioner's account. The petitioner argued that this action was illegal and arbitrary, as Section 110(5) of the Customs Act, which allows for provisional attachment of bank accounts, was only inserted with effect from 1st August 2019 and could not be applied retrospectively. The court agreed with the petitioner, noting that the provision is coercive in nature and requires strict compliance with procedural requirements, including a written order from a proper officer with the approval of the Principal Commissioner or Commissioner of Customs. Since no such order was presented by the respondents, the court held that the freezing of the bank account was without authority of law and directed the respondents to unfreeze the account forthwith.

2. Placing an Alert on the Petitioner's IEC:
The petitioner contended that the alert placed on its IEC was based on mere suspicion and had brought its business to a standstill. The respondents justified the alert by alleging that the petitioner was involved in circular trading to fraudulently claim IGST refunds. The court acknowledged that the alert was based on ongoing investigations but emphasized that such extreme measures could not be continued indefinitely. The court directed the respondents to expedite the investigation and complete it within three months, stating that the alert on the IEC and the withholding of IGST refunds would be subject to the outcome of the investigation.

3. Withholding of IGST Refund:
The petitioner sought the release of withheld IGST refunds, arguing that it had complied with all legal requirements. The respondents claimed that the petitioner had fraudulently obtained government benefits through circular trading. The court noted that the withholding of IGST refunds was linked to the ongoing investigation and reiterated the need for the investigation to be concluded promptly. The court ruled that the claim for IGST refunds would be subject to the results of the investigation.

Conclusion:
The court allowed the writ petitions and issued the following directions:
1. The respondents must unfreeze the petitioner's bank account immediately.
2. The respondents must complete the investigation within three months.
3. The alert on the petitioner's IEC and the claim for IGST refunds would depend on the investigation's outcome.

The court also advised caution in making unsubstantiated allegations in affidavits, noting that the respondents had described the petitioner as a "hardened criminal" without presenting evidence of any criminal conviction or charges. The court's directions and observations applied equally to the other petitioners in related writ petitions.

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