2021 (1) TMI 871 - HC - Customs

Court rules bank account attachment exceeding one year unlawful. Emphasizes statutory timelines and procedural compliance.

The court held that the provisional attachment of the bank accounts exceeding one year was unlawful. Emphasizing the statutory timeline for such ... Provisional attachment of bank account - temporary character of provisional measures - prospective operation of statutory amendment - requirement of written order, prior approval and reasons for extension - statutory time-limit six months extendable by further six months - coercive nature of attachment and necessity for strict complianceProvisional attachment of bank account - statutory time-limit six months extendable by further six months - temporary character of provisional measures - Validity of continuing provisional attachment of the petitioners' bank accounts beyond the outer limit of one year - HELD THAT: - The Court held that sub section (5) of Section 110 prescribes a time limited, provisional mechanism: an initial provisional attachment not exceeding six months which may be extended for a further period not exceeding six months for reasons to be recorded and communicated. Reading the words 'provisional' and 'attachment' together indicates a temporary arrangement and Parliament has therefore fixed a definite timeline beyond which such attachment cannot lawfully continue. Applying these principles, the Court found that the initial permissible period expired in November 2019 and even with the further six months the outer limit lapsed in May 2020. Continuation of the debit freeze beyond that outer limit is unlawful. [Paras 11, 12, 14, 15]Provisional attachment could not be lawfully continued beyond the statutory outer limit of one year and the continued freeze was invalid.Prospective operation of statutory amendment - requirement of written order, prior approval and reasons for extension - coercive nature of attachment and necessity for strict compliance - Whether the respondents validly invoked Section 110(5) for the provisional attachment dated 08.05.2019 and complied with the procedural pre conditions under that sub section - HELD THAT: - The Court observed that sub section (5) was inserted with effect from 01.08.2019 and, being coercive in nature, must be strictly complied with and operates prospectively. The impugned communication dated 08.05.2019 preceded the insertion and thus the respondents could not lawfully invoke the provision for that attachment. Further, the respondents did not place on record any written order passed by a proper officer or any order of the Principal Commissioner/Commissioner approving the provisional attachment or recording reasons for extension as mandated by the sub section. In the absence of a written order and the prescribed approvals and reasoned extension being on record, the attachment lacked statutory authority. [Paras 11, 13, 15]Section 110(5) could not be invoked retrospectively for the 08.05.2019 attachment and the respondents failed to demonstrate the mandatory written order, prior approval or recorded reasons for any extension.Final Conclusion: Impugned letter dated 08.05.2019 setting the debit freeze is quashed; the specified bank accounts of the petitioners are to be unfrozen forthwith; the Court expresses no opinion on the merits of the ongoing investigation and notes petitioners should cooperate with lawful inquiries. Issues:Provisional attachment of bank account exceeding one year.Analysis:The writ petition challenges a letter issued by the Directorate of Revenue Intelligence requesting the debit-freeze of the petitioners' bank account in connection with an investigation into the import of precious stones. The respondents allege that the petitioners engaged in over-invoicing of rough precious stones to evade customs duty, with imports amounting to Rs. 2000 crores. Despite summonses and non-cooperation from the petitioners, the investigation remained inconclusive. The petitioners deny the allegations. The main issue raised is whether a provisional attachment of a bank account can be continued beyond one year.The judgment refers to Section 110 of the Customs Act, which allows provisional attachment of bank accounts for a maximum of one year, extendable for another six months with reasons recorded in writing. Citing previous cases, the court emphasizes strict compliance with the procedural requirements for such attachments. The court in M/s. Boxster Impex Pvt. Ltd. Vs. Union of India held that the provision has prospective application from 01.08.2019 and outlined the necessary pre-conditions for invoking the provision. Similarly, in Samyak Jewels Pvt. Ltd. Vs. Union of India, it was clarified that provisional attachment is temporary, and the statute provides a definite timeline for such attachments.The court found no justification to continue the provisional attachment beyond the permissible period. It noted the absence of any order extending the attachment period and highlighted the unlawful nature of the continued attachment post the one-year limit. The judgment set aside and quashed the impugned letter, directing the immediate unfreezing of the petitioners' bank accounts. The decision emphasized the legality and validity of the attachment, refraining from commenting on the investigation itself, and urged cooperation from the petitioners.In conclusion, the writ petition was allowed, and the provisional attachment of the bank accounts was deemed unlawful and set aside. The judgment underscored the importance of adherence to statutory timelines for provisional attachments and highlighted the necessity for proper orders and compliance with procedural requirements in such cases.