Unlawful freezing of drawback account struck down where no statutory power authorised customs to withhold credited funds.

Drawback amounts credited to a dedicated account became the petitioner's property, so customs could not direct the bank to withhold them merely because an investigation into alleged fraud was pending. In the absence of any statutory power, or any order from a competent court or authority, the instruction to freeze the account was unauthorised and without jurisdiction. The bank likewise had no legal basis to comply with that direction. The impugned letter was quashed, the petitioner was entitled to withdraw the money in the account, and interest at 20% per annum was ordered on the withheld amount, payable by customs and the bank equally.

---

---

Issues: Whether the customs authority could direct the bank to withhold the amount lying in the petitioner's drawback account and whether the bank was bound to act on such direction.

Analysis: The account was maintained only for receipt of drawback amounts. The Court held that once drawback money had been released into the account, it became the petitioner's property and could not be attached or withheld merely because an investigation into alleged fraud was pending. In the absence of any statutory power authorising the Deputy Commissioner to freeze the account, and in the absence of any order from a competent court or authority, the direction to withhold the funds was unauthorised. The bank also acted without legal authority in complying with that instruction. The Court did not decide whether the underlying export transactions violated the Customs Act or whether drawback was ultimately payable.

Conclusion: The direction to withhold the account was illegal and without jurisdiction. The impugned letter was quashed, the petitioner was entitled to withdraw the amount lying in the account, and interest at 20% per annum was directed on the withheld amount, payable equally by the customs authority and the bank.

---