2025 (3) TMI 395 - HC - Customs

Petitioner cooperated with Section 108 summons; provisional bank account attachment lacked jurisdiction and was ordered released as investigation unjustified

M/s Pacific Powertech Solutions Versus Union Of India & Ors.

The HC held the petitioner cooperated with summons under Section 108 and that continued provisional attachment of the petitioner's bank accounts lacked ... Continuous provisional attachment of the Petitioner's Bank Account without any authority of law - Just investigation carried by the office of Respondent No.2 or not - jurisdiction to question or investigate local purchases made against proper invoices - Illegal import - prohibited goods or not - HELD THAT:- The respondent No.5, instead of responding to the notice of this Court and appearing before the Court, has filed the affidavit-in-reply reiterating what is stated earlier in the affidavits filed before this Court with an additional fact that the accounts of the petitioner have been defreezed under Section 110(5) of Customs Act. The petitioner in reply to the summons has already furnished all the relevant documents and based upon such documents, respondents have not further issued any summons meaning thereby that, in the documents furnished by the petitioner in form of the purchase register, ledger, bank accounts etc., the respondent No.2 could not find any irregularities so far as the petitioner is concerned. Thus, it is clear that the petitioner has co-operated with the summons issued by the respondent Nos.2 and 3 - the respondent No.5 in capacity of respondent No.2 has exceeded his jurisdiction insisting upon the personal presence of the proprietor of the petitioner firm for the reasons best known to him without there being anything on record which requires further investigation qua the petitioner, more particularly, when the petitioner has sold the goods imported by M/s. S.T. Electricals to M/s. Mayur Enterprise. The respondent No.2/5, only with an ulterior motive, is trying to harass the petitioner under the guise of exercising its powers under Section 108 of the Act. It is pertinent to note that in spite of issuance of notice of this Court, the respondent No.5 has not remained present in person or through authorised person and has tendered the affidavit through the learned advocates for the respondent-Authorities. When this Court has joined the respondent No.5 in his personal capacity, it was incumbent for him to appear and make submissions qua the allegations levelled against him by the petitioner instead of filing an affidavit in reply through the advocate appearing for the Customs Department. The primary allegation of importing the goods are on ST Electricals and the role of the petitioner is confined only to that of a seller - respondent No.5 has thus acted in total disregard to the notice issued by this court by tendering affidavit only similarly as that of the petitioner filing reply in response to the summons issued under Section 108 of the Act. However, notice issued by this Court against the respondent No.5, while exercising jurisdiction under Article 226/227 of the Constitution of India, is having wider implication than summons issued under Section 108 of the Act and respondent No.5 has ignored the notice by tendering the affidavit-in-reply instead of appearing in person or through authorised person or an advocate. In the facts of the case when the petitioner has filed the detailed reply in response to the summons issued under Section 108 of the Act, no further purpose would be served to continue the investigation qua the petitioner by the respondent-Authorities. Conclusion - i) The investigation against the petitioner was not justified, as the goods were already cleared for home consumption and the petitioner had complied with the summons. ii) The provisional attachment of the petitioner's bank accounts to be without jurisdiction and directed their release. iii) In the facts of the case when the petitioner has filed the detailed reply in response to the summons issued under Section 108 of the Act, no further purpose would be served to continue the investigation qua the petitioner by the respondent-Authorities. Petition allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the investigation carried out by the Customs authorities against the petitioner, concerning the import of goods by M/s. S.T. Electricals, was just and fair.The legality of the provisional attachment of the petitioner's bank accounts.Whether the Customs authorities have the jurisdiction to investigate local purchases made by the petitioner from M/s. S.T. Electricals.The legality and appropriateness of the summons issued to the petitioner under Section 108 of the Customs Act, 1962.Whether the petitioner is liable for any alleged illegal importation and whether the goods in question are prohibited.Whether the High Court has the jurisdiction to entertain the petition filed by the petitioner.ISSUE-WISE DETAILED ANALYSISInvestigation and JurisdictionThe Court examined whether the investigation by the Customs authorities was justified. The petitioner argued that the goods were purchased locally and were already cleared for home consumption, thus ceasing to be 'imported goods' under the Customs Act. The respondents contended that the petitioner was a beneficiary of illegally imported goods and that the investigation was necessary to determine the extent of the petitioner's involvement.The Court noted that the investigation by the Customs authorities was primarily against M/s. S.T. Electricals, the original importer. The petitioner had purchased goods from the local market, which were already cleared for home consumption. Therefore, the continued investigation against the petitioner was deemed unnecessary.Provisional Attachment of Bank AccountsThe petitioner challenged the provisional attachment of its bank accounts, arguing it was without legal authority. The respondents justified the attachment under Section 110(5) of the Customs Act to protect government revenue. However, the Court observed that the attachment had lapsed as no extension was granted, rendering the continued freezing of accounts unjustified.Summons under Section 108 of the Customs ActThe petitioner contended that the summons issued were unwarranted as it had already furnished all required documents. The Court found that the petitioner had complied with the summons and provided necessary documents, and thus, further summons were unnecessary. The Court also noted that the respondents failed to demonstrate any irregularities in the petitioner's transactions.Liability for Alleged Illegal ImportationThe respondents argued that the petitioner was involved in the illegal importation of prohibited goods. However, the Court found no evidence to support the claim that the petitioner was anything other than a bona fide purchaser. The goods were already cleared for home consumption, and the petitioner had sold them to another party, further distancing itself from the original importation.Jurisdiction of the High CourtThe respondents challenged the jurisdiction of the High Court, suggesting the case should be heard in Rajasthan, where the investigation was based. The Court rejected this argument, noting that the petitioner was within its territorial jurisdiction and had received the summons there. The Court also referenced a similar case decided by the Bombay High Court, which was not appealed by the respondents, reinforcing the jurisdictional standing.SIGNIFICANT HOLDINGSThe Court held that the investigation against the petitioner was not justified, as the goods were already cleared for home consumption and the petitioner had complied with the summons.The Court declared the provisional attachment of the petitioner's bank accounts to be without jurisdiction and directed their release.The Court restrained the respondents from issuing further summons to the petitioner concerning the transaction in question.The Court confirmed its jurisdiction to hear the case, dismissing the respondents' jurisdictional challenge.The Court emphasized that once goods are cleared for home consumption, they cannot be seized from subsequent purchasers unless there is evidence of collusion or illegal activity.The Court noted that the respondents failed to provide sufficient evidence to implicate the petitioner in any wrongdoing related to the importation of the goods.In conclusion, the Court ruled in favor of the petitioner, finding that the actions of the Customs authorities were not supported by the evidence and were beyond their jurisdiction. The petitioner was found to have acted within the law, and the investigation against it was deemed unwarranted. The Court's decision underscores the importance of jurisdictional boundaries and the protection of bona fide purchasers in the context of customs investigations.