Court quashes provisional attachment order under Section 110(5) Customs Act issued without jurisdiction during investigation stage
The MP HC quashed a provisional attachment order dated 03.12.2024 issued under Section 110(5) of the Customs Act, 1962, ruling it was issued without jurisdiction. The court held that provisional attachment proceedings can only be initiated after issuance of show cause notice under Sections 28/28AAA/28B, not during investigation stage. Since no adjudication proceedings were pending and no alternative remedy existed under Section 110A during investigation, the writ petition was maintainable. The court directed immediate defreezing of petitioners' bank accounts and noted respondents' non-compliance with earlier interim orders constituted contempt.
Issues Presented and ConsideredThe core legal questions considered by the Court in this matter are:
1. Whether the provisional attachment of the petitioners' bank accounts under Section 110(5) of the Customs Act, 1962 is valid and within jurisdiction when issued during the pendency of investigation but prior to the initiation of adjudication proceedings (i.e., before issuance of any Show Cause Notice under Sections 28, 28AAA or 28B of the Customs Act)Rs.
2. Whether the petitioners have an alternative efficacious remedy available under Section 110A of the Customs Act, 1962 to challenge the provisional attachment at the investigation stageRs.
3. Whether the extension or re-attachment of the bank accounts beyond the statutory limitation period under Section 110(5) of the Customs Act amounts to a colourable exercise of power or is otherwise impermissibleRs.
4. Whether the impugned provisional attachment order dated 03.12.2024 is time-barred under the limitation provisions of Section 28 of the Customs Act, 1962Rs.
5. Whether the petition is maintainable despite the Respondents' contention of non-challenge to the basic approval note dated 02.12.2024 and availability of alternative remediesRs.
Issue-wise Detailed Analysis
Issue 1: Validity and Jurisdiction of Provisional Attachment under Section 110(5) during Investigation Stage
Legal Framework and Precedents: Section 110(5) of the Customs Act, 1962 empowers the proper officer, with prior approval, to provisionally attach any bank account during "any proceedings" under the Act for protecting revenue interests. The term "proceedings" is not explicitly defined in the Act. Section 28 and related provisions (28AAA, 28B) govern the initiation and conduct of adjudication proceedings, which commence only after issuance of a Show Cause Notice (SCN). Section 28BA allows provisional attachment during pendency of proceedings under Sections 28, 28AAA or 28B. Circular No. 10/2008-Customs dated 30.06.2008 explicitly instructs that provisional attachment can only be initiated after issuance of SCN under these sections.
The Supreme Court's ruling in M/s Radha Krishan Industries v. State of H.P. emphasized that provisional attachment is a draconian power that must be exercised strictly in accordance with statutory provisions and only after formation of a tangible opinion that attachment is necessary to protect government revenue during pending proceedings.
Court's Interpretation and Reasoning: The Court interpreted "proceedings" in Section 110(5) to mean proceedings initiated under Sections 28, 28AAA or 28B, i.e., post issuance of SCN. Since no SCN was issued to the petitioners and the matter was under investigation only, the Court held that no "proceedings" were pending within the meaning of the statute. Consequently, the provisional attachment order dated 03.12.2024 issued during investigation was without jurisdiction.
The Court relied on the Circular No. 10/2008 and the Calcutta High Court's decision in Mineral Metal Centre v. DGCEI, which held that freezing bank accounts during investigation without statutory authority is impermissible.
Application of Law to Facts: The petitioners' bank accounts were provisionally attached without any SCN having been issued, and the investigation was ongoing. This did not satisfy the statutory precondition of "pending proceedings" for attachment under Section 110(5). Therefore, the attachment was illegal.
Treatment of Competing Arguments: Respondents argued that the note-sheet dated 02.12.2024 recording approval for attachment constituted a valid order and that the petitioners failed to challenge it separately. The Court rejected this, holding that the note-sheet was merely an internal approval and not communicated to petitioners, thus merged with the impugned intimation and challengeable as such.
Conclusion: Provisional attachment under Section 110(5) during investigation stage without pending adjudication proceedings is without jurisdiction and void.
Issue 2: Availability of Alternative Remedy under Section 110A
Legal Framework: Section 110A provides for provisional release of seized goods or provisionally attached bank accounts pending adjudication, allowing the affected person to seek release by furnishing security and bond. This remedy is available during pendency of adjudication proceedings.
Court's Interpretation: Since no adjudication proceedings had commenced (no SCN issued), Section 110A remedy was not available at the investigation stage. Hence, the petitioners had no alternative efficacious remedy to challenge the attachment at this stage.
Application: The Court held that the writ petition under Article 226 was maintainable as no alternative remedy existed during investigation, especially since the attachment was without jurisdiction.
Conclusion: Absence of alternative remedy under Section 110A during investigation stage justified entertaining the writ petition.
Issue 3: Alleged Colourable Exercise of Power by Respondents
Arguments: Petitioners contended that Respondents circumvented statutory limitation of one year for attachment under Section 110(5) by re-attaching accounts under a new file number, amounting to colourable exercise of power.
Court's Analysis: Since the Court held the attachment itself was without jurisdiction (issue 1), it declined to consider this question in detail, leaving it open for future adjudication.
Issue 4: Time Bar under Section 28
Arguments: Petitioners argued that proceedings were time-barred as the Respondents exceeded the two-year limitation under Section 28.
Court's Analysis: The Court noted that petitioners had not pleaded or established the "relevant date" from which limitation would run. Moreover, since no proceedings under Section 28 had been initiated (no SCN issued), the limitation question did not arise for adjudication in this petition.
Issue 5: Maintainability of Petition Despite Non-challenge to Basic Approval Note and Availability of Alternative Remedies
Legal Framework: The doctrine of alternative remedy generally restricts writ jurisdiction if effective alternative remedies exist. However, exceptions include cases where fundamental rights are involved, orders are without jurisdiction, or principles of natural justice are violated.
Court's Reasoning: The Court relied on the Supreme Court's decision in M/s Radha Krishan Industries and other precedents to hold that the present petition was maintainable as the impugned order was without jurisdiction and violated principles of natural justice by not communicating the approval note to the petitioners.
The Court also rejected Respondents' contention that non-challenge to the approval note barred the petition, holding the note-sheet merged with the impugned intimation and was challengeable.
Significant Holdings
"The word 'proceedings' which finds mention in Section 110(5) of Customs Act, 1962 is referrable to proceedings initiated under 'Section 28, or Section 28AAA or Section 28B'."
"When there is no 'proceeding' pending against the petitioners within the meaning attached to the said word under the provisions of Customs Act, 1962, Respondents had no jurisdiction/authority in law to pass an order of provisional attachment under Section 110(5) of Customs Act, 1962 pending investigation."
"The remedy under Section 110A is not available to the petitioners during the stage of investigation but is only available after the proceedings are initiated before the adjudicating authority."
"Availability of alternative remedy is not an absolute bar for granting relief in the exercise of power under Article 226 of the Constitution of India, and exceptions include where orders are wholly without jurisdiction or violate principles of natural justice."
"The note-sheet dated 02.12.2024 is merely a record of internal approval and was not communicated to the petitioners; hence, it merged with the impugned intimation dated 03.12.2024 and is challengeable."
"Provisional attachment under Section 110(5) of Customs Act, 1962 during investigation stage without pending adjudication proceedings is without jurisdiction and liable to be quashed."
Final Determinations:
- The impugned provisional attachment order dated 03.12.2024 was issued without jurisdiction as no adjudication proceedings were pending.
- The petitioners had no alternative remedy under Section 110A at the investigation stage; hence, the writ petition was maintainable.
- The attachment order dated 03.12.2024 is quashed, and Respondents are directed to defreeze the petitioners' bank accounts immediately.
- The Court refrained from deciding the question of colourable exercise of power and limitation under Section 28, leaving those issues open.
- Non-compliance with the Court's interim order to defreeze accounts was noted as contempt, with expectation of immediate compliance of the final order.
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