Freezing bank account

[Satbir singh wahi]

Sir

Dy commissioner of cutoms preventive,mumbai has directed bank to freeze bank account.As they are investigating the drawback and igst refund taken by exporter.

But no show cause issued. Further exporter has reversed itc for july to sept.17.pls guide.

[KASTURI SETHI]

Dear Sir,. You, being experienced person, must be aware that bank account of the defaulter is freezed with the order of the Competent Authority. In such case, if it is detected that the amount of drawback or refund(fraudulently claimed) is part of bank account and incriminating docs are found during investigation, the SCN is issued. Normally extended period is involved and so SCN will be issued after completion of investigation. If during investigation, nothing objectionable is found , the freezed bank account can be released (unfreezed) without issue of SCN. This is as per law.

[DR.MARIAPPAN GOVINDARAJAN]

In my view the action of the department is correct.

[YAGAY and SUN]

There is no provision in Customs Act allowing freezing a Bank Account: Delhi High Court

In the case of S.B International = 2018 (2) TMI 588 - DELHI HIGH COURT, the Delhi High Court recently held that there is no sanction in the Customs Act, 1962 which allows freezing the bank account of the Assessee. The assessee in the instant case is a sole proprietorship concern. During the relevant period, a search was conducted by the Directorate of Revenue Intelligence (DRI) under the Customs Act in the warehouse of the Assessee regarding the illegal import of tyres. The Assessee was also called upon to produce the bank statements of the concern. After analyzing the documents, the DRI concluded that the said statement was recorded under duress and coercion. Accordingly, the DRI passed an order to freeze the bank account of the concern.

The counsel for the Assessee, Advocate Randhir Singh and Advocate D.K. Devesh submitted that the Assessee is not an importer in respect of the transactions being investigated by the DRI and the tyres were imported by another concern and the Assessee used to purchase goods from the Enterprises as he knew the proprietor of the said concern. It is also asserted by the counsel that even though the Assessee had assisted the importers in identifying the items of import as well as the source from where the goods could be imported, the petitioner was not an importer and, therefore, cannot be held liable for any irregularity in import of the products in question. Assessee sent a letter to the DRI for requesting to de-freeze the bank account maintained by him with Axis Bank.

However, the DRI refused to accept the submissions of the Assessee and continued with his earlier action. After considering the rival submissions of both the parties High Court Justice Vibhu Bhakru observed that “Freezing a bank account is not the same as seizing an asset; it interdicts operation of a bank account and it deprives the account holder of banking facilities. Indisputably, there is no sanction in the Customs Act for such action”. The Court further observed that “DRI was undoubtedly entitled to proceed with the investigation and take appropriate action against the petitioner in accordance with law; however, there was no provision where the DRI could prevent banking operations pending investigations”.

Consequently, the Court directed the Officer that freezing of accounts of the Assessee is unsustainable and the same was set aside.

[Satbir singh wahi]

Thks Sir

[DR.MARIAPPAN GOVINDARAJAN]

Thanks Mr. Yagay. However in tax evasion cases the action of the department will be justified.

[KASTURI SETHI]

If drawback or refund claimed fraudulently, the Govt.has vast powers to eliminate fraud and safeguard revenue.

[KASTURI SETHI]

There is no escape route for a person who claims drawback or refund fraudulently. Govt. surround that person from all corners. The defaulter cannot avoid noose of law.

[Ganeshan Kalyani]

In case of judgement can I say the able council either side who is fittest to argue and present the fact and justify and satisfy and prove and impress the magistrate, Lord, authority is success in taking the judgement in his side. If my view is incorrect then there should be favourable and unfavorable case law in the same subject. So, in nutshell if the authority is of the view that the export benefit is wrongfully taken then it has all it's power to take action on the exporter.

[Ganeshan Kalyani]

In second last sentence, please read as "should not"" in place of should.

AI Summary

Freezing bank accounts during customs refund probes lacks statutory sanction, making such restraints open to legal challenge.
Practices report that a competent authority may direct banks to freeze accounts during investigations into allegedly fraudulent drawback or IGST refund claims, with SCNs normally issued after investigation and freezes released if no objectionable material is found. However, a legal view notes the Customs Act contains no express sanction to prevent banking operations, making such freezes susceptible to judicial challenge where statutory authority is absent.