TaxTMI 
TaxTMI 
2018 (2) TMI 588
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....ned communication as it is suspected that the petitioner is connected/involved in illegal import of tyres which are being investigated. 3. The petitioner claims that the impugned communication is without the authority of law as no order has been passed under the Customs Act, 1962 (hereafter 'the Customs Act'). 4. The principal question, which falls for consideration of this Court in this petition is whether the DRI has the jurisdiction to issue such directions without passing any orders under the provisions of the Customs Act. 5. Briefly stated, the relevant facts necessary to address the aforesaid controversy are as under:- 5.1 The petitioner states that certain officers of the DRI conducted a search in the godown/warehouse of the petitioner on 09.11.2017. He states that the search was conducted in accordance with the provisions of the Customs Act and a Panchnama was drawn. The petitioner further states that the office premises of the petitioner was also searched in the presence of witnesses after complying with the provisions of Section 105 of the Customs Act; however, nothing incriminating was found during the said search. 5.2 On 14.11.2017, respondent  ....
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.... M/s Reet Traders (IEC No. 5614000119) and the petitioner used to purchase goods from M/s Marina Enterprises as he knew the proprietor of the said concern. It is also asserted by the petitioner that even though the petitioner 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 (tyres). 6. The petitioner has made several assertions in the petition including that his nephew and his brother-in-law were apprehended from the factory premises of S.B. International. He has also mentioned that a petition seeking writ of Habeas Corpus was filed in this Court. However, given the limited scope of the present petition, it is not necessary to advert to other assertions made in the petition. 7. The respondents have not chosen to file any response to this petition; however, a brief note of submissions made on their behalf, was filed by the counsel. 8. Mr Aditya Singla, the learned Senior Standing Counsel appearing for the DRI contended that the officers of the DRI have been appointed ....
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....sons and Conclusion 13. Concededly, the impugned communication or impugned order has been issued by the DRI in connection with the investigations being conducted under the Customs Act. Mr. Singla contended that the DRI officials were proper officers within the meaning of Section 2(34) of the Customs Act and were duly empowered to carry out the investigations regarding smuggling of goods. He contended that the petitioner was suspected of being involved in smuggling of tyres and, therefore, the DRI Officials were well within their jurisdiction to pass an order for freezing the petitioner's bank account. 14. Admittedly, Chapter XIII of the Customs Act contains provisions regarding search, seizure and arrest. In terms of Section 105(1) of the Customs Act, if the specified officer has reason to believe that any goods are liable to confiscation or any documents or things, which in his opinion will be useful for or relevant to the proceedings under the Act, are secreted in any place, he may authorize any officer of Customs to search or may himself search for such goods, documents or things. Section 105(1) of the Customs Act is set out below:- "105. Power to search premises.-(1) I....
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....proper officer in such manner as the Central Government may, from time to time, determine after following the procedure hereinafter specified. (1B) Where any goods, being goods specified under sub-section (1A), have been seized by a proper officer under sub-section (1), he shall prepare an inventory of such goods containing such details relating to their description, quality, quantity, mark, numbers, country of origin and other particulars as the proper officer may consider relevant to the identity of the goods in any proceeding under this Act and shall make an application to a Magistrate for the purpose of- (a) certifying the correctness of the inventory so prepared; or (b) taking, in the presence of the Magistrate, photographs of such goods, and certifying such photographs as true; or (c) allowing to draw representative samples of such goods, in the presence of the Magistrate, and certifying the correctness of any list of samples so drawn. (1C) Where an application is made under sub-section (1B), the Magistrate shall, as soon as may be, allow the application. (2) Where any goods are seized under sub-section (1) and no notice in respect thereof ....
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....erred to Section 110(3) of the Customs Act and held that "the formation of a prima facie opinion by the proper officer is a pre-requisite for the exercise of the power of seize any goods, documents or things. The opinion to be formed is that they would be useful for, or relevant to, any proceeding under this Act". 21. Section 121 of the Customs Act also provides for confiscation of sale proceeds of smuggled goods where such goods are sold by persons having knowledge or reason to believe that the goods in question are smuggled goods. 22. In the aforesaid context, the first and foremost question to be addressed is whether it would be open for the DRI officials to take recourse to Section 102 of CrPC for seizing any property. Section 102 of CrPC reads as under:- "102. Power of police officer to seize certain property.-(1) Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence. (2) Such police officer, if subordinate to the officer in charge of a police station, shall forthwith report the seizure to that officer. (3) Every police off....
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....ions for search and/or seizure in relation to violations under the Customs Act. It is thus not open for the DRI officials to circumvent those checks and balances by taking recourse to Section 102 of CrPC. Powers of search and seizure are draconian in nature and any provision granting such powers must be strictly construed. 25. Having stated the above, it is also necessary to note that Section 102(1) of CrPC permits any police officer to "seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence". Apart from the reason that the investigations are being conducted under the Customs Act and the provisions of Section 102 of CrPC are not available as discussed above; the impugned communication is also not sustainable under the provisions of Section 102 of CrPC for several reasons. 26. First of all, the power is available only to any "police officer" and as held by the Supreme Court in Surjeet Singh Chhabra v Union of India & Ors: (1997) 1 SCC 508, the DRI officials are not police officers (Also see: State of Punjab v. Barkat Ram: AIR 1962 SC 273). In Directorate of Enfo....
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.... (ii) which may have been found under circumstances which create suspicion of commission of any offence. In the present case, the investigation had commenced and freezing order had been issued subsequently. Thus, it is difficult to understand as to how the petitioner's bank account (assuming that a bank account is a property) could be stated to have been found under circumstances which had created suspicion of commission of an offence. It appears that the sequence is quite the reverse; the DRI officials suspected commission of the offence of smuggling of goods and during the course of investigation issued orders freezing the petitioner's bank account. 29. Lastly, in terms of Section 102(3) of CrPC, it is necessary for the police officers to report seizure to a Magistrate. Plainly, no such procedure was followed. Mr. Singhla contended that no such procedure is required to be followed by virtue of Section 110(3) of the Customs Act. This contention clearly brings into focus the fallacy in the contentions advanced on behalf of the DRI. It is conceded that powers under section 110(1) of the Customs Act cannot be exercised as the necessary precondition of the proper officer having ....
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....eria with sub-section (1) of Section 104 of the Customs Act of 1962, is produced under sub-section (2) of Section 35 of the Foreign Exchange Regulation Act, has jurisdiction to authorize detention of that person under Section 167(2) of the Code of Criminal Procedure?" 33. Section 104(1) of the Customs Act and Section 35(1) of Foreign Exchange Regulation Act, 1973 (FERA) confer powers on officers authorized to effect such arrest. Section 104(2) of the Customs Act and Section 35(2) of FERA expressly provide that every person arrested under the said Acts would be produced without unnecessary delay before a Magistrate; however, the provisions of the said Acts (Customs Act and FERA) are silent as to the powers of the Magistrate. There are no provisions as to what the Magistrate is required to do once the person arrested is produced before the Magistrate. It is in this context, the Court held that where the provisions of the special Acts (Customs Act & FERA) are silent, the provisions of CrPC could be applied by virtue of Section 4(2) of CrPC. In the present case, the provisions of the Customs Act are not silent as to the manner in which seizure is to be carried out; on the contrary, ....
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....ts reflected positive balances (credit balances) and, therefore, represented certain moneys due from the bank. Indisputably, a credit balance in a bank account is an asset of the account holder and the said asset may be seized or attached provided the same is permissible in law. However, if the bank account is an overdraft account, the same would represent a liability owed by the account holder and, therefore, question of seizing the same or attaching the same would not arise. 39. 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. 40. In Shakuntala Singh v. Addl. DRI, Kolkata Zonal Unit (supra), the Calcutta High Court considered a case where the DRI had directed the bank with which the petitioner was maintaining its account not to permit any debts. The Court held that the 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 inve....