Multitek Engineers vs Union of India

D.V. Shylendra Kumar, J.—In all these appeals the appellants are questioning a common order passed by the learned Single Judge in two batches of writ petitions wherein the learned Single Judge though found the attachment of all bank accounts of the appellants, by the Director of Revenue Intelligence as on 30th June, 2010 was not justified in law nor supported in law, nevertheless directed the respondent to raise attachment by imposing condition to safeguard the interest of the respondent. Appellant was to furnish bank guarantee for an amount of Rs. 2 crores put together, in respect of bank accounts, subject matter of two batches of writ petitions, as the writ petitioners'' establishments are all owned by one individual, namely T. Devaraj. Learned Single has further permitted the appellants by way of an alternative condition, to offer security for the said sum. However, the appellants have pursued the matter in appeals contending inter alia that the attachment is not justified in law and that it well settled in law by high authority that the Customs officials or officials of the Directorate of Revenue Intelligence, while exercising powers under the Customs Act, 1962 do not have power to attach bank accounts, at the stage of investigation, unless they are able to show the subject matter is one liable for confiscation; that there is no liability fastened on the appellants determining the amount due under any adjudication order, commensurate to the balance in the bank account for a total amount of Rs. 58 lakhs and some amounts in other Bank accounts being held up due to attachment has affected business of the appellants for about two years, which is per se unreasonable and not a proper exercise of power by a public authority assuming for arguments sake, such a power is available to the attaching officer etc.

We have heard Sri. Lakshminarayana, learned Counsel for the appellants and Sri. Ravi Raju, learned Counsel for the respondents.

Sri Lakshminarayana, learned Counsel for the appellants by placing reliance on the following decisions:

(1) A.M. Overseas Vs. Union of India (UOI) and Others,

(2) Raghuram Grah Pvt. Ltd. Vs. Commissioner of C. Ex. and Service Tax,

(3) BHP (India) P. Ltd. Vs. Dy. Dir., Directorate of Revenue Intelligence,

(4) Order dated 23-11-2010 of High Court of Judicature, Madras-M/s. Hansum India Electronics Private Ltd. v. Commissioner of Customs.

(5) Laxman Overseas Vs. Union of India (UOI) and Another,

submits that all these decisions are, an authority for the proposition that not only the DRI, but also the Customs officials cannot attach Bank account, but even assuming they have such powers, the attachment as of now becomes bad in law by not issuing show cause notice after lapse of more than an year from the date of attachment.

On the other hand learned Central Government Standing Counsel Sri. Raviraj, for the respondents, submits with reference to provision of Section 110 of the Act, that there is time limit for issuing show cause notice following seizure and it is within six months and before expiry of six months, time can be extended by further six months by the order of the Commissioner; that the time-limits shown apply insofar as seizure of articles is concerned as enabled under subsection (3) of Section 110, but under sub-section (4) of Section 110, insofar as seized documents are concerned, this provision only enables a person to seek for copy of the documents; that no time limit is stipulated here and therefore a person laying claim to documents cannot seek return of documents just because a period of 12 months has expired.

Sri Raviraj, learned Counsel submits that the proceeds of a Bank account, represents the proceeds of sale of contraband goods or goods which are otherwise liable for confiscation, the provisions of the Customs Act not only provides for determining the liability but also provides in law for confiscating the goods seized. Sri. Raviraj, has placed reliance on the decision of the Delhi High Court in the case of Vikas Gumber v. Union of India reported in 2009 (234) E.L.T. 439 (Del.) to submit that even while passing an order for lifting attachment, and defreezing Bank account, the Delhi High Court has imposed a condition on the petitioner to file an undertaking for non-alienation of his properties and the learned Single has precisely done so and there is no need for interference in writ appeal and it is only due laxity on the part of the appellants in not giving details of bank accounts that is come in the way imposing condition against the remaining amount and not due to any default on the part of the respondent, therefore urges for dismissal of the writ appeals.

Section 110 of the Customs Act, 1962 reads as under:

Seizure of goods, documents and things-(1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods:

Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with or otherwise deal with the goods except with the previous permission of such officer.

[(1A) The Central Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the gods or any other relevant considerations, by notification in the Official Gazette, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (1), be disposed of by the 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 of 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 is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:

Provided that the aforesaid period of six months may, on sufficient cause being, shown, be extended by the [Commissioner of Customs] for a period not exceeding six months. (3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act.

(4) The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies thereof or take extract therefrom in the presence of a officer of customs.

A perusal of this provision shows that the statutory provision does not expressly enable an Investigating Officer to attach a bank account. Learned Counsel for the respondents has drawn our attention to sub-section (3) of Section 110 and submits that it is a situation of seizure of documents or things and it includes a bank account.

While it is true that the enabling power for seizure of any documents or things which, in our opinion, will be useful for, or relevant to, any proceeding under this Act is available under sub-section (3) of Section 110 of the Act prima facie it should be shown to be so.

Even while the question whether the proceeds in a bank account can be confiscated within the scope of sub-section (3) of Section 110 may be debatable, it is assumed to be so for the propose of examining of these appeals and we proceeds to examine the merits of the case.

Learned Single Judge has specifically indicated that the seizure is bad-in-law. We find that seizure even if was justified in the beginning, including attachment of bank account, but the manner in which respondents have conduced later, leaves much to be desired as a show cause notice u/s 124 of the Act, is yet to be issued. Until and unless a show cause notice is issued u/s 124 of the Act, there is no question of any duty liability being determined under the Act nor scope for levying any penalty nor even for passing an order for confiscation.

In the judgment of Delhi Court the proceedings initiated was after lapse of 4 years and therefore the Delhi High Court characterised it as not bona fide attachment and therefore directed lifting of attachment of all bank accounts. Only difference in the present case is that the bank accounts are under attachment for about two years, but without issue of a show cause notice u/s 124 of the Act. Whether the period of inaction is for four or two years the question is one of the manner on which the statutory authority has exercised it''s statutory power. The inaction for two years in not taking any action by issuing show cause notice u/s 124 of the Act which, in our opinion is an unreasonable act on the part of the authority and it is unfair to the concerned persons and had resulted in arbitrary use of the available power. In the instant case there is no seizure of any goods liable for confiscation and in such a situation continuation of attachment of bank account is not at all permitted by law.

Sri Lakshminarayana, learned Counsel for the appellant submits that even if it is the case of the department, it may attract a duty liability and if at all penalty can be imposed in such a situation, but when the respondents have not issued show cause notice after enquiry and investigation for determining extent of under valuation and corresponding duty liability, we find no justification in keeping the bank account frozen for the amount in balance therein under attachment.

In the circumstances we find that even the condition imposed on the appellant by the learned Single Judge to furnish bank guarantee or security is not sustainable and the fact that even after passing of the order by the learned Single Judge on 15-9-2010 the respondents have not issued any show cause notice till now is a circumstance which clearly goes against the respondents. Therefore, we allow these appeals and direct the respondents to raise the attachment of bank account forthwith. In the circumstances we direct parties to bear their respective costs.