By TIOL News Service

MUMBAI, DEC 30, 2015: THE Petitioner is challenging the legality and validity of the proceedings initiated by the second Respondent. It is stated that what the communications mentioned seek to do is to restrain the Petitioner from dealing with his immovable properties and freezing of his bank accounts.

The background is that a certain consignment stated to be 7.12 metric ton of red sanders, concealed in the cement blocks and bricks of fly ash for export came to be seized by the Respondent viz. DRI, MZU.

Consequent thereto, the Petitioner came to be arrested on the allegations that he was engaged in smuggling of red sanders and certain endangered species of wild flora and fauna. However, he came to be enlarged on bail on 17th October 2015.

In this context the letters (supra) were issued by DRI to the petitioner. The petitioner vide his letters dated 29th October, 2015 and 8th November, 2015 requested the Assistant Director, Directorate of Revenue Intelligence to de-freeze the bank accounts and allow to operate the same. However, there is no response to this request.

The Petitioner claims that since all properties and bank accounts are frozen and attached, it is impossible for him to carry on his day-to-day business. Moreover, there are no proceedings in the offing. Inasmuch as there is no show cause notice nor any penalty is adjudged or imposed so far and, therefore, this attachment and freezing of properties hampers him and not only he gets affected but those depending upon him, namely 475 workers/staff would be unable to earn their livelihood.

The counsel for the Revenue relied upon the provisions of the Customs Act, 1962 and submitted that this is a clear case of smuggling of red sanders and which is a prohibited activity; that the Petitioner is believed to be actively involved in the same and that is how the seizure of goods and action under section 110 of the Customs Act, 1962 was taken. The counsel also relied upon Chapter XIV of the Customs Act, 1962 to submit that penalty in terms of the provisions of this Chapter can be imposed and the sections, 120, 121 and 122 were also adverted to. Reliance is placed on the decision of apex court in Euroasia Global 2009-TIOL-56-SC-CUS and the decisions of the Division Bench in the case of NitinShirsat & Shri Krishna Chaitanya Enterprises 2013-TIOL-1003-HC-MUM-ST .

After extracting the various sections cited by the counsel for the Revenue, the High Court observed -

+ By section 122A, there is an adjudication procredure. For...the Respondents are inclined to impose penalty on the Petitioner, then, that penalty or the sum in respect thereof has to be declared. The words "adjudged"or "adjudication of confiscation of penalties"have been advisably inserted in this provision and would disclose the intent of the legislature.

+ The legislature, therefore, mandated adjudication of confiscation and penalties and that is by the adjudication procedure set out in section 122A, which was inserted by Act 23 of 2004 with effect from 10th September, 2004. That mandates the adjudicating authority to give an opportunity of being heard to the party in the proceeding, if the party so desires.

+ If that is the adjudication procedure and what we are being informed is that an adjudication of penalty would take place, then, we do not see how without any order being made in pursuance thereof or any sum crystallised or ascertained, the coercive measures initiated and undertaken can continue. The word "adjudication"means to make a formal judgment on a disputed matter.

+ From 17th August 2015 and onwards, such freezing and attachment orders have been in force. We need not express any opinion as to the nature of activities the Petitioner indulges in or whether they are legitimate or not. Even if the Petitioner is alleged to have indulged in smuggling, he has to be proceeded against in accordance with law . If he has to be punished under the Act and criminal proceedings have been launched, which are pending, then, they would take their own course.

+ Similarly, if all authorities under the Customs Act, 1962 are empowered to take other steps, then, they ought to be taken to their logical conclusion. The logical and legal conclusion is that on adjudication, ascertainment of the sum of penalty, if any, in this case. We would therefore not find any justification in law for the steps that Respondent No. 2 has taken and is continuing till date.

The judgments cited by the counsel for Revenue were held to be inapplicable.

The counsel for the Revenue further submitted that the show cause notice would be promptly issued and an adjudication order will be passed in accordance with law and, therefore, the Court should not release the bank accounts.

To this request, the High Court observed -

"None prevented the authorities from August, 2015 or at least from the date the Petitioner requested to issue the letter or notice calling upon him to remain present and answer the allegations. The statements now made, … are after a copy of this Petition was served on the Respondents. We are mindful of the seriousness of the allegations and the rampant smuggling of red sanders. However, we are not directing that the immovable properties which are attached shall stand released from attachment. All that we are taking care of is the grievance of the Petitioner that by these coercive measures his business has come to a standstill. He is unable to make payments nor the act of the Respondents enables the workers and staff of the Petitioner and duly employed by him to earn their livelihood. In these circumstances, we continue the freezing and attachment of the immovable properties subject however to a limited liberty to the Petitioner to deal with the said properties in his ordinary and usual course of business. There will be no transfer, alienation or parting with possession thereof in any manner until an adjudication order in accordance with law is passed. Similarly, the Petitioner is free to operate his bank accounts and the sums therein can be released by the banks so as to enable the Petitioner to meet the liabilities in his business activities and in relation to the deals , which are disclosed in para 10 of the Writ Petition. …. Save and except this limited permission and liberty, we are not inclined to accept all the requests as made in the prayer clauses of the Petition. We are mindful of the fact that in such matters an early adjudication serves the larger interest of public. We direct that within a period of three months from today, the authorities shall issue show cause notice and pass the adjudication order in accordance with law…."

Another request was made by the counsel for the Revenue viz. that there are 32 bank accounts which have been seized and in which the sum available is Rs.36 lakhs, which may not be sufficient to meet the penalty, which would be adjudged and, therefore, while releasing the bank accounts, this Court should impose a condition to furnish Bank Guarantee in favour of the Respondents, at least to the extent of the sum available to his credit.

The High Court observed - "…in the absence of adjudication or the penalty being adjudged in accordance with law, the request as made … cannot be accepted. That would be directing an attachment of the bank accounts in an indirect manner. What is prohibited directly cannot be achieved indirectly. In these circumstances, the request is rejected ."

The Writ Petition was disposed of.

(See 2015-TIOL-2937-HC-MUM-CUS )