By TIOL News Service

MUMBAI, APRIL 28, 2016: THE petitioner is the proprietor of M/s. Infinity Trading Company and is engaged in the business of export of imitation jewellery.

In the matter of subject consignments, the samewere physically examined and found to be satisfactory and after permitting exports, the export incentives were sanctioned. However, on the basis of certain intelligence received by DRI, investigations were initiated into the exports made by certain other exporters who, according to DRI, did not export any goods, but have claimed duty drawback.

The petitioner further submits that they were called upon to make payment towards the duty drawback claim and this was without any notice and without explaining or setting out the grounds on which such payment is demanded. The petitioner claims that since certain threats were administered, he agreed to act as per the directions of the officer and accordingly addressed a letter to the banks informing the banks that they should credit the amount available in their account to the Department.

Thereafter, the respondentDRIaddressed a letter to the bank with a direction that the account of the petitioner in the said bank as well as any account in the name of the petitioner should not be allowed to be operated and any amount in balance in the said account should not be permitted to be withdrawn. Thus, the petitioner claims that the bank accounts were frozen and attached. The bank had no option, but to comply with the demands of the respondents. That is how the petitioner claims that to show his bona fides he deposited a sum of Rs.16,62,792.18 which was available in balance in the account of the petitioner.

On 13th October, 2015, the petitioner claimed that because of the freezing of the account, his business is adversely affected;that his cheques would be dishonoured. The petitioner claims that he has been explaining to the respondents that further compliance with the law and given that the respondents have a power to investigate that does not mean that the bank account should be frozen and endlessly. The petitioner was pressurized to make further payments and that is how the petitioner, relying upon certain judgments, pointed out by a letter of 28th January, 2016, followed by another one dated 15th February, 2016, that the bank account be released.

It is in these circumstances that the petitioner has knocked the doors of the Bombay High Court and relies on the decision in the case of RajendraVithalShinde [2015-TIOL-2937-HC-MUM-CUS], wherein it is held that without any order being made in pursuance of adjudication, coercive measures of freezing bank a/c cannot continue.

The counsel for the Revenue submitted that fraudulent claim of drawback by the petitioner is being investigated; that voluntary payment or deposit of a total amount of Rs.25,48,572/-has been made and that even though several summons have been issued for the presence of the petitioner before the DRIofficers, he has failed to do so and, therefore, the respondents are justified in what they have done.

The High Court observed -

+ It is common ground that when the letter is addressed to the bank and to the petitioner alleging fraud and terming all exports as bogus so as to avail of a duty drawback, then, a one sided or unilateral version of the Revenue is not determinative or conclusive. It is not a case of an established and proved fraud but an alleged fraud.

+ The fact that the petitioner has admitted that there was some liability but the circumstances in which he has paid the sum of Rs.16,62,794.18 has been duly explained by him. He terms the payment as ad-hoc and when he states that this is only to cooperate in the investigation that the petitioner has made this payment, then, we do not find any justification for the continued action.

+ We are not denying to the Revenue an opportunity of investigating or unearthing huge fraud. We are also not denying them their powers, but surely if drastic powers have to be exercised by public bodies, they must be exercised reasonably and fairly.

+ We fail to understand if a huge and systematic fraud is alleged and perpetrated not only on the Revenue but on the public as a whole resulting in a voluntary deposit from the petitioner, then, why the investigations could not be concluded nor a show cause notice issued nor any steps taken till date.

+ When such petitions are filed, it is our experience that detailed affidavits are filed in order to justify the act, but there is not a word about the delay .

+ The deponent has time to file a very detailed affidavit-in-reply and file it in Court, but it is surprising that the Directorate and whole of it does not have time to proceed against those indulging in fraud on the public. A justification of this nature comes promptly only when parties like the petitioner complain of a freezing or attachment of their bank accounts and refusal to release them even if bona fides are shown.

+ This is not a case of an admitted fraud or a liability which is undisputed. Once there are allegations of fraud the Revenue has a larger responsibility and duty to the public. It cannot refuse to take all steps and rest only on freezing of bank accounts of the alleged defaulters.

+ That such an act and which is to be found traceable to different powers and of the nature conferred in the Customs Act, 1962, will not permit the respondents to deprive parties like the petitioner of their source of livelihood. They cannot stop their business by continued freezing of their bank accounts.

+ It is further very clear and requires no reiteration that what is prohibited directly cannot be achieved indirectly or in an oblique manner. A refusal to carry out a duty in accordance with law cannot be justified by such a continued attachment and freezing of the bank accounts.

Conclusion:

Petition allowed. Bank accounts are to be released within 48 hours.

(See 2016-TIOL-841-HC-MUM-CUS)