The Madhya Pradesh High Court pulled up Directorate of Revenue Intelligence (DRI) for contempt over frozen accounts despite the stay and has ordered immediate compliance or face serious consequences.
The bench of Justice Sushrut Arvind Dharmadhikari and Justice Gajendra Singh named the act of provisionally attaching the bank accounts of the petitioners by finding out ways to keep the bank accounts of petitioners remain provisionally attached for a period of more than one year as colourable exercise of power by DRI.
The petitioners are importer of Sri Lankan-origin edible goods, specifically Areca Nuts, which had sought exemption benefits under the Indo-Sri Lanka Free Trade Agreement (ISLFTA).
During an investigation, DRI scrutinized the past imports done by Petitioners in November, 2022 and it was noticed that petitioners had imported 4 consignments of Areca-Nuts in the past, declaring them as Srilankan origin, and availed the duty exemption under ISFTA. With regard to consignment imported in November, 2022, process of verifying the Certificates of Origin (COO) in respect of the aforesaid 4 consignments was started and COO were sent to International Customs Division (ICD) of Central Board of Indirect Taxes and Customs (CBIC) wherein CBIC reported that one of the COO in respect of Bill of entry filed by M/s Mundhra Exim Pvt. Ltd/Petitioner No.1. was found to be fake.
Pertinently, in relation to file number, two intimation notices had been issued under Section 110(5) of Customs Act, 1962 by provisionally freezing the bank account of the petitioners for 6 months and thereafter again two intimations were issued by extending the period of freezing of bank accounts of petitioner for another 6 months which was to expire on 03.12.2024.
During the pendency of the investigation Notes-sheet was prepared wherein approval to provisionally attach bank accounts of Petitioners was obtained from Additional Director General, DRI, Indore Zonal Unit and on the basis of the said approval, intimation was issued freezing the bank accounts of the petitioners for a period of 6 months.
The petitioner contended that what cannot be done directly, is not permissible to be done obliquely, meaning thereby, whatever is prohibited by law to be done, cannot legally be effected by an indirect and circuitous contrivance on the principle of “quando aliquid prohibetur, prohibetur at omne per quod devenitur ad illud” i.e. An authority cannot be permitted to evade a law by shift or contrivance. The DRI tried to evade the statute by adopting an indirect approach as directly they could not have attached the bank accounts of the petitioners beyond the period of 1 year in view of Section 110(5) of Customs Act, 1962. The entire exercise undertaken by respondents is a colourable exercise of power and hence is liable to be struck down.
The petitioners raised a ground regarding colourable exercise of power by Respondents in provisionally attaching the bank accounts of the petitioners by finding out ways to keep the bank accounts of petitioners remain provisionally attached for a period of more than one year in order to circumvent statutory restriction provided under Section 110(5) of Customs but since the court has already held that the provisional attachment of bank accounts during investigation is itself without jurisdiction, the said question does not require consideration for the adjudication of the petition and the same is left open.
The department contended that petition is not maintainable in view of alternative remedies being available to the petitioners under Section 110A of Customs Act, 1962. On merits, it has been argued that the petitioners have not challenged the basic order on the basis of which intimation has been issued, and hence the present petition is not maintainable.
The court noted that the petition deserves to be allowed. Ex Consequenti, intimation issued under Section 110(5) of Customs Act, 1962 is quashed for it being issued without jurisdiction and DRI are directed to defreeze the bank accounts of the petitioners which have been provisionally attached with immediate effect.
Case Details
Case Title: Mundhra Exim Pvt Ltd Represented By Its Director Mr Ashish Mundhra And Others Vs Union Of India And Others
Case No.: Writ Petition No. 874 Of 2025
Date: 21.04.2025
Counsel For Petitioner: Advocate Richa Kapoor
Counsel For Respondent: Deputy Solicitor General Himanshu Joshi
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