The High Court of Bombay has ruled the provisional attachment of bank accounts under the Customs Act as illegal due to procedural irregularities and the absence of a written order by the proper officer.
The case involved three separate writ petitions filed by Chokshi Arvind Jewellers, Pallav Gold and Maxis Bullion, challenging the provisional attachment of their bank accounts by the customs authorities.
The petitioners, who are engaged in the business of gold bullion trading, had their bank accounts provisionally attached by the customs authorities during ongoing proceedings.
The petitioners, represented by Dr. Sujay Kantawalla, Mr. Anupam Dighe, Ms. Changni Tanna, Mr. Prathamesh Chavan and Mr. Ankit Trivedi, argued that the provisional attachment of their bank accounts lacked a written order and violated Section 110(5) of the Customs Act, 1962, jeopardising their businesses.
The respondent revenue, Union of India and others, represented by Mr. Jitendra Mishra, Ms. Sangeeta Yadav and Mr. Umesh Gupta asserted that the provisional attachment did not require a written order, arguing that its absence did not invalidate the action under Section 110(5) and served the interests of revenue and smuggling prevention.
The court noted that the provisions of Section 110(5) of the Customs Act, 1962 mandate the proper officer to form an opinion that it is necessary to provisionally attach a bank account to protect the interest of revenue or prevent smuggling. This opinion must be based on tangible material and must be recorded in writing. However, in the present case, the proper officer had not passed any written order justifying the provisional attachment.
The court held that the provisional attachment was illegal because the proper officer did not pass any order in writing as required by Section 110(5) of the Customs Act.
The bench also stated that before provisionally attaching the bank accounts, the proper officer must form an opinion that it is necessary to do so to protect the interest of revenue or prevent smuggling. This opinion must be based on tangible material and must be reflected in the order in writing.
The court emphasised that the order in writing should be served not only on the bank but also on the bank account holder. Since these requirements were not fulfilled, the court declared the provisional attachment illegal and directed the banks to unfreeze the petitioners’ bank accounts.
The court further emphasised that the power to provisionally attach a bank account is a drastic and coercive power that can have severe consequences for the account holder. Therefore, it must be exercised strictly in accordance with the statutory requirements.
The court rejected the argument of the respondents that no written order is required for provisional attachment under Section 110(5) of the Customs Act, stating this interpretation would go against the settled principles of law and deprive the petitioners of the safeguards provided in the statute.
In result, the bench set aside the provisional attachment of the bank accounts of the petitioners and directed the respondent banks to allow the petitioners to operate their accounts without any hindrance.
The court highlighted the importance of procedural compliance and the necessity of tangible evidence before provisionally attaching bank accounts under the Customs Act. The bench concluded that the exercise of such coercive powers must be based on valid grounds and must be in compliance with all the statutory requirements.
The court, however, clarified that the customs authorities are not prohibited from provisionally attaching the bank accounts of the petitioners provided they adhere to due procedure of law.
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