By TIOL News Service

NEW DELHI, FEB 10, 2018: THE petitioner impugns a letter dated 14.11.2017 issued by the Assistant Director, Directorate of Revenue Intelligence (DRI) calling upon AXIS Bank to freeze the petitioner's current account maintained with the Bank.

The petitioner claims that the impugned communication is without the authority of law as no order has been passed under the Customs Act, 1962.

The Counsel for the DRI contended that the officers of the DRI have been appointed as officers of Customs/proper officers and, therefore, are empowered to carry on investigation under the Customs Act; that in terms of Section 110 of the Customs Act, officers of the DRI are empowered to seize goods and documents.

The petitioner countered the submissions made by the respondent and contended that the investigations being carried out by the DRI were under the Customs Act and freezing of the petitioner's bank account, which is not supported by any order passed under the Customs Act, is wholly illegal and without jurisdiction. Reliance is placed on the decisions in Ravi Crop Science - 2015-TIOL-2072-HC-DEL-CUS;   Raghuram Grah Pvt. Ltd. - 2005-TIOL-104-HC-ALL-CX;   MK International =  2006-TIOL-454-HC-P&H-CUS;   Laxman Overseas - 2010-TIOL-181-HC-DEL-CUS;   Lal Mahal Ltd. - 2017-TIOL-510-HC-DEL-CUS.

The High Court observed –

+ It is clear from a plain reading of Section 105(1) of the Customs Act that the specified officers must have "reason to believe" that any goods are liable to confiscation or any documents or things, which are useful or relevant to the proceedings have been secreted. A mere reason to suspect would not be sufficient for authorizing search of any premises.

+ In terms of Section 110(1) of the Customs Act, the proper officer has the power to seize goods provided he has "reason to believe" that the goods are liable for confiscation. The words "reason to believe" are material and the Customs Act does not contemplate seizure of goods only on mere suspicion.

+ Undisputedly, the proper officer is empowered to seize any documents or things; however, such seizure is permissible only where he is of the opinion that such documents or things would be useful or relevant to any proceedings under the Customs Act. However, it is necessary that the proper officer must at the relevant time form a prima facie opinion that the documents or things in question would be relevant and useful for the proceedings under the Customs Act. And, such opinion must be reasonable and bona fide.

+ Section 121 of the Customs Act also provides for confiscation of sale proceeds of smuggled goods where such goods are sold by persons having knowledge or reason to believe that the goods in question are smuggled goods.

Whether it would be open for the DRI officials to take recourse to Section 102 of CrPC for seizing any property?

++ The Customs Act is a special Act and clearly the provisions of the Customs Act would override the general provisions of CrPC. As noticed above, specific provisions have been made under the Customs Act with regard to search and seizure. The Parliament has in its wisdom expressly enacted the conditions to be satisfied before powers of search and seizure can be exercised. Thus, the question of Section 102 of CrPC being applicable does not arise.

To the submission by the counsel for the DRI that it would be permissible for the DRI officials to first effect seizure under Section 102 of CrPC till they find any "reason to believe" that the goods are liable for confiscation and they could, thereafter, proceed to effect seizure under Section 110(1) of the Customs Act, the High Court rejected the same as being bereft of any merit.

The High Court added –

++ The Customs Act is a special Act and exhaustive provisions have been enacted for conducting search and seizure under the said Act. The provisions of the Customs Act contains the checks and balances considered necessary by the Parliament while enacting provisions for search and/or seizure in relation to violations under the Customs Act. It is thus not open for the DRI officials to circumvent those checks and balances by taking recourse to Section 102 of CrPC. Powers of search and seizure are draconian in nature and any provision granting such powers must be strictly construed.

++ Section 102(1) of CrPC permits any police officer to "seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence". Apart from the reason that the investigations are being conducted under the Customs Act and the provisions of Section 102 of CrPC are not available as discussed above; the impugned communication is also not sustainable under the provisions of Section 102 of CrPC for several reasons. [DRI officials are not police officers, power is available only to any "police officer" Surjeet Singh Chhabra v Union of India & Ors: (1997) 1 SCC 508  =  2002-TIOL-158-SC-CUS]

++ In the present case, the investigation had commenced and freezing order had been issued subsequently. Thus, it is difficult to understand as to how the petitioner's bank account (assuming that a bank account is a property) could be stated to have been found under circumstances which had created suspicion of commission of an offence. It appears that the sequence is quite the reverse; the DRI officials suspected commission of the offence of smuggling of goods and during the course of investigation issued orders freezing the petitioner"s bank account.

++ Lastly, in terms of Section 102(3) of CrPC, it is necessary for the police officers to report seizure to a Magistrate. Plainly, no such procedure was followed.

++ Plainly, it would not be permissible for the DRI to justify its actions by partly reading one provision of CrPC and circumventing the checks and balances contained therein by referring to the provisions of the Customs Act, which concededly have not been complied with.

++ Although Section 4(2) of CrPC postulates that all offences under any other law would be investigated, inquired into and tried in accordance with the Provisions of CrPC, it is also expressly stipulated that the same is subject to any enactment regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences. In the present case, the Statute regulating the alleged offences is the Customs Act and as observed above, the Customs Act contains exhaustive provisions with regard to seizure and search. Thus, plainly the provisions of Section 4(2) of CrPC would be of little assistance to the respondents.

++ There is no provision under the Customs Act which permits the proper officer to direct freezing of bank accounts. Section 110(1) of the Customs Act provides for seizure of goods.

++ Thus, the amount in a bank account which represents the sale proceeds of smuggled goods can be confiscated in terms of Section 121 of the Customs Act and can also be seized under section 110 of the Customs Act. But, there is no provision which permits freezing of bank accounts. Even if the credit balance of a bank account is considered as goods which can be seized, there is no authority in law to suspend operations in a bank account. [Section 2(22) of the Customs Act, 3(26) and 3(36) of the General Clauses Act, 1897 refers.]

++ Freezing a bank account is not the same as seizing an asset; it interdicts operation of a bank account and it deprives the account holder of banking facilities. Indisputably, there is no sanction in the Customs Act for such action.

Concluding that the impugned communication directing freezing of accounts of the petitioner is unsustainable, the same was set aside.

The petition was allowed.

(See 2018-TIOL-242-HC-DEL-CUS)