By TIOL News Service

NEW DELHI, AUG 30, 2018: THE petitioner is a sole proprietorship concern of Smt Deepa. The petitioner claims to be engaged in trading business of readymade garments.

The petitioner states that during the course of business, the petitioner had supplied readymade garments to exporters including M/s Konark Exim Pvt. Ltd., M/s G.D. Mangalam Exim Pvt. Ltd., M/s Sidh Designers Pvt. Ltd., M/s Yogmaya Traders Pvt. Ltd. and M/s DSM International; the five exporters being investigated by the DRI.

The DRI had received specific information that high value transfers had been received in the bank account of certain traders/vendors from five Delhi based exporters and the petitioner was one of the recipients.

By letter dated 19.03.2014, the DRI had called upon UBI to not to permit any debit/withdrawal from the petitioner's account till further communication. It is stated that the same was in connection with investigation of an "alleged export fraud case". UBI complied with the aforesaid request and informed the petitioner of the same by a letter dated 12.01.2015.

The petitioner is aggrieved by the DRI action of freezing her current account maintained with the respondent Union Bank of India.

The Counsel for the DRI was unable to point out any provision of law in exercise of which the DRI sent the impugned communication, however, it was contended that the DRI was investigating the case of fraudulent exports and, therefore, a blanket order permitting the petitioner to operate the account ought not to be granted. Reliance is placed on the decisions in Euroasia Global -   2009-TIOL-56-SC-CUS  and Ravi Crop. Science v. UOI & Ors. -   2015-TIOL-2072-HC-DEL-CUS in support.

The High Court was also informed that the investigations were completed and the DRI had already issued a show cause notice to the five exporting firms proposing imposition of penalty; that the petitioner was not one of the noticees; that Gopal Sharma, as the controller of seven domestic firms including the petitioner, had been arrayed as a noticee for imposition of penalty under Section 114 (iii) of the Customs Act for having abetted fraudulent export of goods by the aforementioned five exporters resulting in incorrect availment of Drawback and Duty scripts under the Focus Product Scheme.

The High Court observed that the said show cause notice cannot result in any adverse order against Smt Deepa (the sole proprietor of R.K. Impex) as she is not one of the noticees. The impugned communication is in the nature of an ad interim measure; therefore, it is difficult to understand its purpose as, admittedly, no proceedings have been commenced against the petitioner.

To answer the principal question as to whether the impugned communication is founded on any statutory provision, the High Court adverted to sections 105 and 110 of the Customs Act, 1962 and observed -

++ Plainly, the impugned communication has not been issued in exercise of any of the aforesaid provisions. In  S.B. International v. The Assistant Director, Directorate of Revenue Intelligence and Ors.: W.P. (C) 237/2018, decided on 05.02.2018  -  2018-TIOL-242-HC-DEL-CUS, this Court had rejected the contention that such orders for freezing the bank accounts could be issued by the DRI under Section 102 of the Code of Criminal Procedure, 1973.

++ In the aforesaid view, this Court is unable to sustain the impugned communication as the same is without the authority of law.

After distinguishing the case laws cited by the respondent Revenue, the petition was allowed by setting aside the impugned communication. Union Bank of India was directed to ignore the said communication.

(See 2018-TIOL-1761-HC-DEL-CUS)