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S.B. International Versus The Assistant Director, Directorate Of Revenue Intelligence And Ors.

2018 (2) TMI 588 - DELHI HIGH COURT

Jurisdiction - power of DRI to issue directions - Freezing of petitioner's Current account - it is suspected that the petitioner is connected/involved in illegal import of tyres - whether the DRI has the jurisdiction to issue such directions without passing any orders under the provisions of the Customs Act? - Held that: - Chapter XIII of the Customs Act contains provisions regarding search, seizure and arrest. In terms of Section 105(1) of the Customs Act, if the specified officer has reaso .....

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gs, 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. - 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 provision .....

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Magistrate. Plainly, no such procedure was followed. - Whether the operations on bank accounts could be interdicted? - Held that: - 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 - 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 .....

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communication directing freezing of accounts of the petitioner is unsustainable - Petition allowed. - W.P.(C) 237/2018 & CM No. 1023/2018 - Dated:- 5-2-2018 - MR VIBHU BAKHRU J. Advocates who appeared in this case: For the Petitioner: Mr. Randhir Singh and Mr. D.K. Devesh. For the Respondents: Mr. Aditya Singla, Senior Standing Counsel for DRI with Ms Drishti Harpalani and Mr. Pallav Gupta, Advocates for R-1, 2 & 3. Mr. Lavleen Goyal, Advocate for R-4/Axis Bank. JUDGMENT VIBHU BAKHRU, J .....

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nk. 2. The DRI has issued the impugned communication as it is suspected that the petitioner is connected/involved in illegal import of tyres which are being investigated. 3. The petitioner claims that the impugned communication is without the authority of law as no order has been passed under the Customs Act, 1962 (hereafter the Customs Act ). 4. The principal question, which falls for consideration of this Court in this petition is whether the DRI has the jurisdiction to issue such directions w .....

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lso searched in the presence of witnesses after complying with the provisions of Section 105 of the Customs Act; however, nothing incriminating was found during the said search. 5.2 On 14.11.2017, respondent no.1 sent the impugned communication to Axis Bank for freezing the petitioner s account with that bank. 5.3 The Senior Intelligence Officer (SIO), DRI issued summons dated 27.11.2017 under Section 108 of the Customs Act calling upon the petitioner (Shri Premji Bhanushali) to appear before hi .....

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directed and was kept in illegal custody and detention from 28.11.2017 to 01.12.2017. The petitioner states that his statement was recorded at the Indore Regional Unit of the DRI and, thereafter, he was taken to Mumbai where his statement was recorded. He alleges that the said statement was recorded under duress and coercion. 5.5 The petitioner claims that while he was in custody of the officials of DRI, he was handed over another summons to appear on 05.12.2017 before the DRI at Indore. The pe .....

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General (ADG), DRI requesting the DRI to de-freeze the bank account maintained by the petitioner with AXIS Bank. 5.8 The petitioner received a letter dated 30.12.2017 from the AXIS Bank informing the petitioner firm that the said account would remain frozen until further instructions/orders are received from the DRI. 5.9 The petitioner states that he is not the importer in respect of the transactions being investigated by the DRI. He claims that tyres were imported by M/s Marina Enterprises (IE .....

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rregularity in import of the products in question (tyres). 6. The petitioner has made several assertions in the petition including that his nephew and his brother-in-law were apprehended from the factory premises of S.B. International. He has also mentioned that a petition seeking writ of Habeas Corpus was filed in this Court. However, given the limited scope of the present petition, it is not necessary to advert to other assertions made in the petition. 7. The respondents have not chosen to fil .....

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ize goods and documents. 9. He submitted that the powers of investigation granted to proper officers have to be considered along with the provisions of Section 4(2) of Code of Criminal Procedure (hereafter CrPC ). He referred to the decision of the Supreme Court in Directorate of Enforcement v. Deepak Mahajan & Anr: (1994) 3 SCC 440 in support of his aforesaid contention. 10. Next, he referred to Section 102 of CrPC and contended that in terms of the said Section, any police officer was enti .....

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ns being carried out by the DRI were under the Customs Act and this was clear from the summons issued to the petitioner under Section 108 of the Customs Act. He contended that the Customs Act is a complete code 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. 12. Mr. Singh referred to various decisions in support of his contentions: (i) Shakuntala Singh v. Addl. DRI, Kolkata Zonal Unit : 2 .....

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17 (355) E.L.T. 243 (Del.); and (viii) Commissioner of Cus. & C. Ex., Bhopal v. D.K. Singh : 2006 (199) E.L.T. 202 (M.P.) Reasons and Conclusion 13. Concededly, the impugned communication or impugned order has been issued by the DRI in connection with the investigations being conducted under the Customs Act. Mr. Singla contended that the DRI officials were proper officers within the meaning of Section 2(34) of the Customs Act and were duly empowered to carry out the investigations regarding .....

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things, which in his opinion will be useful for or relevant to the proceedings under the Act, are secreted in any place, he may authorize any officer of Customs to search or may himself search for such goods, documents or things. Section 105(1) of the Customs Act is set out below:- 105. Power to search premises.-(1) If the [Assistant Commissioner of Customs or Deputy Commissioner of Customs], or in any area adjoining the land frontier of the coast of India an officer of customs specially empower .....

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iable 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. Further, Section 105(2) of the Customs Act expressly provides that the provisions of CrPC would apply to such searches except that the copies or the record made under Section 165(1) or 165(3) would be sent to the Principal Commissioner of Customs or Commissioner of Customs instead of the Magi .....

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t, he may seize such goods: Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. (1A) The Central Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any othe .....

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f such goods containing such details relating to their description, quality, quantity, mark, numbers, country of origin and other particulars as the proper officer may consider relevant to the identity of the goods in any proceeding under this Act and shall make an application to a Magistrate for the purpose of- (a) certifying the correctness of the inventory so prepared; or (b) taking, in the presence of the Magistrate, photographs of such goods, and certifying such photographs as true; or (c) .....

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se possession they were seized: Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Principal Commissioner of Customs or Commissioner of Customs for a period not exceeding six months. (3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act. (4) The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies t .....

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s for conduct of search and seizure. 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. 19. Mr. Singla had also referred to Section 110(3) of the Customs Act, which empowers a proper officer to seize any documents or things. Undisputedly, the proper offic .....

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hings in question would be relevant and useful for the proceedings under the Customs Act. And, such opinion must be reasonable and bona fide. 20. In Laxman Overseas v. Union of India (supra), a Coordinate Bench of this Court referred to Section 110(3) of the Customs Act and held that the formation of a prima facie opinion by the proper officer is a pre-requisite for the exercise of the power of seize any goods, documents or things. The opinion to be formed is that they would be useful for, or re .....

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. Power of police officer to seize certain property.-(1) Any police officer may 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. (2) Such police officer, if subordinate to the officer in charge of a police station, shall forthwith report the seizure to that officer. (3) Every police officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate ha .....

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to the further orders of the Court as to the disposal of the same. Provided that where the property seized under sub-section (1) is subject to speedy and natural decay and if the person entitled to the possession of such property is unknown or absent and the value of such property is less than five hundred rupees, it may forthwith be sold by auction under the orders of the Superintendent of Police and the provisions of sections 457 and 458 shall, as nearly as may be practicable, apply to the net .....

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that seizure under Section 110(1) of the Customs Act is only permissible where proper officer has reason to believe; however, in terms of Section 102 of CrPC, seizure is also permissible on a mere suspicion and, therefore, 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; they could, thereafter, proceed to effect seizure under Section 110(1) of the Customs Act. The afor .....

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PC. Powers of search and seizure are draconian in nature and any provision granting such powers must be strictly construed. 25. Having stated the above, it is also necessary to note that 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 Ac .....

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t v. Deepak Mahajan (supra), which was relied upon by Mr Singhla, the Supreme Court had noted that there are series of decisions holding that Officers of Enforcement or Customs Officers are not police officers although they are vested with powers of arrest and other analogous powers. Paragraph nos. 109 & 110 of the said decision are relevant and are quoted below:- 109. No doubt, it is true that there are a series of decisions holding the view that an Officer of Enforcement or a Customs Offic .....

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kat Ram and Badku Joti Savant v. State of Mysore. 110. As we have pointed out in the preceding part of this judgment, Section 167(1) falls under Chapter XII relating to Information to the Police and their powers to investigate . Sub-section (1) of Section 167 speaks of the arrest by a police officer and the follow-up investigation by him. Section 35(1) of FERA and Section 104(1) of the Customs Act empower the authorised officer under the relevant provisions to effect arrest of a person against w .....

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s under the special Acts (such as the Customs Act) are not vested with powers of a police officer qua investigation of an offence under Chapter XII of CrPC and as such continue to be good law. 28. Secondly, it is also relevant to note that power of a police officer to seize any property is contingent upon: (i) whether such property may be alleged or suspected to be stolen; or (ii) which may have been found under circumstances which create suspicion of commission of any offence. In the present ca .....

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eezing the petitioner s bank account. 29. 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. Mr. Singhla contended that no such procedure is required to be followed by virtue of Section 110(3) of the Customs Act. This contention clearly brings into focus the fallacy in the contentions advanced on behalf of the DRI. It is conceded that powers under section 110(1) of the Customs Act cannot .....

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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. 30. The reliance placed by Mr. Singla upon the provisions of Section 4(2) of CrPC is also misplaced. Section 4 of CrPC reads as under:- Section 4 - Trial of offences under the Indian Penal Code and other laws: (1) All offences under the Indian Penal Code s .....

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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 seizu .....

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oms Act of 1962, is produced under sub-section (2) of Section 35 of the Foreign Exchange Regulation Act, has jurisdiction to authorize detention of that person under Section 167(2) of the Code of Criminal Procedure? 33. Section 104(1) of the Customs Act and Section 35(1) of Foreign Exchange Regulation Act, 1973 (FERA) confer powers on officers authorized to effect such arrest. Section 104(2) of the Customs Act and Section 35(2) of FERA expressly provide that every person arrested under the said .....

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rPC. In the present case, the provisions of the Customs Act are not silent as to the manner in which seizure is to be carried out; on the contrary, the Customs Act expressly provides the circumstances in which such powers can be exercised. The decision in the case of Deepak Mahajan (supra) cannot be read as an authority for the proposition that all provisions of CrPC are applicable for the purposes of investigating, inquiring into, trying or otherwise dealing with offences under any other law, n .....

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a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property. 35. Section 3(36) of the General Clauses Act, 1897 defines movable property as under: 3(36) movable property shall mean property of every description, except immovable property. 36. Section 3(26) of the General Clauses Act, 1897 defines immovable property as under: 3(26) immovable property shall include land, benefits to arise out of land, and things a .....

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ons in a bank account. 38. The decision rendered in the case of State of Maharashtra v. Tapas D. Neogy (supra) is of little assistance to the respondents as it was rendered in the context of Section 102 of CrPC. The Court had held that bank account would fall within the expression property which could be seized under Section 102(1) of CrPC. A closer examination of the said decision also indicates that the Court had proceeded on the basis that the bank accounts reflected positive balances (credit .....

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n 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. 40. In Shakuntala Singh v. Addl. DRI, Kolkata Zonal Unit (supra), the Calcutta High Court considered a case where the DRI had directed the bank with which the petitioner was maintaining its account not to permit any debts. The Court held that the DRI was undoubtedly entitled to proceed with the investigation and take a .....

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d been passed, the Court directed that the petitioner be allowed to operate its accounts. 41. In Raghuram Grah Pvt. Ltd. (supra), a Division Bench of the Allahabad High Court had considered a challenge to an order freezing the bank accounts of the petitioner therein. Search and seizure operations had been conducted by the officials of the Central Excise Department in the residential premises of the second petitioner therein and certain documents, cash, etc. were seized. The current account of th .....

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