Padmavati Industries v. The Commissioner of Customs (Preventive), Jaipur / The Deputy Commissioner of Customs (Preventive), Jaipur
[Citation -2020-LL-0908-49]

Citation 2020-LL-0908-49
Appellant Name Padmavati Industries
Respondent Name The Commissioner of Customs (Preventive), Jaipur / The Deputy Commissioner of Customs (Preventive), Jaipur
Court HIGH COURT OF RAJASTHAN
Relevant Act CGST
Date of Order 08/09/2020
Judgment View Judgment
Keyword Tags modus operandi • bogus purchase • duty drawback • notice issued • market value • service tax • fraudulent


HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 2366/2020 M/s Padmavati Industries, Through Its Authorized Representative - Mr. Rakesh Kumar Khandelwal, Having Its Office At G-23, Bagru Industrial Area, Ajmer Road, Jaipur. Also At E-27, Nirman Nagar, Ajmer Jaipur Road, Jaipur, Rajasthan. ----Petitioner Versus 1. Commissioner Of Customs (Preventive), Jaipur, NCR Building, Statute Circle, C-Scheme, Jaipur-302005. 2. Deputy Commissioner Of Customs (Preventive), Jaipur, NCR Building, Statute Circle, C-Scheme, Jaipur- 302005. ----Respondents For Petitioner(s) : Ms. Priyadarshi Manish, Advocate with Mr. Amol Vyas, Advocate through video conferencing For Respondent(s) : Mr. Kanishka Gupta, Advocate HON'BLE MRS. JUSTICE SABINA HON'BLE MR. JUSTICE CHANDRA KUMAR SONGARA Order 08/09/2020 Petitioner has filed petition challenging order Annexure-3 dated 4.6.2019, whereby, bank account of petitioner company was frozen. Learned counsel for petitioner has submitted that investigation in present case had been initiated and was being carried out under provisions of Central Goods and Service Tax Act, 2007. Hence, freezing of bank account by Deputy Commissioner (Customs) under provisions of Customs Act, 1962 was not permissible. Moreover, no power to issue orders (2 of 7) [CW-2366/2020] for freezing of bank account was available under Customs Act, 1962 and said power had only been introduced by way of amendment to Section 110(5) inserted by Finance (No.2) Act, 2019, dated 1.8.2019. said power had only been granted to Commissioner of Customs for period not exceeding six months with maximum cap of one year. In support of her arguments, learned counsel for petitioner has placed reliance on case of Balaji Enterprises vs. Union of India (2017 (356) ELT 529 (Del.), wherein it was held as under:- 11. However, as already noted hereinbefore, in reply filed it has been categorically stated that no proceedings under Section 110 of Act have been undertaken "as there was no stock of goods with Petitioners firms. 12. On contrary, learned counsel for Petitioners has referred to number of decisions, including Khaja Mustafa Kamal v. Union of India 2016 (337) ELT 221 (Bom), Rajendra Vitthal Shinde v. Union of India 2016 (332) ELT 699(Bom) and Laxman Overseas v. Union of India 2010 (252) ELT 512 (Del) where similar freezing of bank account has been held to be illegal. decision of this Court in Laxman Overseas v. Union of India (supra) has been followed in Multitek Engineers v. Union of India 2013 (287) ELT 44 (Kar) where bank accounts were asked to be de- frozen. 13. Learned counsel for Respondents has referred to another decision dated 16th March, 2017 passed in W.P.(C) No.12251/2016 (Lal Mahal Ltd. v. Union of India) where while ordering de-freezing of bank account, Court required Petitioner to furnish bank guarantee. It is accordingly submitted that in this case also, Petitioners may be asked to furnish some security for de-freezing bank account. 14. Court is unable to accept above submission of Respondents. Without there being any authority in law to justify freezing of bank accounts, requiring Petitioners to furnish security for de-freezing such bank accounts would be unjustified. It is always open to DRI to conclude investigation and issue SCN in accordance with (3 of 7) [CW-2366/2020] law. Statutory authorities have to exercise their powers strictly according to Act under which they function. In Khaja Mustafa Kamal v. Union of India (supra), in similar circumstances, it was observed as under: "19 Once there are allegations of fraud Revenue has larger responsibility and duly to public. It cannot refuse to take all steps and rest only on freezing of bank accounts of alleged defaulters. That such act and which is to be found traceable to different powers and of nature conferred in Customs Act, 1962, will not permit respondents to deprive parties like petitioner of their source of livelihood. They cannot stop their business by continued freezing of their bank accounts. It is further very clear and requires no reiteration that what is prohibited directly cannot be achieved indirectly or in oblique manner. refusal to carry out duty in accordance with law cannot be justified by such continued attachment and freezing of bank accounts. In given facts and circumstances, we do not see any justification for same." Further reliance was placed on case of Khaja Mustafa Kamal vs. Union of India (2016 (337) ELT 221 (Bom.), wherein it was held as under:- 15. If this letter is addressed on 11th September, 2015 and petitioner is applying from 21st September, 2015, that his bank account be released and freeze order be withdrawn, then, we do not see how Mr. Jetly can justify action impugned in writ petition. It is common ground that when such is letter addressed to bank and to petitioner alleging fraud and terming all exports as bogus so as to avail of duty drawback, then, one sided or unilateral version of Revenue is not determinative or conclusive. It is not case of established and proved fraud but alleged fraud. fact that petitioner has admitted that there was some liability but circumstances in which he has paid sum of Rs.16,62,794.18 has been duly explained by him. He terms payment as ad-hoc and when he states that this is only to cooperate in investigation that petitioner has made this payment, then, we do not find any justification for (4 of 7) [CW-2366/2020] continued action. In letter addressed on 4th January, 2016, to Senior Intelligence Officer, copy of which is at page 34 of paper-book, petitioner specifically complains that investigation started in month of September, 2014.He has appeared and has given evidence. He was asked to submit copies of all shipping bills and related export documents. They have been submitted. He claims that no wrong has been committed by him in relation to exports nor any undue benefit is availed of, still total amount of Rs.25,48,573/- being deposited, he should be allowed to continue his business activities. He claims that he is exporter in imitation jewellery for past several years. He has also set out as to how he has throughout acted bona fide. He has also pointed out that there are documents which would evidence that exports are genuine. 16.As indicated that he had bills from one Suhail Ansari but same were issued to several exporters. That is no ground to presume that petitioner's exports were not genuine. All exports were made in accordance with provisions of law and practice and procedure of department. He has explained entire modus operandi to Investigating Officer in this letter which is fairly detailed and running into about 15 paragraphs. He has claimed that once he is familiar with system and has not defrauded Revenue at all nor made any attempt since 2011, his bank account being frozen is causing serious prejudice and loss to him. 17.Now it is indeed surprising that in affidavit-in- reply in paragraph 7, deponent states as under : 7.I say that in present case, sufficient material has been placed on record to establish that Petitioner amongst other exporters was indulging in fraudulent exports by inflating Prevailing Market Value (for short PMV) and Free On Board value (for short FOB) in order to claim excess Duty Drawback and other export benefits. I say that investigations have revealed that Petitioner was procuring bogus purchase bills from fictitious firms which existed only on paper. Infact no goods were purchased from these firms. I say that this modus operandi was used in order to claim excess Duty Drawback by inflating PMV as per value shown on bogus purchase bills. I say that there (5 of 7) [CW-2366/2020] exists linkage between monies which have been held in bank accounts with modus operandi of illegally obtaining benefit of drawback by showing inflated FOB value. I say that data/information gathered was confirmed by Shri Parvez Mohammed Sharif Ansari, person who was involved in issuing bogus purchase bills to exporters, in his statement recorded under Section 108 of said Act. I say that this fact has been admitted by Petitioner albeit differently in para 4.9 of petition. I say that Petitioner has accepted that he has obtained bogus purchase bills from Shri Parvez Mohammed Sharif Ansari. I say that initial investigations have revealed that Petitioner has fraudulently availed Duty Drawback amounting to Rs.24,00,000/- (Rupees Twenty Four Lakhs only) and availed of duty scrips amounting to Rs.74,00,000/- (Rupees Seventy Four Lakhs Only). 18.We have found from reading of above paragraph that petitioner is attributed clear admission of guilt. Once there is admission of guilt, according to Revenue, then, it is enough justification for their act is submission of Mr.Jetly. Far from reading any admission of guilt, what we do in order to completely reject submissions of Mr. Jetly is reading of documents annexed to petition as also above reproduced paragraph in affidavit-in-reply as whole. We cannot pick and choose certain sentences or portions thereof. We are not denying to Revenue opportunity of investigating or unearthing huge fraud. We are also not denying them their powers, but surely if drastic powers have to be exercised by public bodies, they must be exercised reasonably and fairly. We fail to understand if huge and systematic fraud is alleged and perpetrated not only on Revenue but on public as whole resulting in voluntary deposit from petitioner, then, why investigations could not be concluded nor show cause notice issued nor any steps taken till date. When such petitions are filed, it is our experience that detailed affidavits are filed in order to justify act, but there is not word about delay. On 21st April, 2016, deponent has time to file very detailed affidavit-in-reply and file it in Court, but it is surprising that Directorate and whole of it does not have time to proceed against those indulging in fraud on public. justification of this nature comes promptly only when (6 of 7) [CW-2366/2020] parties like petitioner complain of freezing or attachment of their bank accounts and refusal to release them even if bona fides are shown. 19.We are of firm view, therefore, that this is not case of admitted fraud or liability which is undisputed. Once there are allegations of fraud Revenue has larger responsibility and duty to public. It cannot refuse to take all steps and rest only on freezing of bank accounts of alleged defaulters. That such act and which is to be found traceable to different powers and of nature conferred in Customs Act, 1962, will not permit respondents to deprive parties like petitioner of their source of livelihood. They cannot stop their business by continued freezing of their bank accounts. It is further very clear and requires no reiteration that what is prohibited directly cannot be achieved indirectly or in oblique manner. refusal to carry out duty in accordance with law cannot be justified by such continued attachment and freezing of bank accounts. In given facts and circumstances, we do not see any justification for same. Learned counsel for respondents has opposed petition. Facts in present case are not in dispute. Admittedly, investigation under Central Goods and Service Tax Act is pending against petitioner company. However, impugned order has been passed by Deputy Commissioner of Customs (Preventive), in view of investigation initiated against petitioner company by Anti Evasion Wing of Central Goods and Service Tax, Commissionerate, Jaipur. Vide impugned order, bank account of petitioner company was frozen. impugned order was passed before amendment in Section 110(5) of Customs Act, 1962 had come in operation. Moreover, as per amendment also, account cannot be frozen beyond period of one year. (7 of 7) [CW-2366/2020] Keeping in view facts and circumstances of case, we are of opinion that petition deserves to be allowed. Accordingly, petition is allowed. impugned order dated 4.6.2019 (Annexure-3) is quashed. Consequently, bank account of petitioner be allowed to be operated by petitioner company. (CHANDRA KUMAR SONGARA),J (SABINA),J Anil Makwana /101 Padmavati Industries v. Commissioner of Customs (Preventive), Jaipur / Deputy Commissioner of Customs (Preventive), Jaipur
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