Priya Soparkar 1 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 IN HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION (ST.) NO.5669 OF 2020 M/s Boxster Impex Pvt. Ltd. Petitioner V/s. Union of India and ors. Respondents WITH WRIT PETITION (ST.) NO.5666 OF 2020 Elantra Exports Pvt. Ltd. Petitioner V/s. Union of India and ors. Respondents AND WRIT PETITION (ST.) NO.5670 OF 2020 Dunox Trading and Exports Pvt. Ltd. Petitioner V/s. Union of India and ors. Respondents --- Mr.Brijesh Pathak i/by Mr.Anand Sachwani, Advocates for Petitioners in all petitions. Mr.P.S.Jetly, Senior Advocate with Mr.J.B.Mishra, Advocates for Respondents in all petitions. --- CORAM : UJJAL BHUYAN & ABHAY AHUJA, JJ. DATE : SEPTEMBER 22, 2020 Balaji G. Panchal P.C.:- Digitally signed by This order will dispose of above noted three writ Balaji G. Panchal Date: 2020.09.30 petitions. 14:36:49 +0530 Priya Soparkar 2 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 2. We have heard Mr.Anand Sachwani alongwith Mr.Brijesh Pathak, learned counsel for petitioners; and Mr.P.S.Jetly, learned senior counsel alongwith Mr.J.B.Mishra, learned counsel for respondents. 3. In Writ Petition (St.) No.5670 of 2020 M/s Dunox Trading and Exports Private Limited, private limited company having its registered office at Andheri (W), Mumbai is petitioner and has filed writ petition seeking following reliefs:- (i) To unfreeze bank account of petitioner bearing No. 10025372568 with IDFC Bank, Andheri (E) Branch; (ii) To set aside alert imposed on Import Export Code of petitioner; (iii) To set aside any direction(s) of respondents for withholding refund of Integrated Goods and Services Tax ( IGST). 4. In Writ Petition (St.) No.5669 of 2020 M/s Boxster Impex Private Limited, private limited company having its registered office at Ballard Estate at Mumbai is petitioner and by filing this petition under Article 226 of Constitution of India has prayed for identical reliefs; its account number being 172011100002306 with Andhra Bank, Lokhandwala Branch and 811230139267 with DBS Bank, Andheri Branch. 5. In Writ Petition (St.) No.5666 of 2020 petitioner is Elantra Exports Private Limited, private limited company having its registered office at New Link Road, Andheri (W), Priya Soparkar 3 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 Mumbai. In this petition under Article 226 of Constitution of India reliefs sought for are identical save and except, bank account numbers which are as under :- Account No.03800200001461 of Bank of Baroda, S.V.Branch and 916020048013860 of Axis Bank, Airoli Branch. 6. In course of hearing, learned counsel for parties advanced their arguments treating Writ Petition No.5670 of 2020 as lead case as pleadings have been exchanged in this case. Therefore, all references to facts and pleadings will be in respect of Writ Petition (St.) No.5670 of 2020. 7. According to petitioner he is engaged in business of imports and exports and is duly registered with Directorate General of Foreign Trade having Importer and Exporter Code (IEC) No.AAGCD7568P. 8. Petitioner has stated that it buys handicraft items from various sellers in India for purpose of export out of India. Petitioner has paid Goods and Services Tax (GST) while purchasing goods; petitioner has also ensured that sellers are registered with GST authorities too and have paid GST. Therefore, it is contended that petitioner is entitled to take input credit or refund under Section 16 of Central Goods and Services Tax Act, 2017 when goods are exported out of India by petitioner. Petitioner has complied with all requirements of said Act and therefore, entitled to refund. Priya Soparkar 4 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 9. Petitioner s further claim is to refund of Integrated Goods and Services Tax (IGST) on exported goods. 10. Grievance has been expressed by petitioner that since year 2018 bank account of petitioner has been frozen; besides refund claim of IGST has not been entertained for more than one year. That apart, alert has been put on IEC of petitioner as result of which its business has come to standstill. 11. Petitioner has stated that officers of respondent No.1 has carried out certain investigation pursuant to which director of petitioner was summoned to office of respondent No.1 in month of March, 2019, whereafter his statement was recorded. Thereafter, he was summoned several times which he had compelled with. However, till date no seizure of any goods belonging to petitioner has been made nor any show cause notice has been issued to petitioner. 12. Petitioner wrote letters dated 15th May, 2019, 20th May, 2019, 4th February, 2020 and 12th February, 2020 to office of respondent No.1 for removal of alert against IEC of petitioner. Petitioner also wrote to office of respondent No.1 on said dates for unfreezing bank account of petitioner as well as to allow refund of GST/ IGST. However, no decision has been taken. Priya Soparkar 5 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 13. Aggrieved, present writ petition has been filed seeking reliefs as indicated above. 14. affidavit has been filed by Mr.Raghavendra Singh, Joint Commissioner of Customs (Preventive) on behalf of respondent No.1. Stand taken in affidavit is that petitioner is fictitious and bogus company. Specific intelligence was received that M/s Ronera Overseas Private Limited and related firms are involved in circular trading by exporting cheap quality glass bangles on highly inflated value by mis- declaring description for claiming ineligible IGST refund and other government benefits. On examination of export consignments of M/s Ronera Overseas Private Limited it was found that goods contained therein were ordinary glass bangles, many of which were already in broken state and not fit for market sale. During same period on examination of import consignments drawn at M/s Ashte Ligistics Private Limited belonging to M/s Alan Impex and M/s Serco Import and Export Private Limited, it was observed that goods appeared to be plain glass bangles out of which many were in broken state. Some were wrapped in Hindi newspapers of Firozabad. On that basis inference was drawn that there was circular trading of glass bangles to avail ineligible government benefits in form of IGST etc. 15. Following above, search was conducted in premises of Mr.Uzair Basar, resident of Tardeo, Mumbai, on 25th February, 2019 wherein 129 stamps of various Priya Soparkar 6 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 companies were found including M/s Dunox Trading and Export Private Limited i.e., petitioner in Writ Petition (St.) No.5670 of 2020, M/s Ronera Overseas Private Limited, M/s Boxster Impex Private Limited i.e., petitioner in Writ Petition (St.) No.5669 of 2020, M/s Serco Import and Export Private Limited and M/s Elantra Exports Private Limited i.e., petitioner in Writ Petition (St.) No.5666 of 2020. 16. It is stated that activities of above companies are being investigated. 17. That apart, information was received from Joint Commissioner of State Tax on 12 th July, 2019 that petitioner had obtained GST registration on basis of forged documents. Partner of supplier of glass bangles M/s Raja Bangles Store was examined and partner made statement that business of bangles was totally GST free and no GST was paid to government. 18. Statement of Mr.Uzair Basar was recorded wherefrom it appears that he was exporting goods on behalf of all above mentioned companies. 19. No goods of petitioner have been seized under section 110 of Customs Act, 1962 (briefly Customs Act hereinafter). Therefore, there is no question of any provisional release. However, export goods of some of companies like M/s Ronera Overseas Private Limited and import goods of M/s Alan Impex and M/s Serco Import and Priya Soparkar 7 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 Export Private Limited were put on hold and seized by department. Subsequently, even those goods were granted provisional release on furnishing bond and bank guarantee though export goods could not be handed over to concerned exporting party due to failure to comply with conditions imposed which should not be cause of concern for petitioner. 20. It is stated that by his activities Mr.Uzair Basar has created complex maze of various fictitious firms to defraud government revenue for which detailed investigation needs to be carried out. However, Mr.Uzair Basar has not cooperated with investigation for which investigation could not be completed on priority basis. That apart, ownership of goods has not yet been established. 21. Unfreezing of frozen bank account of petitioner would cause huge loss to department. In so far claim to IGST and other dues are concerned, it is stated that Mr.Uzair Basar has already obtained benefits to tune of Rs.9.86 crores fraudulently. Petitioner is fake entity which has never presented itself before department to evade scrutiny. affiant has described petitioner as hardened criminal who has carried out illegal activities of circular trading with sole objective to loot government revenue. 22. Petitioner has filed rejoinder affidavit. In rejoinder affidavit all above allegations have been denied and averments made in writ petition have been reiterated. It Priya Soparkar 8 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 is stated that petitioner is carrying on business activity of exports of handcrafts being manufactured in various parts of India which has huge demand in foreign market. After identifying overseas purchases of handicraft items, petitioner procured goods from various manufacturers / traders under proper GST paid invoices. Payments were made through banking channels which have been duly accounted for in books of account maintained by petitioner. All previous exports of petitioner were allowed clearance by following due process. Merely on obtaining one rubber stamp from premises of Mr.Uzair Basar cannot lead to any adverse inference that petitioner is engaged in circular trading. Allegations against petitioner are based on presumptions and assumptions. Petitioner has cooperated in investigation. Regarding freezing of bank account, reference has been made to sub-section (5) of Section 110 of Customs Act and it is submitted that freezing of bank account of petitioner could not have been carried out under said provision which came into effect subsequently on 1st August, 2019. 23. Learned counsel for petitioner submits that impugned action of respondents is wholly illegal and arbitrary. Section 110(5) of Customs Act could not have been invoked to freeze bank account of petitioner. Even if said provision is applied, conditions precedent for invoking same have not been complied with by respondents and therefore, freezing of bank account and continuing with same is without any authority of law. In Priya Soparkar 9 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 so far putting of alert on IEC of petitioner is concerned, learned counsel for petitioner submits that merely on basis of suspicion such alert cannot be placed on petitioner s IEC thereby completely restraining petitioner from carrying on its legitimate business activities of export and import. Likewise, he submits that under Section 41 of Central Goods and Services Tax Act, 2017 petitioner is entitled to refund of tax paid. Withholding of same is wholly unjustified and liable to be appropriately interfered with by court. 24. Mr.Jetly, learned senior counsel for respondents on other hand supports action taken by respondents. He submits that it is case of circular trading and by such unlawful activity petitioner has defrauded government revenue substantially and in process has made unlawful gain. By continuing such action possibility of further defrauding government revenue cannot be ruled out. 25. Submissions made by learned counsel for parties have received due consideration of court. 26. From pleadings and submissions it is seen that three grievances have been raised by petitioner, viz, (i) Freezing of its bank account; (ii) Putting alert on its IEC; (iii) Issuing directions for withholding GST / IGST dues. Priya Soparkar 10 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 27. We take up first grievance for consideration at outset. Ex.A to writ petition is letter dated 1 st March, 2019 issued from office of Principal Commissioner of Customs(P) to Branch Manager, IDFC Bank, Mumbai stating that office of Principal Commissioner of Customs was investigating case of misuse of export documents to claim inadmissible dues, drawback and IGST refund by M/s Dunox Trading and Export Private Limited. Reference was made to current account of petitioner in said bank. While Branch Manager was called upon to provide certain details of bank account he was also requested not to allow any withdrawal from said account and operation of locker without prior permission. This is only document on record on basis of which bank account of petitioner has been effectively frozen. In affidavit in reply filed on behalf of respondent No.1 only statement made in respect of freezing of bank account is in paragraph 26 wherein it is stated that unfreezing frozen bank account would cause huge loss to department. 28. Section 110 deals with seizure of goods, documents and things. Sub-section (5) was inserted in Section 110 by Finance (No.2) Act, 2019 with effect from 1st August, 2019. Sub-section (5) of Section 110 reads as under :- Where proper officer, during any proceedings under Act, is of opinion that for purposes of protecting interest of revenue or preventing smuggling, it is necessary so to do, he may, with approval of Principal Priya Soparkar 11 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 Commissioner of Customs or Commissioner of Customs, by order in writing provisionally attach any bank account for period not exceeding six months. Provided that Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to further period not exceeding six months and inform such extension of time to person whose bank account is provisionally attached, before expiry of period so specified. 29. From above it is evident that said provision was inserted in statute with effect from 1 st August, 2019. Besides, from tone and tenor of sub-section it is apparent that it is not procedural provision per se; rather it is coercive in nature, though procedure is also laid down for giving effect to said provision. Being coercive provision, there has to be strict compliance to procedure laid down. In such circumstances and having regard to its very nature, such provision can only have prospective operation and not retrospective operation. Infact, concerned Finance Act makes it explicit by making provision effective from prospective date i.e. from 1 st August, 2019. 30. Letter from office of Principal Commissioner of Customs to Branch Manager of IDFC Bank was issued on 1st March, 2019 for freezing of bank account of petitioner. This was prior to insertion of sub-section (5) in Section 110 with effect from 1 st August, 2019. Therefore, it is Priya Soparkar 12 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 quite clear that this provision could not have been invoked for freezing bank account of petitioner. 31. Even otherwise, we find that above provision can only be invoked in manner provided therein which can be culled out as under :- (i) order of attaching bank account provisionally shall be passed in writing by proper officer; (ii) Such order can be passed during any proceedings under Customs Act; (iii) Before passing such order proper officer must form opinion that such attachment of bank account is necessary for purposes of protecting interest of revenue or for preventing smuggling; (iv) Before passing such order proper officer must obtain prior approval of Principal Commissioner of Customs or of Commissioner of Customs; and (v) Such provisional attachment shall be for period not exceeding six months. 32. As per proviso Principal Commissioner of Customs or Commissioner of Customs can extend such provisional attachment for further period not exceeding six months; but he must record reasons for such extension and such extension of period has to be informed to Priya Soparkar 13 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 person whose bank account is provisionally attached before expiry of period so specified. 33. Thus from careful reading of sub-section (5) of Section 110 it is noticeable that several pre-conditions and procedures are mandated. It may not be necessary for elaborate deliberation of same in view of fact that respondents in their affidavit have not placed on record any order passed by Principal Commissioner of Customs or Commissioner of Customs under sub-section (5) of Section 110. Suffice it to say that order in writing for provisional attachment of bank account is must before such account can be attached. In absence of such order in writing respondents could not have provisionally attached bank account of petitioner and continued with such attachment even beyond permissible extended period. 34. Learned counsel for respondents could not show any other provision in Customs Act which empowers or authorizes customs department to freeze bank account of person other than sub-section (5) of Section 110. Such attachment of bank account of petitioner on 1st March, 2019 and its continuation thereafter being in breach of Section 110(5) is therefore, without any authority of law. 35. Coming to second and third grievance of petitioner, we are of view that alert has been placed on IEC of petitioner on basis of materials which are Priya Soparkar 14 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 presently under investigation of customs department. For said reason, refund of IGST/GST dues has also been held up. However, we feel that investigation needs to be expedited and taken to its logical conclusion one way or other because extreme measures such as placing of alert on IEC and withholding of IGST/GST dues can not be continued for indefinite period. same cannot be continued ad- infinitum merely on basis of suspicion, howsoever strong such suspicion may be. 36. Before issuing final directions and parting with record, we may make observation on averments made in affidavit-in-reply filed on behalf of respondent No.1. affiant in said affidavit has described petitioner as hardened criminal with sole objective of looting government revenue. We find that nothing has been mentioned in affidavit about any conviction of petitioner in any criminal case or charge-sheeting of petitioner in any criminal case nor naming of petitioner as accused in any first information report. In absence of such material, referring to any person as hardened criminal that too in sworn affidavit filed before High Court is not proper. affiant or for that matter any one swearing affidavit before court should be careful in making averments which in any event should be restrained. We say this and no further. Priya Soparkar 15 5,6,7 wpst 5669-20, 5666-20 and wpst 5670-20 37. Thus, having regard to discussions made above, we are of view that following directions will meet ends of justice:- (i) Respondents are directed to unfreeze bank account of petitioner bearing No.10025372568 with IDFC Bank, Andheri (E) Branch forthwith; (ii) Respondents are also directed to complete investigation into allegations against petitioner within period of three months from date of receipt of copy of this order; (iii) Placing of alert on Import Export Code of petitioner or claim of refund of IGST/GST would be subject to outcome of such investigation. 38. Ordered accordingly. 39. above directions would be equally applicable in case of petitioners in Writ Petition (St.) Nos.5669 of 2020 and 5666 of 2020. 40. All writ petitions are accordingly allowed in above terms. However, there shall be no order as to cost. 41. This order will be digitally signed by Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of digitally signed copy of this order. (ABHAY AHUJA, J.) (UJJAL BHUYAN, J.) Boxster Impex Pvt. Ltd. v. Union of India and or