Madhya Pradesh HC Warns DRI for Contempt Over Frozen Accounts Despite Stay [Read Order]

The Madhya Pradesh High Court directed the Directorate of Revenue Intelligence (DRI) to comply immediately or face harsh penalties for contempt regarding frozen accounts in spite of the stay. The division bench of Justice Sushrut Arvind Dharmadhikari and Justice Gajendra Singh referred to a "colorable exercise of power" by DRI for the act of provisionally attached the petitioners' bank accounts by determining out how to keep them temporarily attached for longer than that.

Steel Scrap or Tax Trap? ITAT Slams PCIT’s Overreach in Ahmedabad Bizman’s Case [Read Order]

The petitioners, Mundhra Exim Pvt Ltd, are importers of edible products with Sri Lankan origins, particularly Areca Nuts, and they requested exemption benefits under the Indo-Sri Lanka Free Trade Agreement (ISLFTA). In November 2022, as part of an inquiry, DRI examined the petitioners' previous imports and discovered that they had previously imported four consignments of areca nuts, claiming they were of Sri Lankan origin, and had taken advantage of the tariff exemption under the ISFTA.

Regarding the consignment imported in November 2022, the process of confirming the Certificates of Origin (COO) for the four consignments mentioned above began. The COO were forwarded to the Central Board of Indirect Taxes and Customs' (CBIC) International Customs Division (ICD), which reported that one of the COOs for the Bill of Entry submitted by M/s Mundhra Exim Pvt. Ltd/Petitioner No. 1 was discovered to be fraudulent.

Worried About SME IPO Pitfalls? Gain Clarity with This Advanced Course! Register Now

Importantly, with regard to file number, two intimation notices were issued under Section 110(5) of the Customs Act, 1962, freezing the petitioners' bank accounts for a period of six months. Two more intimations were then issued, extending the freezing period for an additional six months, which was set to expire on 03.12.2024.

ITAT Sets Aside CIT(A) Direction on TDS Recalculation, Says Original Demand Already Nullified [Read Order]

Furthermore, with regard to file number, two intimation notices were issued under Section 110(5) of the Customs Act, 1962, freezing the petitioners' bank accounts for a period of six months. Two more intimations were then issued, extending the freezing period for an additional six months, which was set to expire on 03.12.2024.hs.

The petitioner argued that on the basis of the principle of "quando aliquid prohibetur, prohibetur at omne per quod devenitur ad illud," which states that an authority cannot be allowed to circumvent a law by shift or contrivance, anything that is legally forbidden to be done cannot be done so indirectly or circuitously.

By using an indirect strategy, the DRI attempted to circumvent the law because, according to Section 110(5) of the Customs Act of 1962, they were not permitted to directly attach the petitioners' bank accounts for more than a year. Because the respondents' entire action is a colorable exercise of power, it could be overturned.

Worried About SME IPO Pitfalls? Gain Clarity with This Advanced Course! Register Now

GST Payment for Defect Liability Period in Public Works Contract : Allahabad HC Directs Dept to Consider Claim of Contractor [Read Order]

Since the court has already ruled that the provisional attachment of bank accounts during investigation is itself without jurisdiction, the said question does not need to be taken into consideration for the petition's adjudication and is left open. The petitioners raised a ground regarding the Respondents' colorable exercise of power in provisionally attaching the petitioners' bank accounts by figuring out ways to keep the petitioners' bank accounts remain provisionally attached for a period of more than a year in order to get around the statutory restriction provided under Section 110(5) of Customs.

The agency argued that since the petitioners had access to other remedies under Section 110A of the Customs Act of 1962, the petition could not be maintained. According to the merits of the case, the petitioners have not contested the fundamental order that served as the basis for the notification, and as a result, the current petition cannot be upheld.

As a result, the notification made in accordance with Section 110(5) of the Customs Act of 1962 is revoked for lack of jurisdiction, and DRI is ordered to immediately defreeze the petitioners' provisionally linked bank accounts.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates