M/S Ravi Crop Science vs Union Of India & Ors
2015 Latest Caselaw 3264 Del

          *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Date of decision: 23rd April, 2015

+                              LPA 136/2014

       M/S RAVI CROP SCIENCE                       ..... Appellant
                    Through: Mr. H.G.R. Khattar, Adv.
                                      Versus
       UNION OF INDIA & ORS                               ..... Respondents
                    Through:          Mr. Akshay Makhija, CGSC with Mr.
                                      Roshan Lal Goel & Mr. Rohitendra
                                      Deb, Advs. for R-1/UOI.
                                      Mr. S.K. Dubey with MS. Sushma
                                      Yadav & Mr. Vikram Singh, Advs.
                                      for R-2/DRI.
CORAM :-
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J.

1. This intra-court appeal impugns the judgment dated 20 th December, 2013

of the learned Single Judge of this Court in W.P.(C) no.7449/2012 filed by the

appellant to the extent the same, while directing the release of the amount

deposited in the bank account of the appellant with the respondent no.3

Citibank after the date the same was frozen at the instance of the respondent

no.2 Addl. Director General, Directorate of Revenue Intelligence (DRI), makes

the same subject to the appellant furnishing a bank guarantee to the respondent

no.2 DRI in respect of the amount credited in the account from the date of the

freezing of the account.

2. The appeal came up for admission on 18th March, 2014 when the

counsels for the respondents appeared on advance notice. The tenor of the order

sheet thereafter shows that though no formal notice of the appeal was issued but

the counsels were heard finally on the appeal from time to time. Vide order

dated 7th July, 2014 the writ record was also requisitioned.

3. The appellant filed the writ petition from which this appeal arises

pleading:-

(i) that the account of the appellant with the Punjabi Bagh Branch of

the respondent no.3 Citibank was frozen at the instance of the

respondent no.2 DRI in July, 2011;

(ii) the aforesaid account was frozen in the follow up of an

investigation initiated by the respondent no.2 DRI against few

companies who were importing high value Pesticides/Insecticides

in the guise of Sodium Bi-Carbonate; however even on

culmination of investigation, the appellant had neither been

indicted nor arraigned as a noticee in the show cause notice issued

in relation to the said matter;

(iii) the order of freezing of the bank account was passed without any

notice to the appellant;

(iv) that though the appellant firm is also engaged in manufacture of

different types of Pesticides, Herbicides etc. but has undergone

major changes and erstwhile partners have since resigned and new

partners have acquired the appellant firm w.e.f. 1st April, 2012;

(v) that Section 110(1) of the Customs Act, 1962 provides for seizure

of goods, documents, sale proceeds etc. on reasonable belief that

the same are offending the provisions of the Act but Section

110(2) mandates that if a show cause notice under Section 124 has

not been issued in respect of the said seizure, the person from

whose possession the seizure was effected, shall be entitled to the

release of the seized material;

(vi) that the arbitrary freezing of the bank account has put the

appellant's business to a halt;

(vii) that the Customs Authorities have not issued any show cause

notice under Section 124 in respect of the account; and,

(viii) that the appellant has no liability under the Customs Act.

4. The respondent no.2 DRI filed a counter affidavit to the writ petition,

pleading:-

(a) that the intelligence developed by DRI indicated that certain firms

were importing high value pesticides / Insecticides / Herbicides /

Fungicides from China under the guise of Sodium Bi-carbonate,

Thionyl Chloride and Sodium Bromide and thereby evading higher

customs duty;

(b) that live consignments imported by the firms were intercepted and

search operations were carried out and samples of goods stored in

various warehouses were drawn and sent to Central Insecticides

Board, Faridabad and Institute of Pesticide Formulation

Technology, Gurgaon;

(c) that the extent of undervaluation resorted to by the said firms was

massive;

(d) that investigations revealed that such import was being done in the

name of several fake front firms by one Mr. Vimal Kumar,

proprietor of M/s. V.V.K. Traders, Bhagwan Dass Nagar, East

Punjabi Bagh, new Delhi; goods imported against these fake front

firms namely M/s Mehta Overseas, M/s Chopra Overseas and M/s

Umesh Impex etc. were shown to be sold to individuals against

fake cash bills; the imported chemicals with the correct description

were shown to be supplied by another set of fake front firms to

several firms controlled by said Mr. Vimal Kumar through his

brother Mr. Kamal Kumar; one such firm namely the appellant

was being used by the fraudsters to regularize the illegally

imported material / chemicals;

(e) at the premises of the appellant, stock including imported

Insecticides/Pesticides of different varieties worth more than Rs.2

crores was detained/seized for further investigation;

(f) modest estimate of the duty evasion on account of misdeclaration

and undervaluation was in excess of Rs.4 crore;

(g) that the test reports confirmed that the goods were Pesticides;

(h) correlation of batch number of the goods detained at the unit of the

appellant with imported goods confirmed that the said goods were

mis-declared as Sodium Bi-carbonate at the time of import;

(i) that the mis-declared and undervalued imported goods are liable

for confiscation under Section 111(d), (f) and (m) of the Customs

Act, 1962;

(j) that the importers and other persons involved are liable for penal

action under Section 112 of the Customs Act;

(k) on 10th August, 2011, statement of one Mr. Arpit Rajvanshi a

former partner of the appellant firm was recorded under Section

108 and particulars of bank accounts of the appellant learnt;

(l) on 27th August, 2012 statement of Shri Om Prakash another

partner of the appellant firm was recorded under Section 108 of

the Customs Act, who disclosed that besides him Shri Inderjit was

the only other partner of the appellant and that the firm had been

purchased from Mr. Arpit Rajvanshi;

(m) on 16th November, 2011, statement of one Mr. Subodh Kumar,

authorized signatory of the appellant qua the Citibank account,

was recorded under Section 108 of the Customs Act;

(n) that investigation into the transaction in the Citibank account of

the appellant firm revealed huge transactions between the

appellant and V.V.K. Traders, M/s Classic International and M/s

Galaxy Marketing; it also showed that an amount of Rs.4.09 crores

had been received in the said account from V.V.K. Traders, an

amount of Rs.5.60 crores, Rs.0.66 crores and Rs.1.75 crores had

been transferred into the bank accounts of M/s Classic

International, M/s Galaxy Marketing and M/s V.V.K. Traders;

(o) the investigations further revealed that M/s Classic International

and M/s Galaxy Marketing were non-existent entities;

(p) all this showed that the appellant had indulged in transfer of huge

amounts to non-existent firms against the purchase of various

types of illegally imported Pesticides in the name of non-existent

firms;

(q) it appeared that the Citibank account at Delhi was opened only to

facilitate easy transfer of money to non-existent firms and for

which reason only a person with whom the appellant firm had no

relationship was made the signatory thereof;

(r) that the said bank account had been frozen under Section 110(3) of

the Customs Act; and,

(s) that the investigations into the matter had not culminated till then.

5. The appellant filed a rejoinder to the aforesaid counter affidavit but need

is not felt to refer thereto as no reference thereto was made during the hearing.

6. The learned Single Judge, vide the impugned judgment found / observed

/ held:-

I. that it was the contention of the appellant, relying on Harbans Lal

Vs. Collector of Central Excise & Customs (1993) 3 SCC 656 that

since no notice under Section 110(2) had been given within a

period of six months, the goods seized were liable to be restored to

the person from whose possession they had been seized;

II. per contra, it was the contention of the respondent no.2 DRI that

though Section 110(2) provides for a notice to be served within six

months but there is no such requirement under Section 124 of the

Act and the seizure can continue under Section 124; reliance in

this regard was placed on Jeevraj Vs. Collector of Customs (1997)

8 SCC 519;

III. that it was also the contention of the respondent no.2 DRI that if

unconditional de-freezing of the bank account was allowed, it

would become difficult for the DRI to recover the customs duty

and penalty which may fall due; reliance in this regard was placed

on Commissioner of Customs, New Delhi Vs. Euroasia Global

(2009) 6 SCC 58;

IV. that the Supreme Court in Harbans Lal supra has held that

liability to release the seized goods upon non-service of notice

under Section 110(2) within six months does not affect the

proceedings for confiscation of the goods under Section 124 of the

Act;

V. it was also the contention of the counsel for the respondent no.2

DRI that the seizure in the instant case was not under Section

110(2) but under Section 110(3) of the Act whereunder there is no

requirement for issuance of notice within six months and that

investigations were in progress and show cause notices were likely

to be issued soon and that freezing of the account was only to

ensure recovery of customs duty which was evaded by mis-

declaration of goods;

VI. however Section 110(3) dealt with seizure of documents or things

and would not cover freezing of bank account; freezing of bank

account was also not the same as seizure of currency; and,

VII. that since the freezing of the bank account was not seizure of

goods as envisaged under Section 110, the appellant was not

entitled to de-freezing of the bank account unconditionally.

Accordingly, it was directed that the amount deposited in the bank

account, after the date of freezing the account be released subject to furnishing

of a bank guarantee in respect of the amount credited in the account from the

date of freezing of the account.

7. The counsel for the appellant before us argued, (i) that the appellant did

not import anything and thus the Customs Act does not apply to it; (ii) that till

then even, no notice whatsoever had been served on the appellant; and, (iii) that

thus the condition imposed on the appellant of furnishing a bank guarantee for

de-freezing of the account was improper.

8. Per contra the counsel for the respondent no.2 DRI argued, (i) that a

show cause notice dated 29th November, 2013 had already been issued and

adjudication was pending - a copy of the said show cause notice was handed

over in the Court; and, (ii) that the appellant is not co-operating in the said

proceedings.

9. The counsel for the appellant in rejoinder argued, (i) that the appellant

had been granted bail by the Supreme Court and it had further been ordered that

proceedings be held in the presence of the Advocate for the appellant; (ii) that

the offences under the Customs Act are bailable; (iii) nothing against the

appellant was found in the search seizure; (iv) that the notice of freezing the

account is without any particulars; and, (v) copies of some bills, ledger and

accounts was handed over to show that all the transactions of the appellant are

above board and tax paid.

10. The appellant neither along with the writ petition nor along with the

appeal has filed the order or direction or notice freezing the bank account of the

appellant. All that the appellant filed along with the writ petition was a copy of

a letter dated 4th August, 2012 written by it to the respondent no.2 DRI for

release of the money in the frozen account, on the ground that the partners in

the firm had changed and a copy of the judgment of the Bombay High Court in

Veritas Exports Vs. Union of India 2005 (184) ELT 341 Bombay.

11. The counsels, during the hearing referred to Sections 110(1), (2) & (3) of

the Customs Act and which are as under:-

"110. Seizure of goods, documents and things. - (1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, 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.

(2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose 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."

12. The hearing before us revolved around whether such freezing of bank

account is confiscation/seizure of goods. We had during the hearing raised

several queries and are constrained to observe that neither are there any proper

pleadings from either side nor was proper assistance forthcoming. However the

counsels at the time of close of the hearing handed over copies of numerous

judgments, without showing the application thereof to the controversy. The

counsel for the appellant has handed over copies of, (i) I. J. Rao, Asstt.

Collector of Customs Vs. Bibhuti Bhushan Bagh (1989) 3 SCC 202; (ii)

Assistant Collector of Customs Vs. Charan Das Malhotra 1971 (1) SCC 697,

(iii) BHP (India) P. Ltd. Vs. Dy. Dir., Directorate of Revenue Intelligence

1999 (113) ELT 383 (Cal.); (iv) Veritas Exports Vs. Union of India 2005

(184) ELT 341 (Bom.); (v) Vikas Gumber Vs. Union of India 2008 [3] JCC

2004; (vi) Motilal Lalchand Shah Vs. L.M. Kaul AIR 1972 Gujarat 115 (V 59

C 19); (vii) Mohan Shet Vs. Commissioner of Customs (Prev.), Mumbai 2001

(129) ELT 358 (Tri. - Mum.); (viii) Hansraj Baid Vs. Collector of Customs

(Prev.), W.B., Calcutta 2000 (123) ELT 531 (Tribunal); and, (ix) Laxman

Overseas Vs. Union of India 167 (2010) DLT 302 and the counsel for the

respondent no.2 DRI has handed over copies of, (i) Black's Law Dictionary

VIth Edition; (ii) Words and Phrases IVth Edition; (iii) AM Overseas Vs.

Union of India 2006 (194) ELT 267; (iv) Rohit Kumar Vs. Union of India

2002 (141) ELT 27; (v) Union of India Vs. A.M. Overseas (2006) 6 SCC 19;

(vi) M.K. International, Ludhiana Vs. Union of India 2006 Indlaw PNH

2003; (vii) Commissioner of Customs, New Delhi Vs. Euroasia Global (2009)

6 SCC 58; (viii) LPA No.450/2012 titled as Director General, Directorate of

Revenue Intelligence Vs. Sajjan Kumar; (ix) Harbans Lal Vs. Collector of

Central Excise and Customs, Chandigarh (1993) 3 SCC 656; and, (x) Jeevraj

Vs. Collector of Customs (1997) 8 SCC 519.

13. In so far as we could understand, the case of the respondent no.2 DRI

against the appellant is that the appellant firm facilitated sale of goods imported

by mis-declaration and evasion of stamp duty.

14. Section 111 of the Act, to which a reference is found in the counter

affidavit of the respondent no.2 DRI, entitles the DRI to confiscate improperly

imported goods. The respondent no.2 DRI, under the said provision, could have

seized the said goods from the custody of appellant also. However the present

is not a case of seizure of improperly imported goods. So far as we could

understand, the present is a case of seizure of the sale proceeds of the

purportedly improperly imported goods. A provision therefor was found by us

in Section 121 of the Act and to which attention of the counsels was drawn

during the hearing and which is as under:-

"121. Confiscation of sale-proceeds of smuggled goods. - Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation.

15. We had enquired from the counsels that since a express provision for

confiscation of sale proceeds of smuggled goods exists, whether it could be said

that the same was a seizure under Section 110.

16. We could not get any answer.

17. We, without even the order / notice / direction of freezing of the account

and without proper pleadings, and merely on the basis of copies of some

documents handed over across the bar, do not deem it appropriate to render any

interpretation of Sections 110 and 121 of the Act. Suffice it is to state that from

the show cause notice dated 29th November, 2013 issued by the respondent no.2

DRI to the appellant, a case of the monies in the frozen account being sale

proceeds of smuggled goods is made out and the said monies are liable to

confiscation under Section 121 supra and thus cannot be allowed to be

withdrawn unconditionally by the appellant.

18. We may note, that the appellant has failed to explain the source of the

imported goods sale proceeds whereof were credited into the bank account

which has been frozen. The onus was/is on the appellant to explain the

transactions in the said bank account and to establish that the said transactions

were/are not tainted. No endeavour even in that direction has been made. We,

at this stage, have thus but to presume that the monies in the bank account

which has been frozen, are sale proceeds of smuggled goods.

19. Once that is found to be the case, the appellant in any case is not entitled

to any discretionary relief under Article 226 of the Constitution of India.

20. As far as the argument of the appellant, of the constitution of the

appellant firm having since changed, and on which main reliance was placed, is

concerned, we may only observe that mere change in partners will not entitle

the appellant firm to the monies in the bank account, if the same were otherwise

liable to be confiscated.

21. We, in this view of the matter, do not feel the need to refer to the

plethora of judgments aforesaid.

22. We therefore dismiss this appeal, leaving the parties to bear their own

costs.

RAJIV SAHAI ENDLAW, J

CHIEF JUSTICE

APRIL 23, 2015 'pp'