Legal principle

An extension of provisional attachment of a bank account under the proviso to Section 110(5) of the Customs Act, 1962 requires a pre-decisional hearing and reasons recorded in writing; an extension passed without notice, hearing or reasons is bad in law and liable to be set aside.

Court decision

The Court refused to interfere with the initial provisional attachment orders (Annexure 'P/1' series) because they were in writing and contained the reasons forming the proper officer's opinion. It held the extension orders bad in law — passed without any pre-decisional opportunity of hearing, without show-cause notice and without recorded reasons — set them aside, and allowed the writ petition to that extent in favour of the petitioner, while clarifying that the department may continue the pending adjudication and, if so advised, pass fresh attachment and extension orders in accordance with law.

Facts

M/s Nxtify Technologies Private Limited, a digital marketing and affiliate-marketing firm also reselling brands and gift vouchers/cards, had multiple bank accounts (ICICI, RBL, IDFC First, Yes Bank, IndusInd, Kotak Mahindra) provisionally attached and later put on 'debit freeze' by the Commissioner of Customs (Preventive), Patna. The action stemmed from an investigation begun in October 2023 against exporter firms (M/s Venus Exports, M/s Vidhur Enterprises, M/s B.K. Overseas, and a proceeding also noted against M/s Kumar Enterprises and M/s Kentil Technosoft Pvt Ltd) for fraudulent exports contrary to Section 50 of the Customs Act, 1962 and wrongful availment of ITC under Section 54 of the CGST Act, in which a fund trail was noticed in the petitioner's accounts, making it an alleged third-party beneficiary. Adjudication orders dated 18.10.2024 imposed penalties of Rs. 50,00,000 and Rs. 1,50,00,000 on the exporters, and amounts were appropriated/debited from the petitioner's attached accounts, including after an interim stay granted by the Karnataka High Court. The present writ was directed against the provisional attachment/debit freeze and, critically, the extension of attachment under the proviso to Section 110(5) of the Customs Act.

Key provisions

• Section 110(5), Customs Act, 1962 — Seizure of goods, documents and things
• Section 108A, Customs Act, 1962 — Obligation to furnish information
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 142, Customs Act, 1962 — Recovery of sums due to Government
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material