Dhruv Jewellers Vs Principal Commissioner of Customs (Madras High Court)
Summary: Madras High Court allowed the writ petition filed by Dhruv Jewellers challenging the continued freezing of its bullion bank account pursuant to a communication dated 04.08.2022 issued by the Directorate of Revenue Intelligence. The petitioner, engaged in the business of exporting gold jewellery, stated that its premises had been searched by the second respondent and that no incriminating material was found, but its bank account was nevertheless frozen. The Court considered it sufficient to examine the statutory period prescribed under Section 110(5) of the Customs Act, 1962.
The Court observed that Section 110(5) permits provisional attachment of a bank account for a period not exceeding six months. Its proviso permits the Principal Commissioner of Customs or Commissioner of Customs, for reasons recorded in writing, to extend the attachment for a further period not exceeding six months, with the extension being communicated to the person concerned before expiry of the originally specified period. Consequently, a provisional attachment under Section 110(5) cannot continue beyond the maximum period of twelve months.
In the present case, the petitioner’s bank account had been frozen pursuant to the communication dated 04.08.2022. The Court held that even assuming the attachment had been validly extended under the proviso, the maximum twelve-month period had long expired. The respondents contended that a show cause notice had meanwhile been issued under Section 124 of the Customs Act and that the petitioner should therefore approach the adjudicating authority for defreezing. The Court rejected this contention. It held that subsequent issuance of a show cause notice under Section 124 could not, by itself, extend the statutory period governing provisional attachment under Section 110(5). Mere pendency of adjudication proceedings could therefore not justify continuation of the attachment beyond the maximum statutory period.
The petitioner relied upon Kesari Nandan Mobile v. Office of Assistant Commissioner of State Tax (2), Enforcement Division–5, Civil Appeal No.9543 of 2025, decided on 14.08.2025. The Supreme Court had considered provisional attachment under Section 83 of the CGST Act and emphasised that an attachment which ceased to operate by efflux of the statutory period could not be continued through administrative action. Although that judgment arose under the CGST Act, the Madras High Court considered the principle relevant because Section 110(5) of the Customs Act itself prescribes the maximum period during which a bank account can remain provisionally attached.
Accordingly, the Court held that continued freezing of the petitioner’s bank account after expiry of the statutory period had no authority of law and that the provisional attachment had ceased to operate by efflux of time. The communication dated 04.08.2022 was directed to be treated as having ceased to operate, and HDFC Bank was directed to defreeze the petitioner’s Bullion Account No. 57500000622632 forthwith and permit its operation. The Court clarified that its order would not preclude the respondents from taking any other action permissible in law in respect of the petitioner or the subject matter of the investigation. The connected miscellaneous petitions were closed with no order as to costs.
Cases Discussed
- Kesari Nandan Mobile v. Office of Assistant Commissioner of State Tax (2), Enforcement Division–5 — Civil Appeal No.9543 of 2025, decided on 14.08.2025 — relied upon for the principle that provisional attachment which has ceased by efflux of the statutory period cannot be continued through administrative action.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Ms.Pooja Jain, learned Standing Counsel, accepts notice for the first respondent. Ms.M.Sheela, learned Senior Standing Counsel, accepts notice for WP No. 37046 of 2026the second respondent. Mr.C.Mohan, learned counsel of M/s.King and Partridge, accepts notice on behalf of the third respondent.
2. The petitioner has approached this Court challenging the communication dated 04.08.2022 issued by the second respondent to the third respondent directing the freezing of the petitioner’s bank account.
3. The petitioner is engaged in the business of exporting gold jewellery. According to the petitioner, the second respondent conducted a search of the petitioner’s premises, during which no incriminating material was found. Nevertheless, the impugned communication was issued directing the freezing of the petitioner’s bank account.
4. Heard the learned counsel appearing for the petitioner and the learned Standing Counsel appearing for the respondents.
5. Though several grounds have been raised challenging the freezing of the bank account, it is sufficient to consider the statutory period prescribed under Section 110(5) of the Customs Act, 1962 (hereinafter “said Act”).
6. Section 110(5) of the said Act permits provisional attachment of a bank account for a period not exceeding six months. The proviso permits the Principal Commissioner of Customs or Commissioner of Customs, for reasons to be recorded in writing, to extend the period by a further period not exceeding six months. Such extension must also be communicated to the person whose account has been attached before expiry of the period originally specified. Thus, the provisional attachment under Section 110(5) cannot continue beyond the maximum period of twelve months.
7. In the present case, the petitioner’s bank account was frozen pursuant to the communication dated 04.08.2022. Even assuming that the attachment was validly extended in accordance with the proviso to Section 110(5), the maximum period of twelve months has long since expired. Therefore, the provisional attachment cannot be continued under Section 110(5) beyond the statutory period.
8. The respondents contend that, in the meantime, the adjudicating authority has issued a show cause notice under Section 124 of the Customs Act and, therefore, the respondents no longer have the authority to consider the petitioner’s request for defreezing the account. According to the respondents, the petitioner has to approach the adjudicating authority.
9. The said contention cannot be accepted. The freezing of the petitioner’s bank account was ordered at the instance of the second respondent under Section 110(5) of the said Act. The power to provisionally attach the bank account is expressly subject to the limitation prescribed under that provision. The subsequent issuance of a show cause notice under Section 124 cannot, by itself, extend the period of provisional attachment prescribed under Section 110(5).
10. Therefore, the mere pendency of adjudication proceedings cannot justify continuation of a provisional attachment made under Section 110(5) beyond the maximum period prescribed by the statute.
11. Learned counsel for the petitioner also placed reliance on the judgment of the Hon’ble Supreme Court in Kesari Nandan Mobile v. Office of Assistant Commissioner of State Tax (2), Enforcement Division–5, Civil Appeal No.9543 of 2025, decided on 14.08.2025. In that case, while considering the statutory scheme governing provisional attachment under Section 83 of the CGST Act, the Hon’ble Supreme Court emphasised that an attachment which has ceased to operate by efflux of the statutory period cannot be continued by administrative action.
12. Though the said decision arose under the CGST Act, the principle that a statutory authority cannot continue a provisional attachment beyond the period expressly permitted by the statute is relevant to the present case. In the present case, Section 110(5) itself prescribes the maximum period for which the bank account can remain provisionally attached.
13. In the circumstances, the continued freezing of the petitioner’s bank account, after expiry of the statutory period prescribed under Section 110(5), has no authority of law. The provisional attachment has ceased to operate by efflux of time.
14. Accordingly, the Writ Petition is allowed. The communication issued by the second respondent in F.No.DRI/CZU/VIII/48/Enq.1/INT-04/2022 dated 04.08.2022 shall be treated as having ceased to operate by efflux of the statutory period. The third respondent is directed to defreeze the petitioner’s Bullion Account No. 57500000622632 forthwith and permit the petitioner to operate the account.
15. This order will not preclude the respondents from taking any other action that may be permissible in law in respect of the petitioner or the subject matter of the investigation.
16. Consequently, the connected miscellaneous petitions are closed. There shall be no order as to costs.
