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Can’t freeze firms’ bank accounts based solely on allegations, says Bombay high court

The Directorate of Revenue Intelligence had approached the Bombay high court, saying the firms had defrauded the public exchequer by claiming fake exports

mumbai Updated: Feb 15, 2018 11:14 IST
Kanchan Chaudhari
Kanchan Chaudhari
Hindustan Times
Bombay high court,DRI,Directorate of Revenue Intelligence
On mere allegations alone, and without any serious and real apprehensions, the revenue authorities could not have taken the drastic measure of freezing the bank accounts, said the court.(HT FILE PHOTO)

Revenue authorities cannot take the drastic step of freezing business establishments’ bank accounts based on mere allegations, held the Bombay high court on Thursday.

“On mere allegations alone, and without any serious and real apprehensions, the revenue authorities could not have taken the drastic measure of freezing the bank accounts,” said a division bench of justice SC Dharmadhikari and justice Bharati Dangre.

“Something more must be brought before the vourt to justify this drastic action,” said the bench, permitting three firms to operate their current accounts with Kotak Mahindra Bank and Bank of Baroda at Surat.

The firms had approached the high court, saying they are in the export-import business and deal with the revenue authorities frequently. They added that despite this, the Directorate of Revenue Intelligence (DRI) had initiated an investigation into an old case and abruptly instructed its bankers to stop debit transactions from their current accounts.

The firms complained that though they had been running their fabrics and ready-made garment business for the past 25 years, their operations were paralysed by the sudden and drastic action.

The DRI, however, argued that the firms had defrauded the public exchequer by claiming fake exports. It said the firms’ exports were of a cheap variety and their prices were inflated in order to claim drawback of excise duty, customs duty and other benefits.

The court, however, found no material in support of the serious allegations levelled against the establishments. It said there must be strong prima facie material pointing towards systematic fraud or attempt to defraud the public exchequer before the accounts could be frozen or attached.

“We do not hesitate to conclude that in the current case, this drastic action was unjustified and uncalled for,” the bench said.

First Published: Feb 15, 2018 11:13 IST