M/S Nxtify Technologies Private Limited vs. The Union Of INDIA

Held

The Court held that the extension orders for the provisional attachment of the petitioner's bank accounts were bad in law and liable to be set aside. The Court agreed with the petitioner's submission that Section 110(5) of the Customs Act mandates a pre-decisional hearing, not a post-decisional one. The extension orders were found to be passed without giving the petitioner an opportunity of hearing and without recording any reasons, thus violating the principles of natural justice. The Court set aside these extension orders. However, the Court clarified that setting aside these extension orders would not prevent the department from proceeding with pending adjudication or from passing fresh provisional attachment orders and valid extension orders in accordance with the law, if so advised. The writ application was allowed to the extent indicated.

Facts

The petitioner, M/s Nxtify Technologies Private Limited, engaged in digital marketing and reselling, had its bank accounts provisionally attached by the Assistant Commissioner of Customs. This action stemmed from an investigation into other firms (M/s Venus Exports, M/s Vidhur Enterprises, and M/s B.K. Overseas) for alleged fraudulent export activities and wrongful availment of Input Tax Credit (ITC) under the CGST Act. The petitioner was considered a third-party beneficiary of funds allegedly fraudulently transferred. Initially, the petitioner challenged these attachments before the Karnataka High Court. Subsequently, after withdrawing that petition, the petitioner filed a writ petition before the Patna High Court challenging the appropriation of funds and further debit freezes on its bank accounts in October 2025. The petitioner sought quashing of provisional attachment orders and unfreezing of its bank accounts.

Key Issues

1. Whether the provisional attachment orders issued under Section 110(5) of the Customs Act, 1962, against the petitioner's bank accounts are valid, considering the petitioner was not directly under investigation for any contravention of the Customs Act? 2. Whether the extension of provisional attachment orders, granted without providing the petitioner an opportunity of hearing or issuing a show-cause notice, are legally sustainable? Petitioner's Arguments: The petitioner argued that the provisional attachment orders were issued without proper notice and that the extensions of these orders were also passed without affording the petitioner a pre-decisional hearing, violating the principles of natural justice. They relied on Section 110(5) of the Customs Act, emphasizing the requirement for a pre-decisional hearing. Revenue's Arguments: The revenue (Union of India and Assistant Commissioner of Customs) contended that the provisional attachment orders were issued to secure revenue and prevent smuggling, and that the extensions were granted in accordance with the law. The judgment does not explicitly record detailed arguments from the revenue regarding the necessity of attachment or the validity of extensions beyond the general assertion of statutory compliance.