Charting the legality of Passport Seizure during Tax Investigations

The escalating prevalence of duty evasion has intensified scrutiny from investigating authorities, necessitating robust measures to safeguard public interests and economic well-being. This heightened scrutiny has led to a focus on measures that expedite investigations while minimizing potential impediments.

However, these preventive actions raise a critical question: at what point do they encroach upon the legitimate rights of the assessee?

One such contentious area involves the seizure of passports by tax authorities during investigations. While it is not a general practice to seize passports during investigation proceedings, this practice raises numerous questions regarding the legality and necessity when the same are deployed by the authorities.

This article strives to examine the legality of passport seizure by tax authorities, and the evolving judicial perspective on this contentious issue.

The power to seize a passport under Section 14 of the Passports Act, 1967 (‘Passports Act’), is inter alia bestowed on any officer of Customs. This power is exercisable when a Customs Officer has a reasonable suspicion that a person has committed an offence under Section 12 of the Passports Act, which enlists various offences and penalties. These offences include departing or attempting to depart from India, without holding a valid passport, failure to produce passport or travel documents for inspection, knowingly using passport issued to another person, knowingly allowing other person to use passport issued to self, etc. However, the said Section does not categorically mention any tax related offence or any other economic offences. Therefore, the Passports Act does not explicitly sanction seizing passports on account of offences related to taxation laws.

This calls in question, which statute does in fact authorize the same?

Interesting to note, Section 110(3) of the Customs Act, 1962 (‘Customs Act’) empowers the Proper Officer to seize any ‘document’ or things which he considers useful for any proceedings under the Customs Act. Similar powers are conferred upon the Proper Officer under GST, by virtue of Section 67 of the Central Goods and Services Act, 2017 (‘CGST Act’). This poses a cardinal question, i.e., whether a passport can be said to be a ‘document’ and therefore be liable to seizure?

To answer this vexed question, let us appreciate the relevant judicial precedents in this respect.

The Madhya Pradesh High Court in the Bangantavida Nazir case has held that a passport is undoubtedly a document and therefore, the Customs Authorities have the power to detain the same under Section 110(3). However, this observation came with a tailpiece that it is to be seen whether such detention is actually required or not. If the passport is detained only to ensure the availability of the person during the proceedings, then there are other measures to ensure the same, which do not curtail the person’s fundamental right to travel. In this context, it is also pertinent to refer to the decision of the Madras High Court in the case of Thanapal v. Asst. Collector, wherein the Court countermanded the action of the Customs officer who seized the passport of a foreign national. It was held that Section 110(3) of the Customs Act does not postulate seizing of a passport as a passport cannot be assimilated to other documents or things which would be relevant to any proceedings under the Act.

Indeed, a passport cannot be equated to any other piece of documentation related to tax investigations. Its nature travels beyond being merely an information source to being a conduit to travel overseas. Therefore, depriving a person of his passport, without any situational exigency or cogent reasons, can curtail the personal liberty of the individual, which would be unconstitutional.

Although Section 14 of the Passports Act authorizes Customs Authority to seize passports, this power is far from absolute. Such a seizure can only be justified when there exists a reasonable suspicion of an offence under the Passports Act. The conferment of this power cannot be interpreted in isolation to grant unbridled powers to the Customs Authorities which could be exercised without any rhyme or reason.

On the flipside, there are cases wherein seizure of passports by the Customs Authorities has been found to be within the bounds of law. The Madras High Court in the case of Assistant Collector v. Abdul Samanthu, has upheld the seizure of passport by Customs Authority. In this case, the passport of a foreign national was seized upon the discovery of valuable gold bars and jewelry stones meticulously concealed inside a television brought by him from another country. Similarly, in the case of Shantha Kumar v. Collector of Customs, the Kerala High Court upheld the seizure of passport by Customs Authority when undeclared gold biscuits were found with the Appellant.

Therefore, it can be seen that cases involving grave offences such as smuggling, invite tighter scrutiny and stringent repercussions. The likelihood of passport seizure cannot be ruled out in such cases as this measure may be imperative to ensure the conclusion of the adjudicatory process in such cases.

While the GST and Customs laws empower tax Authorities to seize passports in certain circumstances, it may not be the case with impoundment. Section 10(3) of the Passports Act enlists various circumstances under which passports can be impounded by the Passport Authority. This includes issuance of warrant or summons or an order prohibiting the departure of the passport-holder from India, by any Court under any law in force.

Therefore, all things considered, it is also important to understand the difference between ‘seizing’ and ‘impounding’ as the former appears to be within the tax authorities' purview, while the latter seems to be within the sole purview of Passport Authority. These terms, although used synonymously in various contexts, differ in meaning and effect.

The apex court in the case of Suresh Nanda v. CBI, has made a notable distinction between these two terms. It has been observed that a seizure is made at a particular moment when a property is taken into possession. However, if after seizing the property, it is retained for some period of time, then such retention amounts to impounding. The apex court made reference to Section 10A of the Passports Act, as per which, passports can be retained by the Central government or any designated officer, for a period up to four weeks or such extended period provided under the said Section. Thereafter, it can only be impounded by an order of the Passport Authority. It was further observed that while the police may have the power to seize passport under the Code of Criminal Procedure, 1973, which allows for seizure of ‘property’, only the Passport Authority has the power to impound a passport, in terms of the Passports Act. This is because the Passports Act is a special Act and special law prevails over general law.

Borrowing the same principle, it may be possible to argue that even if a passport is considered to be a ‘document’ which can be seized under Section 110(3) of the Customs Act or Section 67 of the CGST ACT, the Customs or GST Authorities are not empowered to impound the same as it is only the Passport Authority which can impound a passport under the Passports Act. Hence, retaining a seized passport for a prolonged period of time could be said to be at the borders of impoundment, which exceeds the power of seizure granted to tax authorities.

Therefore, seizure of passport and impounding of passport are two different things. The Customs or GST Authorities may have the power to seize passports in certain demanding circumstances. They, however, cannot impound passports. In case the tax authorities believe that the circumstances stated under Section 10(3) of the Passports Act exist and the passport merits impoundment, then they may communicate such order in writing to the Airport Authority and Passport Authority, who shall then give effect to such order.

Having said that, the judicial trend underscores the need for a balanced approach. There is no cut-and-dried answer which can be applied to all sets of circumstances. The facts, circumstances and gravity of each case will have to be considered subjectively.

While the tax authorities must undertake their functions sincerely and it is the right of an individual to exercise personal liberty, pursuing both in tandem is bound to skew the interests of one party. It needs to be seen whether the authority seizing a passport is actually empowered to do so within the permissible bounds of law. This requires an examination of the facts and circumstances of each case and the applicable laws.

Bottom line being, the tax authorities cannot indiscriminately seize the passport of an individual. This power has to be exercised judiciously considering the merits of each case.

About the authors: Rachit Jain is an Executive Partner, Harshdeep Khurana is a Principal Associate and Aishwarya Vardhan is a Senior Associate at Lakshmikumaran & Sridharan attorneys.

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