5 days Ago
New Delhi: The Supreme Court on Thursday revived Directorate of Revenue Intelligence (DRI) tax notices worth ₹ 20,000 crore to ₹ 23,000 crore, hanging since 2006, against major companies including Vedanta, Vodafone Idea, Adani Enterprises and Canon. A three-judge bench comprising Chief Justice D.Y.
Chandrachud, justice J.B. Pardiwala and justice Manoj Mishra held that DRI officers have the authority under the Customs Act, 1962, to issue show-cause notices and recover duties.
The court ruled that DRI officers are “proper officers” to issue show-cause notices under Section 28 of the Customs Act. Mint had earlier reported that the Supreme Court had begun hearing these tax notices which have been pending since 2006 worth an estimated ₹ 23,000 crore. The ruling came in response to a review petition filed by the government seeking a re-evaluation of a 2021 judgment that had limited the powers of the DRI to issue notices.
Also read | GST evasion: DGGI shoots over 1,000 tax notices ahead of 5 August deadline During the hearing, additional solicitor general N. Venkatraman informed the court that the case has significant implications for the revenue department, saying Delhi alone has around 800 pending cases, with the list extending across various tribunals. He wanted the court to review its previous judgement, arguing that the earlier ruling was flawed.
“We need to resolve the fate of 18 years’ worth of show-cause notices. The stakes are difficult to quantify, with the estimated value between ₹ 20,000 crore and ₹ 23,000 crore, although we lack complete visibility,” said Venkatraman. The case involves major companies such as Canon, Sony, Samsung, Vodafone Idea and Adani Enterprises.
The review petition specifically concerns a 2021 ruling where the Supreme Court had ruled that the DRI was not the “proper officer” to issue tax investigation notices. This judgement led to the quashing of several notices by various courts and tribunals. Also read: Seven years of GST: Its adoption has been a remarkable success In 2006, the Finance Act amended the Customs Act, empowering DRI officers with greater authority.
Prior to this amendment, there had been ambiguity regarding the powers of DRI officers to issue show-cause notices. However, a 2021 Canon judgment invalidated many such notices issued by the DRI after the 2006 amendment. Legal experts previously told Mint that the Canon ruling undermined the DRI’s authority, weakening its position in pending litigation and affecting its ability to defend show-cause notices.
The so-called Canon case pertains to a customs dispute. On 15 March 2012, a consignment of cameras arrived in Delhi, and the importer submitted a bill of entry five days later, accompanied by the product literature. After verifying the documents, customs cleared the cameras on 24 March, under Notification No.
15/2012, which provided a duty exemption. But two years later, on 19 August 2014, a show-cause notice was issued by the DRI under Section 28 (4) of the Customs Act. It alleged that the clearance was obtained through “wilful mis-statement and suppression of facts.
” Also read: Reset GST to make it a 'good and simple tax' Specifically, it claims that the cameras were capable of recording multiple video sequences of less than 30 minutes each, a detail that was not evident in the submitted literature. The notice therefore seeks to recover any duties that may have been evaded due to this alleged misrepresentation. The Customs Excise and Service Tax Appellate Tribunal (CESTAT) upheld these penalties, prompting the companies to appeal to the Supreme Court.
In March 2021, the Supreme Court ruled in favour of the companies, finding that the DRI lacked the authority to challenge the customs clearance of their digital cameras. The court ruled that only the original customs officer could review the assessment and invalidated the notifications extending customs functions to DRI officers. The ruling found no evidence of deliberate misstatement or suppression of facts by the companies, overturning the penalties and confiscation.
Following this ruling, many high courts and tribunals across India quashed proceedings undertaken by DRI officers based on these notices, leading to a backlog of appeals in the Supreme Court. The Central Board of Indirect Taxes and Customs (CBIC) subsequently directed its officers to keep show-cause notices issued by the DRI on hold. In response to the ruling, the Finance Bill 2022 amended the Customs Act to clarify the DRI’s role, redefining “proper officer” to include DRI officers and validating actions taken before the amendment.
The DRI is India’s premier anti-smuggling agency, operating under the CBIC. The DRI is responsible for tackling smuggling, illicit international trade and commercial frauds related to customs duties..
