SC upholds DRI's power, ₹20,000cr tax recovery back on track
The Supreme Court of India has reversed its 2021 ruling, restoring Directorate of Revenue Intelligence (DRI) officers' authority to issue recovery notices under the Customs Act, 1962. The landmark verdict was pronounced by a three-judge bench comprising Chief Justice DY Chandrachud, and Justices JB Pardiwala and Manoj Misra. The verdict clears the path for the Union government and DRI to resume several tax recovery cases worth over ₹20,000 crore that were stalled due to legal disputes.
SC overturns previous ruling limiting DRI's authority
The SC's verdict essentially overturns its previous position in the Canon India Pvt Ltd case, which drastically limited the DRI's authority to issue notices under the Customs Act, 1962. In that judgment, it was held that only customs officers who were originally tasked with clearing goods could issue such notices. This reading resulted in several dismissals of DRI-issued notices by courts and tribunals nationwide.
Canon ruling's impact on DRI's enforcement capabilities
The Canon ruling in March 2021 added a lot of ambiguity by saying that DRI officers weren't "proper officers" to issue show-cause notices. This affected thousands of cases at different stages of adjudication. The government, through Additional Solicitor General N Venkatraman, argued in its review petition that the Canon judgment was flawed and had missed important statutory interpretations. Venkatraman explained how this ambiguity affected DRI's enforcement capabilities, especially in Delhi which is dealing with around 800 such cases.
SC ruling impacts ₹20,000-₹23,000 crore in revenue recovery
The government's review petition further stressed that restricting DRI officers' powers to issue notices under the Customs Act could weaken enforcement. The stakes were high as this decision could have affected ₹20,000-₹23,000 crore in revenue recovery from major corporations such as Sony, Canon, Samsung, and Vodafone Idea (Vi). Importers had argued that the 2021 decision limited DRI's role and created uncertainty around pending cases.
2022 Finance Act's amendment faced challenges in high courts
The 2022 Finance Act tried to resolve these problems by amending the definition of "proper officer" to specifically include DRI officers. However, even this amendment was challenged in several high courts. Petitioners contended that Parliament couldn't retroactively change the basis of a judicial ruling. Today, the SC clarified that its judgment only dealt with issues arising out of the Canon India decision and didn't express any opinion on any other pending challenge to the 2022 Finance Act provisions.
