SC to decide fate of DRI tax notices going back 18 years
New Delhi, Sep 12, 2024
In 2006 the government gave more power to various officers including those of the DRI.
Thousands of tax notices, worth up to ₹23,000 crore and hanging fire for 18 years are finally set to have their fate decided by the Supreme Court in a sticky legal battle that will decide whether the Department of Revenue Intelligence had the power to issue such notices.
The apex court has begun hearings following a government petition to review its own ruling, delivered in 2021, that clipped the DRI’s powers to issue notices.
A three-judge bench comprising chief justice D.Y. Chandrachud and justices J.B. Pardiwala and Manoj Mishra has started hearing a review petition filed by the Union government’s revenue department seeking these show cause notices to be revalidated.
Additional solicitor general N. Venkatraman told the court that the case has significant implications for the revenue department, noting that Delhi alone has around 800 of these pending cases, with the list extending across various tribunals.
He sought the top court’s review of a previous judgment, arguing that it had erred in its assessment and seeking relief for the department.
“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 going back to 2006 involves major companies such as Canon, Sony, Samsung, Vodafone Idea, and Adani Enterprises. However, the review petition is around just one ruling, delivered in 2021, where the Supreme Court ruled that the DRI was not the “proper officer” to conduct tax investigations.
In 2006 the Finance Act, 2006 amended the Customs Act, 1962 giving more powers to various officers including those of the DRI.
The 2021 ruling led to the quashing of many such notices by various courts and tribunals.
According to experts, the 2021 case, involving Canon, jeopardized the DRI’s authority and weakened its position in pending litigation and its ability to defend its show-cause notices.
On 15 March, 2012, a consignment of cameras arrived in Delhi, with the importer submitting a Bill of Entry, 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 DRI under Section 28 (4) of the Customs Act. It alleged that the clearance was obtained through “wilful misstatement and suppression of facts”.
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 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.
[Mint]
