In a landmark ruling, the Supreme Court of India has revived tax notices worth an estimated ₹20,000 crore to ₹23,000 crore, originally issued by the Directorate of Revenue Intelligence (DRI) against prominent companies such as Vedanta, Vodafone Idea, Adani Enterprises, and Canon. These notices, which date back to 2006, were previously quashed in 2021 following a Supreme Court judgment that had limited the DRI’s power to issue such notices. However, a recent decision by a three-judge bench, led by Chief Justice D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Mishra, reversed that ruling, restoring the DRI’s authority to investigate and recover customs duties.
The ruling comes after the government filed a review petition, arguing that the 2021 judgment was flawed and had caused significant setbacks for the revenue department. The government pointed out that there were a substantial number of cases pending, with approximately 800 cases in Delhi alone. While the exact revenue at stake remains unclear, it is estimated to be between ₹20,000 crore and ₹23,000 crore, underscoring the scale of the matter.
The controversy stems from an amendment to the Customs Act in 2006, which gave DRI officers expanded powers to investigate customs violations. However, the Supreme Court’s 2021 decision, stemming from a case involving Canon, which concerned the customs clearance of cameras, limited the scope of DRI’s authority to issue investigation notices. This ruling had far-reaching implications, as it invalidated numerous notices issued by the DRI post-2006.
The judgment in 2021 had weakened the DRI’s position in legal proceedings, particularly in its fight against smuggling and commercial fraud, and resulted in a backlog of appeals in the Supreme Court. Many high courts and tribunals had quashed proceedings initiated by DRI officers based on these notices.
In response to the 2021 decision, the Finance Bill 2022 amended the Customs Act to clarify the DRI’s role. The amendment redefined the term “proper officer,” explicitly including DRI officers, and validated actions taken before the amendment. This was seen as a step to restore the DRI’s authority and ensure that their investigations would continue without further legal obstacles.
The latest decision by the Supreme Court marks a significant victory for the government and the DRI, reaffirming their power to investigate and recover customs duties. It also provides much-needed clarity on the DRI’s jurisdiction, reinforcing their ability to combat illicit trade and enforce customs regulations effectively.
