Supreme Court Restores DRI’s Authority, Resurrects ₹23,000 Crore Tax Notices Against Major Corporations

In a significant ruling, the Supreme Court on Thursday reinstated the Directorate of Revenue Intelligence’s (DRI) power to issue tax notices, reviving demands for unpaid duties totaling ₹20,000–23,000 crore against major companies like Vedanta Ltd, Vodafone Idea Ltd, Adani Enterprises, and the Indian subsidiaries of Sony, Samsung, and Canon. These notices have been pending since 2006.

Background and Key Rulings:

2006 Finance Act Amendment: This amendment to the Customs Act empowered DRI officers to issue show-cause notices, addressing a prior ambiguity.

2021 Canon Judgment: The Supreme Court had ruled that only the original customs officers could issue show-cause notices, invalidating DRI-issued notices on assessment issues and resulting in the quashing of multiple cases.

Finance Bill 2022: In response, the Customs Act was amended to redefine “proper officer” to include DRI officers, validating past actions by DRI in a bid to preserve its jurisdiction.

Current Ruling:

The recent Supreme Court decision clarified that DRI officers are indeed “proper officers” under Section 28 of the Customs Act with the authority to issue and enforce show-cause notices. The ruling followed the government’s review petition to reinstate DRI’s powers, arguing that the 2021 ruling had erroneously limited its scope.

This restoration of DRI’s jurisdiction will likely prompt recovery actions and issuance of fresh notices where feasible, although some previously quashed cases may be affected by expired limitation periods.

The DRI — India’s leading anti-smuggling agency under the Central Board of Indirect Taxes and Customs (CBIC) — plays a key role in combating smuggling and commercial fraud related to customs duties, strengthening India’s customs compliance framework.

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