DRI empowered to issue tax notices: SC

The Supreme Court on Thursday reversed its 2021 ruling and declared that officers of the Directorate of Revenue Intelligence (DRI) are indeed "proper officers" under the Customs Act, thereby restoring their authority to issue recovery notices.

- Utkarsh Anand

The decision is a significant victory for the Union government and DRI, which now has the green light to proceed with numerous pending tax recovery cases, estimated to be worth more than ₹20,000 crore, that were left in limbo due to legal challenges.

The ruling was delivered by a three-judge bench comprising Chief Justice of India (CJI) Dhananjaya Y Chandrachud, along with justices JB Pardiwala and Manoj Misra. The decision effectively overturned the previous stance taken by the top court in the Canon India Pvt Ltd case, which had significantly limited DRI's authority to issue notices under the Customs Act, 1962.

In the Canon judgment, the court had held that only the customs officers originally responsible for clearing goods could issue such notices, invalidating those issued by DRI officers. This interpretation had led to numerous dismissals of DRI-issued notices by courts and tribunals nationwide.

The top court, however, held this finding to be "ill-founded" and "an error apparent", for the interpretation overlooked critical statutory and administrative directives.

"In Canon India, this Court erroneously concluded that an officer from the Directorate of Revenue Intelligence was not an officer of customs and therefore cannot function as a 'Proper Officer'... contrary to the aforesaid observations of the court, DRI officers were notified as the 'proper officer' vide notification dated 06.07.2011 issued by the central government," noted the judgment.