November 7, 2024: The Supreme Court of India has delivered a significant ruling in favor of the Directorate of Revenue Intelligence (DRI), reinstating the agency’s powers to issue show cause notices for the recovery of customs dues under the Customs Act, 1962. This ruling overturns a 2021 verdict that had restricted the DRI's jurisdiction, a decision that had far-reaching consequences for several companies, and revives notices worth over Rs 20,000 crore.

In its judgment, the top court held that the earlier 2021 decision had been “patently erroneous” and failed to consider the statutory framework of the Customs Act properly. The 2021 ruling had declared that DRI officers, in the absence of an explicit charge to perform duties under the Act, could not be considered “proper officers” and thus lacked the authority to issue show cause notices. This had led to the quashing of several notices issued by DRI officers, affecting major corporations across India.

The Supreme Court's new ruling corrects that interpretation, affirming that DRI officers are indeed "proper officers" for the purpose of customs recovery duties. This move is expected to have significant implications for companies that had been facing large customs dues, as it restores show cause notices previously annulled. Among the affected companies are prominent names such as Godrej & Boyce Manufacturing Ltd., Sony India Pvt., Vedanta Ltd., and Vodafone Idea Ltd., all of which are now likely to face renewed legal scrutiny and potentially substantial financial penalties.

The 2021 verdict had sparked controversy by narrowing the scope of DRI officers' powers, creating uncertainty in the enforcement of customs laws. Following that decision, the DRI had filed a review petition, arguing that the verdict was flawed in its interpretation of the Customs Act. The Supreme Court's bench, led by Chief Justice DY Chandrachud, decided to revisit the matter and conduct an open hearing, ultimately concluding that the DRI’s officers were indeed empowered to issue such notices, as they were designated under the statute as “proper officers.”

The restoration of these powers is seen as a victory for the government’s efforts to enforce stricter compliance with customs laws, particularly in cases of alleged tax evasion and under-invoicing by multinational companies. It is also expected to enhance the enforcement capabilities of the DRI, which plays a key role in curbing smuggling and safeguarding India's revenue interests.

Legal experts suggest that this decision will have wide-ranging consequences for businesses operating in the country, especially those involved in large-scale imports and exports. Companies now face the prospect of dealing with the revived notices, which could lead to protracted legal battles and significant financial implications.