Power of DRI Officers to issue SCNs: Hoping Budget 2022 puts an end to the Controversy

Shankey Agrawal & Rishabh Prasad – [2022] 134 taxmann.com 124 (Article)

As per the provisions of various tax laws, recovery is a quasi-judicial function which requires a show cause notice to be issued to the concerned taxpayer and then adjudication thereafter. Both the notice and adjudication functions are strictly governed by legal provisions. The issue arises when the Directorate of Revenue Intelligence (DRI) seeks to carry out the recovery function.

Under the Customs Law, the recovery power is vested upon the proper officer, which has led to a lot of controversy and multiple rounds of litigation up to the Supreme Court. The Judgment of the Supreme Court in case of Canon India has conclusively settled the controversy that the Officers of DRI and other intelligence and investigation agencies are not proper officers for the purpose of issuance and adjudication of SCNs.

However, the Department of Revenue has preferred a Review Petition [Review Petition No. 400/2021], requesting the Supreme Court to reconsider the judgment of the Canon India. In the meanwhile, the Supreme Court in another judgment in the case of Commissioner of Customs, Kandla vs. Agarwal Metals and Alloys [2021] 130 taxmann.com 53 (SC) has followed the judgment of the Canon India and set aside the Department’s Appeal, while holding that the SCNs issued by Additional Director General (ADG), DRI, is not a proper officer within the meaning of Section 28(4) of the Customs Act. In this article, the authors have discussed the controversial issue of power of DRI Officers to issue SCNs in light of various judicial decisions and way forward.

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