Companies drag DRI to court for not following procedure

Some companies have dragged India's primary anti-smuggling intelligence agency of the indirect tax department to court and challenged its jurisdiction over issuing notices and summons in a questionable manner by officers who may not be authorised under the statute.

According to a writ petition filed in the Gujarat High Court on Tuesday, Directorate of Revenue Intelligence (DRI) officers allegedly did not follow the prescribed procedure in investigating certain cases.

As per the writ petition filed by the companies, only officers with certain seniority have the right to issue notices and summons. In certain cases, some officers, who merely introduced themselves as “senior officers,” carried on these procedures.

The court on Thursday decided to hear the matter and has sought responses from the government.

“The statute confers the power to perform specific acts on specific officers and this is the subject matter of judicial review to ensure that the act performed does not lead to an anarchical and unruly operation of a statute which is not contemplated by any canon of construction of statute”, said Abhishek A Rastogi, partner at Khaitan & Co, who is arguing on the jurisdiction of DRI officers.

Lately, DRI has been investigating several cases where they suspect that companies or exporters have evaded paying Goods and Services Tax (GST). DRI had recently again started issuing notices to exporters for wrongfully availing GST exemptions in cases where exports preceded imports.

In most cases, DRI only investigates cases where it suspects either a large tax avoidance or where it suspects some illegal activity. In the last few months, both DRI and Directorate General of GST Intelligence (DGGI) have also been investigating cases where they suspected that fake invoices were issued by companies to avail GST input tax credit.

Nationwide raids were conducted in the last few months in this regard.

“When the statute directs that acts such as issuance of notices/summons should be done in a certain way, these acts must be done in that way alone and any deviation accordingly will be subject to judicial revie,” added Rastogi.