2025 (4) TMI 836 - HC - Customs

Jurisdiction of Directorate of Revenue Intelligence (DRI) to initiate an investigation into the issuance of Service Exports from India Scrips (SEIS) to the petitioner by the Directorate General of Foreign Trade (DGFT) respondent No. 3 - HELD THAT - The petitioner should not be aggrieved at the stage of investigation by respondent No. 2. However at the same time respondent No. 2 is also restrained from taking any coercive action against the petitioner during the course of investigation. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the Directorate of Revenue Intelligence (DRI), respondent No. 2, has the jurisdiction to initiate an investigation into the issuance of Service Exports from India Scrips (SEIS) to the petitioner by the Directorate General of Foreign Trade (DGFT), respondent No. 3.

2. Whether the actions of respondent No. 2, including the issuance of summons and alleged coercion of the petitioner, were lawful and justified.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction of the Directorate of Revenue Intelligence

Relevant legal framework and precedents: The petitioners argued that the SEIS scrips were issued under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) in conjunction with the Foreign Trade Policy, 2015-20. According to the petitioners, the DRI is not an authority under the FTDR Act, and therefore lacks jurisdiction to initiate an inquiry into the issuance of these scrips.

Court's interpretation and reasoning: The Court acknowledged the petitioners' argument regarding the jurisdiction but did not make a definitive ruling on this issue. Instead, the Court focused on ensuring that no coercive actions were taken by respondent No. 2 during the investigation.

Key evidence and findings: The petitioners highlighted that the DGFT, which issued the SEIS scrips, had not canceled them, suggesting that there was no apparent irregularity warranting investigation by the DRI.

Application of law to facts: The Court did not resolve the jurisdictional question but allowed the investigation to proceed while restraining respondent No. 2 from taking coercive actions.

Treatment of competing arguments: The Court balanced the petitioners' concerns about jurisdiction and coercion with the respondent's argument that the investigation was still in its preliminary stages and no conclusions had been reached.

Conclusions: The Court did not quash the investigation but imposed restrictions on respondent No. 2 to prevent coercive actions during the investigation.

Issue 2: Legality of Actions by Respondent No. 2

Relevant legal framework and precedents: The petitioners alleged that respondent No. 2's actions, including the issuance of summons and coercion, were unlawful. They contended that the classification of services should fall under the DGFT's domain, not the DRI's.

Court's interpretation and reasoning: The Court considered the petitioners' claims of coercion and the improper classification of services. It noted the petitioners' allegations that they were coerced into signing a statement under duress.

Key evidence and findings: The petitioners provided details of their interaction with respondent No. 2, including being made to wait for extended periods and being coerced into signing a statement.

Application of law to facts: The Court took the petitioners' allegations seriously and issued an order restraining respondent No. 2 from taking coercive actions during the investigation.

Treatment of competing arguments: The Court recognized the need for the investigation to proceed but also acknowledged the potential for abuse of power by respondent No. 2, hence the restraint order.

Conclusions: The Court allowed the investigation to continue but protected the petitioners from coercive actions by respondent No. 2.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Respondent No. 2 shall not take any coercive action during the course of the investigation as directed by this Court vide order dated 22.06.2022, more particularly, in view of the averments made by the petitioner in para 4.10 quoted here-in-above."

Core principles established: The Court established that while investigations can proceed, they must do so without coercive actions that could infringe upon the rights of the parties involved.

Final determinations on each issue: The Court did not definitively resolve the jurisdictional issue but allowed the investigation to continue with restrictions on coercive actions. It provided a protective measure for the petitioners against potential abuse during the investigation.