The Bombay High Court has rapped the Directorate of Revenue Intelligence for seeking differential tax dues from Vodafone Essar by threatening the company?s directors with arrest. The court condemned DRI for ?terrorising? Vodafone and ?totally flouting the norms? of law for the agency?s role in a case relating to Vodafone?s import of optic fibre cables, the appropriate duty on which is still being debated by tax tribunals.
On December 18, DRI searched Vodafone?s premises and demanded additional duty of Rs 1.83 crore on its optic fibre cable imports. Though the Mumbai customs department has ruled that tariff head 85.44 of the Indian Customs Act applies to such cables, DRI claimed they fell under the higher dutiable head 90.01.
DRI threatened to arrest the company?s directors if the differential duty amounting to Rs 1.83 crore was not paid. Under duress, the company deposited the amount the next day, but instead of approaching a tribunal for clarity on the tax treatment, it sought relief through a writ petition in the Bombay High Court.
Curiously, three days after Vodafone met DRI?s demand, the agency still went ahead and seized three optic fibre cable consignments imported by the company. Vodafone, in its petition to the High Court, argued that once goods are cleared on payment of duty assessed, the department could not seize them without initiating fresh proceedings. Neither fresh proceedings were initiated, nor a show-cause notice issued to Vodafone.
The company sought a refund of the duty as it was ?collected under threat and coercion without there being any enforceable demand?. The revenue department sought to impress upon the court that Vodafone paid the duty voluntarily and was not entitled to relief for mis-declaration.
Pulling up the DRI for its misconduct, the Bombay High Court observed: ?It is apparent that the DRI officers, in utter disregard to the order passed by the Commissioner of Customs (Mumbai), have forced the petitioners to pay the amount by threat and coercion, which is not permissible in law.? The court observed that its behaviour ?is wholly arbitrary, illegal and contrary to law?.
The court also directed the revenue department to issue show cause notices within two weeks. It should also initiate proceedings and pass orders within four weeks to address the issue. While Vodafone declined to comment on the case, DRI said it would follow the court?s direction.
?We will examine the conduct of our officers in consultation with our counsel.
We are confident there has not been any high-handedness,? a senior official said. DRI claims it only asked Vodafone to pay customs duty under a tariff heading suggested by the ministry of telecom.
It is standard procedure for a defaulter to pay part of the differential duty voluntarily immediately after possible evasion is detected. A show-cause notice is only sent after investigation is completed.
The Commissioner of Central Excise, Chennai, based on a decision by the authority for advance ruling held that optic fibre cables were classifiable under tariff heading 90.01. In a separate case, the Commissioner of Customs, Mumbai, held they were classifiable under tariff heading 85.44. The revenue department, however, is appealing this in the Central Excise & Service Tax Appellate Tribunal, Mumbai.