The freedom of investigating agencies to enter into Special Economic Zones (SEZs) to probe into economic offenses such as money laundering has become a major bone of contention between the finance ministry and the commerce ministry. The differences could now reach the court room soon.
While the commerce ministry wants to protect SEZ units from ?the interference? of various intelligence agencies like the CBI, Enforcement Directorate (ED), Directorate of Revenue Intelligence (DRI) and officials dealing with law and order, narcotics and environment, the finance ministry wants to ensure that there is no safe haven in the country that is not accessible to agencies probing into white collar crimes.
On May 7, commerce ministry withdrew the freedom it gave to intelligence and enforcement agencies to enter inside SEZs and investigate offenses without securing any permission from the SEZ?s development commissioner (DC)?the sole official responsible for the zone. The freedom was given on November 30 last year as visiting officials from Financial Action Task Force (FATF), an inter-governmental body that sets global benchmarks on legislation to prevent terror funding and money laundering, wanted to know how fool proof India?s SEZ rules and regulations were. Keen to get membership of FATF, the government in December assured FATF officials that that there is no safe haven in India, that economic intelligence agencies cannot freely access, said a source. Subsequently, on May 7, the commerce ministry withdrew that freedom.
A week ago, the commerce ministry brought to force a few sections in the SEZ rules (20-21) that mandated it to notify certain offenses and who should exclusively investigate them, said a ministry official. Commerce ministry, which is mandated to facilitate export growth, does not want too many agencies to interrupt export production in the name of investigations.
But for these agencies, the concern is that the absence of deterrence could encourage illegal cross-border fund transfer and terror funding through SEZ units. Several SEZ units are now fighting cases regarding smuggling of finished jewellery from Europe and alleged imports of plastic waste.
Since only one class of offense has been notified under SEZ rules?violations of the Foreign Trade Development and Regulation Act of 1992 to be investigated by the DC?intelligence and enforcement agencies cannot enter SEZs without the DC?s permission, said the official.
Field officers of one of the enforcement agencies told FE that investigations are best done discreetly maintaining its secrecy till the last moment. Protesting at the need for taking permission from the DC to enter an SEZ, he said, ?Revealing in advance, where a search is to be conducted, can only make it ineffective. Often, members of the investigation team are kept in the dark till the last moment about where they are going to conduct a search or a raid,? said the official.
As per finance ministry?s interpretation, all its agencies can enter SEZs without the DC?s permission. ?Not notifying other classes of offenses and not naming the appropriate investigating agency under SEZ rules do not mean that they cannot enter these zones. The prohibition on enforcement and intelligence agencies to investigate is applicable only on violations of the FTDR Act, for which the DC has been made the sole authority. For other offences, enforcement agencies are free to enter SEZs,? said another source. The difference in interpretation could end up in court if officials in the field find any hurdles during their probe, he said. The official said that the union Cabinet had said earlier that even after SEZ rules 20-21 coming into force, intelligence agencies of the government will be free to do their task without having to ?intimate? the DC.