INVESTIGATING AGENCIES
METHOD-OUTLOOK-FRAMEWORK-POWERS
SESSION – III November
18, 2022
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2 CONTENTS 01 | AUDIT Vs INVESTIGATION 02 | INVESTIGATING AGENCIES - KEY AGENCIES - OTHER AGENCIES 03 | INVESTIGATION - METHODS - POWERS - FRAMEWORK 04 | SUMMONS AND STATEMENT 05 | SEARCH AND SEIZURE 06 | CHECKLIST 07 | KEY TAKEAWAY
1 AUDIT VS. INVESTIGATION KEY DIFFERENCE 3
AUDIT Vs. INVESTIGATION
INVESTIGATION
In the parallel, representation needs to be drawn and filed for fixation of lucrative RoDTEP rates qua goods classifiable under said Chapters
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AUDIT • Conducted as a matter of routine • Pre determined periodicity • Precedes with advance Notice • Absence of pre-conceived notion • Tends to bear optimistic approach • Co operative demeaner
AUDIT and INVESTIGATION tend to be referred interchangeably, although these are not one and the same • Undertaken in case of suspicion • An Ad hoc action • Usually brings in element of surprise • Usually aimed at a particular transaction • Tends to bear aggressive approach • Interrogatory demeanour
INVESTIGATING AGENCIES
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INVESTIGATING AGENCIES
DRI Incorporated in the Year of 1957
The Directorate of Revenue Intelligence (DRI), under the Central Board of Indirect Taxes and Customs (CBIC), Department of Revenue, Ministry of Finance, Government of India, is the apex agency of the Indian Customs in the field of antismuggling in India
SIIB
• Special Investigation and Intelligence Branch (SIIB) is one of the critical branch of the Customs Department; To prevent fraudulent exports/importers and illegal export of restricted/prohibit ed goods;
DGGI
• Established in the year 1979 as DGCEI
• Renamed as DGGI in June 2017 owing to introduction of GST
• The role of the Directorate General in tackling the menace of duty evasion is manifolds
CEIB
• Central Economic Intelligence Bureau (CEIB) was incorporated in the year 1985
• Responsible for gathering information and monitoring the economic and financial sectors for economic offences and warfare.
ED
Incorporated in the year 1956 investigation of economic crimes and violations of foreign exchange laws
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KEY AGENCIES OVERVIEW
DRI-AN OVERVIEW
Incorporated in the Year of 1957 – Operates under CBIC
Apex investigating agency of the Indian Customs
Enforces provisions of the CustomsAct, 1962 and over 50 other allied Acts (FTDRA, FTP, BIS, FSSAI, Narcotics, etc.)
Key Functions: Dissemination of intelligence, investigations and prosecution
NO POWER OF ADJUDICATION: Supreme Court in Cannon India Private Limited
FinanceAct 2022 - Corresponding amendment to Customs Act to restore DRI’s power to adjudicate.
To keep liaison with C.B.I. and through them with the INTERPOL
To refer cases registered under the CustomsAct to the Income Tax Department for action under the Income Tax Act
To study and suggest remedies for loopholes in law
To keep statistics of seizures and prices/rates etc. and supply required material to the Ministry of Finance and other Ministries
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SIIB-AN OVERVIEW
NECESSITY
Restricting of fraudulent exports is necessary just as much as encouraging genuine exports
It involves prevention of revenue leakage, outright smuggling of prohibited/restricted goods, undue export benefits, etc.
This requires a specialized agency
JURISDICTION
Gathering of information/intelligence
Taking action on information received across agencies
Examination of export of goods and Search, Seizure and Arrest
Market enquiry/survey to curb over valuation of exports
Holding export benefits such as Drawback, MEIS etc
OTHER FUNCTIONS
SIIB(X) also acts as coordinating agency and work in tandem with other investigating agencies like CBI, DRI, DGCEI, R&I & ED etc.
Whenever intelligence/information are received by SIIB(X) , they either act upon them or provide assistance to such agencies in interception, examination and investigation into cases of fraudulent export
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DIRECTORATE OF REVENUE INTELLIGENCE
IMPORT
EXPORT
SPECIAL INTELLIGENCE &
INVESTIGATION BRANCH
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Claim
Free Trade Agreement duty benefit
Foreign Trade
benefits, AA
EPCG,
duty
Addition
royalty
value
Duty
imports
Illegal export of prohibited/restricted goods
Foreign Trade Policy benefits MEIS, SEIS, EO fulfilment
Duty Drawback
IGST refund
KEY INVESTIGATING AGENCIES
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of
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Policy
and Pre-import condition,
imports by EOU, etc. - Classification and consequent
differentials -
of
and other costs to the transaction
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exemptions to temporary
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etc. -
etc. -
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OTHER AGENCIES
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DGGI-AN OVERVIEW
INTRODUCTION
Established in the 1979 as an independent wing under Directorate of Revenue Intelligence,
Develops intelligence in new areas of tax evasion through its intelligence network across country
NETWORK
Exchanges information with various agencies (as below) for combating indirect tax evasion and frauds
Income Tax Department, Financial Intelligence Unit (FIU), Central Economic Intelligence Bureau (CEIB), Serious Fraud Investigation Office (SFIO), NATGRID (National Intelligence Grid) and various other departments and agencies;
Detection of potential frauds
Collection, collation and dissemination of intelligence relating to evasion of Central Excise Duty, Service Tax and GST, on an all India basis;
FUNCTIONS
Primarily engaged in multi-commisionerate investigation and complicated cases selected by the Directorate or entrusted to it by the Ministry;
ACTIVELY ENGAGED IN GST INVESTIGATIONS THAT HAVE CLOSE NEXUS WITH CUSTOMS LAW SUCH AS ITC ON IMPORT OF GOODS; REFUND OF IGST ON EXPORT OF GOODS, CLASSIFICATION, ETC.
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CEIB AND ED-AN OVERVIEW
CEIB
ED
Set up in 1985 CEIB functions as Nodal Agency for economic intelligence and seamless co ordination amongst other agencies in the area of economic offences May not have direct interface with taxpayer but provides platform for exchange of intelligence between different agencies such as- DRI, SIIB, CBI, ED, IB, RAW etc.
Operates inter alia on issues relating to tax evasion, foreign exchange violations, supply of counterfeit currency, hawala transactions, financial frauds in stock markets, money laundering, drug trafficking, smuggling, etc.
Incorporated in the year 1956, The Directorate of Enforcement or ED is a multi-disciplinary organization mandated with investigation of economic crimes and violations of foreign exchange laws
The Directorate is under the administrative control of Department of Revenue, Ministry of Finance, Government of India
Prevention of Money LaunderingAct, 2002 (PMLA)
Foreign Exchange ManagementAct, 1999 (FEMA)
The Foreign Exchange RegulationAct, 1973 (FERA)
Conducting investigation provisional attachment of property, ensure prosecution of the offenders;
NON-REALISATION OF EXPORT PROCEEDS TEND TO RAISE SUSPICION OF PMLA/FEMAAND ATTARCTS ED’s SCRUTINY
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INVESTIGATION METHODS
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15 INVESTIGATION METHODS 01 02 03 04 - Human intelligence as well as Data analysis - Referred by Officers posted at Docks/Ports (Preventive officers, Superintendent, appraiser, etc.) - Information exchange inter se agencies such as DRI, SIIB, CBDT, EDI, CBI, Other Customs formations, etc. - Change in export pattern such as declared assessable value, HSN, rate of tax, description of goods, etc.
POWERS OF INVESTIGATING AGENCIES Examination of Goods • Search, Seizure and Arrest • Market Survey 1 Setting up Alert • keeping errand exporters under check • physical verification, export realisation proof, installation certificate, EODC’s • NOC needed per shipment once alert 2 Cancellation • Import Export Code • Customs Broker License 3 Issuing Circulars • To sensitise field formation of offence pattern 4 Launching Criminal Complaints 5 Withholding Benefits • Withholding benefit/incentive of DBK, MEIS, RoDTEP etc 6 16
INVESTIGATION FRAMEWORK
Issuance of multiple summons to the business leadership
Recording statements of senior leadership Lengthy and exhausting process
Search and seizure operations, threat of arrest
Coercive and prejudicial approach for demand of duty
Possible reporting to media on the investigation
ISSUANCE OF SCN
?
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SUMMONS AND STATEMENTS
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SUMMONS AND STATEMENTS
SUMMON
• Powers to call upon a person either to give evidence or produce documents
PRE-REQUISITE
• Status of the person summoned is of no consequence however, sufficient care should be taken to summon only such persons who would have firsthand knowledge
GAZETTED OFFICER
• All gazzeted officer empowered to issue summons
• Persons so summoned shall be bound to attend either in person or by an authorised agent
ONLY FACTS
• A personal opinion, belief of statutory interpretation rendered in the statement is not binding and must be retracted
‘JUDICIAL PROCEEDINGS’
• False evidence, intentional insults interruptions may result in punishment under Sec-193 & 228 of IPC-imprisonment
FAILURE TO RESPOND TO SUMMONS
• Prosecution under Sec-174 of the IPCimprisonment
Exemption from appearance: woman who, according to the customs and manners of the country, ought not to be compelled to appear in public
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Section 108 of Customs Act, 1962
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SEARCH AND SEIZURE
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SEARCH AND SEIZURE
Search of Persons
- Entering or leaving India (S. 100) and to search suspected persons anywhere in India (S.101)
- Persons right to be produced before magistrate, if he wishes so
Search before two or more witnesses
Women officer for search of women
Search of Premise
- To identify goods liable to confiscation
- documents or things relevant for proceeding under this Ac
Can be executed only if the requisite goods/documents is not produced despite requisitioning
Stop and Search Conveyance
- Conveyance includes motor vehicle, aircraft, vessel, animal
- On sufficient reasons to believe that conveyance is being used for smuggling or carries smuggled items
Power extends to India and Indian Customs waters
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CHECKLIST
23 CHECKLIST Co-operate with the Investigating agencytaxpayer’s duty Information transparency – to avoid personal prosecution Resist coercive measures: Forced duty payment admission of fact/Guilt Retract Statement Expert Guidance –conceding/disputing legal position Periodic Review Re-affirm tax positions Formal Communication –Every action to be brought on record WHILE FACING CUSTOMS INVESTIGATION FOLLOWING ASPECTS TO BE CONSIDERED
KEY TAKE AWAY
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KEY TAKE AWAYS
- Strong Temperament to face investigation
- Nominating the appropriate person to face the investigation
- Proper identification / understanding of the procedure being undertaken (Audit v Investigation)
- Identification of other related statutes and respective governing agencies
- Awareness of the rights and duties of person / organization under investigation
- Maintaining balanced approach is the key
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