ED leads finance ministry pack, but conviction rates offer cold comfort

The finance ministry houses a dozen or so investigative agencies but the large pendency of cases in various courts and tribunals raises questions about where their efforts are headed

One of the lesser-known facts about the Finance Ministry is that it oversees at least about a dozen investigative agencies, including the Enforcement Directorate (ED), the Financial Intelligence Unit—India (FIU-Ind), the Directorate General of Goods and Service Tax Intelligence (DGGI), the Central Economic Intelligence Bureau, the Directorate of Revenue Intelligence (DRI) and the Serious Fraud Investigations Office (SFIO), among others.

 

What sets the ED apart from the others at the stage of prosecution is that it is the only investigative agency that can investigate and enforce the Prevention of Money Laundering Act (PMLA), leading other agencies to ask for similar powers to prosecute such cases.

 

Currently, there are two ways to examine the importance of the work of these investigative agencies. The first of those is the statement prepared in the ministry's annual report, which was tabled in Parliament last month. Not surprisingly, the ED took the lion's share of the space allocated to the 50 or so divisions in the ministry.

 

The other way is to consider the list of what happens when these agencies, including the ED, approach the courts following an investigation: not only is the list of pending cases long, it threatens to stay that way. An exercise conducted in September 2024 to cut frivolous cases has reduced the pendency by less than a quarter percent - a paltry 0.13 per cent, to be precise - of the total number of such disputes pending in various courts and tribunals.

 

To reduce the number of pending cases, both the direct and indirect tax departments had in late 2024 raised the monetary limits for appeals which could be contested. However, only a mere 214 cases out of 153,464 were discovered where the two departments were able to close the files.

 

To be fair, all cases do not emanate from investigative agencies, yet the overall numbers tell a similar story of delays at the judicial levels. Cases from ED face the same delays as those from other agencies, which form a sizable phalanx under the government of India. For companies, large and small, high net worth individuals, and others with large contested tax liabilities, these are the agencies where the cases could often land.

 

But few can match the reach and breadth of the ED. In a response to the Parliament, the revenue department of the finance ministry has designated the ED's role as primus inter pares, so to speak.  “The Directorate of Enforcement (ED) is the premier law enforcement agency of the Government of India," the Parliamentary reply said bluntly. This makes the ED's position superior to not only the other investigative agencies of the ministry but conceivably that of the Central Bureau of Investigation (CBI), as well, as far as financial crimes go. This primacy has, possibly extracted a cost, primarily a decline, even dissolution, of inter-agency cooperation meetings.

 

It is interesting that a significant interface of these agencies with the political executive at the formal level, the annual exercise where officers from these departments along with those of other arms of the tax department met each other, has fallen into disuse.

 

Going back to FY22, the annual practice of officers from these departments meeting the finance minister every April to set annual targets and iron out glitches has been given a miss.  “These meetings did not happen even when the scheme of Faceless Assessment was introduced in FY23 so we are not surprised when the new Income Tax Act has just been introduced, consultations with the consequent role of the investigative agencies have not happened too”, a top official of the tax department told Business Standard.

 

Instead of such a stock-taking exercise, the current practice, developed by both the Central Board of Direct Tax (CBDT) and the Central Board of Indirect Taxes and Customs, for conversing with these agencies has become mostly digital. These offices submit their annual plans by the beginning of the April and the consequent nodal officer in the ministry holds consequent regular briefings with them.

 

As a result, gaps have opened up, loosening inter-agency coordination among them. Into one of those gaps has fallen the Economic Intelligence Council (EIC), headed by the Union finance minister, which is also designated as the apex forum for inter-agency coordination.

 

These meetings are steered by another agency, the Central Economic Intelligence Bureau (CEIB), also under the department of revenue. Based on the directions of the EIC, the CEIB works with a standing group known as the Working Group on Intelligence Apparatus, under the chairmanship of the revenue secretary. The working group monitors the progress on decisions taken by the EIC, monitors the working of similar groups at the state levels, and also examines the extent of intelligence sharing “on the basis of inputs provided by various agencies including the FIU”. However, the last time the working group met was more than two years ago in March 2023, as per CEIB’s published data on its website.

 

Instead, all such data collection has now passed into the hands of the ED. It maintains a Crime and Criminal Tracking Network & Systems (CCTNS) as a national database to “enable law enforcement agencies to share and access information about crimes and criminals, facilitating better tracking and investigation”. But what happens to these cases when they land up in courts is another matter.