The adjudicating authority of the Directorate of Revenue Intelligence (DRI), K V S Singh, has struck down the second show-cause notice issued by the agency against an Adani Group firm for alleged 380 per cent inflation of imported power equipment.
Maharashtra Eastern Grid Power Transmission Company Ltd (MEGPTCL), a subsidiary of Adani Enterprises, Electrogen Infra FZE, UAE (EIF) and Ahmedabad-based PMC Projects (India) Private Ltd were accused of inflating the total declared value of goods imported under power and infrastructure heads, which attracts zero or less than 5 per cent duty, to the extent of Rs 1,493.84 crore.
“I drop the proceedings initiated against MEGPTCL, PMC, EIF, Vinod Shantilal Adani @ Vinod Shantilal Shah…” said Singh in the order issued on October 18. The Adani Group did not respond to phone calls and an email from The Indian Express seeking comment.
On August 22, The Indian Express had reported that the adjudicating authority had dropped the first show-cause notice of the DRI against two other Adani firms and Electrogen Infra that were allegedly accused of inflating the total declared value of imports to the extent of Rs 3,974.12 crore.
With the latest 293-page adjudication order, the two show-cause notices issued by the DRI in 2014 for alleged over-valuation of imports by Adani Group firms to the tune of Rs 5,467 crore have been dropped. In terms of value, the DRI cases against Adani firms were among the biggest the agency has handled in the last three years.
Sources said the DRI is still in the process of filing an appeal against the August order. “The latest adjudication order is along the same lines as the previous one. The agency is in the process of filing an appeal,” said sources.
The new order pertains to a case in which a DRI notice has alleged that MEGPTCL through PMC Projects made “extra remittances” of Rs 1,493.84 crore, which “have been siphoned off abroad to and for the benefit of their related party Electrogen Infra FZE, UAE, in the guise of import remittances by resorting to gross over-valuation of the imported goods”. DRI authority cancels proceedings against Adani Group companies
The DRI alleged that while the goods — power generation and transmission equipment — are being shipped directly to India by the original equipment manufacturers based in China and South Korea, “the documents are routed through an intermediary entity (Electrogen Infra FZE) created in UAE, who raised inflated invoices (inflating the values in original invoices of OEM several times) on the Indian company, against which money is remitted to UAE…”
According to the DRI notice, “Intelligence further suggested that from UAE, while the actual invoice value is remitted to respective OEMs, the extra amount is routed to the Mauritius account of the parent company of M/s Electrogen Infra FZE i.e. Electrogen Infra Holding Pvt. Ltd. The actual invoice value of the OEM is remitted to the supplier while the inflated extra amount is sent to accounts held in subsidiary/holding company established by Adani Group in Mauritius.”
The DRI notice alleged that the Mauritius entity, Electrogen Infra Holdings Pvt Ltd, is allegedly “controlled and managed by Vinod Shantilal Shah, alias Vinod Shantilal Adani”. Vinod Shantilal Shah is the eldest of the Adani brothers.
“…I find that MEGPTCL and EIF to be related entities through Shri Vinod Shantilal Adani @Vinod Shantilal Shah. I have come to the conclusion that the said relation has not affected the price and that the same was at arms length and have accepted the transaction value. Thus I find that the allegation that the impugned goods were over-valued does not hold water,” said Singh in his adjudication order.
In his order, Singh has also dismissed the contention of DRI that “the activities of PMC were managed, controlled and influenced by MEGPTCL” on the basis of literature produced by PMC Projects showing their “expertise” in handling projects. The 2014 DRI show-cause notice had examined bills of entry of 57 consignments imported and cleared by PMC Projects. In some import consignments, the agency has alleged at least 800 per cent inflation of the value of the goods.
“The DRI notice has relied upon evidences including back-to-back invoices between parties. Also the same adjudicating authority (Singh) has confirmed the charges in case of another importer in an overvaluation case. This calls for an enquiry,” said sources.
In his order, Singh said that the imports by Adani firms were made under Project Import Regulation 1986, where the full contract “needs to be assessed on completion” and “not the individual consignments” therefore “comparison of value of goods covered by each and every individual consignment was impermissible and unjustified in law because the SCN (show-cause notice) has not challenged the validity of the contract between MEGPTCL and PMC”.
“Nevertheless, I find that the contract had been allotted to PMC on the basis of International Competitive Bidding wherein the said bid was found to be the lowest,” said the order.