The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai has allowed the appeal filed by Delhi-based Knowledge Infrastructure Systems Pvt Ltd that is accused of over-invoicing Indonesian coal imports by the Directorate of Revenue Intelligence (DRI) in what is a big setback to the investigations into the alleged over valuation of coal imports from Indonesia by Indian firms..
The CESTAT on Friday in an open court allowed the appeal of Knowledge Infrastructure. However, it yet to upload the full order on its website.
Knowledge Infrastructure had moved CESTAT after the adjudicating authority of the DRI had upheld the findings of the agency and imposed a penalty of Rs 17.5 crore and Rs 1.25 crore on Knowledge Infrastructure and its promoter respectively for mis-declaration of coal quality and its imports.
The case pertains to allegations of the DRI that a wholly-owned subsidiary of Knowledge Infrastructure in Singapore first bought the coal from a Switzerland-based firm and then the same consignment was sold to two intermediary firms, which then “dispatched the coal to the Indian firm. In these transactions, the price of coal sold by the two intermediary firms was “substantially higher” than the price at which the Singapore subsidiary had bought it from the Switzerland firm. Knowledge Infrastructure has denied all the allegations of the DRI.
The decision of the tribunal in the Knowledge Infrastructure case assumes significance as it will set a precedent for over two dozen prominent coal importers including a few firms of the Adani Group, Essar Group and the Anil Ambani Group that are being probed for alleged overvaluation of Indonesian coal imports, collectively pegged at Rs 29,000 crore.
The DRI has alleged that several traders are directly importing Indonesian coal but the invoices are “routed through one or more related /associated intermediary firms based abroad” after artificially inflating its value. To justify the inflated price, “manipulated test reports” of the quality of coal is submitted to PSUs and Customs. This coal is then supplied to public power generation firms at the “artificially inflated import price and the inflated price is remitted from India to the intermediary firms abroad which remit only the actual price to the suppliers of the coal and the balance is siphoned off elsewhere”.