THE adjudicating authority of the Directorate of Revenue Intelligence (DRI) K V S Singh has passed an order striking down all proceedings launched by the DRI against the Adani Group firms. These were accused of allegedly 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 3974.12 crore.
“I do not agree with the case of the department that the noticees APML (Adani Power Maharashtra Ltd) and APRL (Adani Power Rajasthan Ltd ) along with their related entity i.e. EIF (Electrogen Infra Holdings Pvt Ltd) had connived to over-value the value of the impugned goods,” said Singh in his 280-page adjudication order passed on August 22.
READ | September 13, 2016: DRI notices to ADAG, Essar, Adani for alleged violation of norms
Singh is Additional Director General, Adjudication, with the DRI in Mumbai.
Sources said the adjudication order passed by Singh will be reviewed by a committee of Chief Commissioners of Customs – Ahmedabad and Mumbai.The review order will have to be passed in 30 days and the DRI will not have any role in the review process.
However, the DRI can challenge the decision in the Central Board of Excise and Customs before Member (Legal).
In 2014, The Indian Express had reported that the DRI had issued a show-cause notice to a few firms of the Adani Group alleging over valuation of imported power equipment and “siphoning off of money abroad”.
READ | July 24, 2014: SIT, CBI to look into Adani Group case
The notice said 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 (M/S Electrogen Infra FZE, UAE) created in Dubai . The actual invoice value of the Original Equipment Manufacturer (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 notice also said that 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.
Subsequently, the DRI issued two more show-cause notices to seven other Adani group firms alleging similar overvaluation of imports in their transactions with EIF.
Dropping all charges against the Adani Group, Singh said that Adani Power Maharashtra Ltd, Adani Power Rajasthan Ltd, Electrogen Infra, Vinod Shantilal Adani and two officials of Electrogen Infra Jatin Shan and Moreshwar Vasant Rabade are “not liable to penalty under Section 112(a) and 114AA of the Customs Act, 1962”.
Singh’s order, sources said, is a big setback to the DRI investigation against the Adani Group and other top Indian firms that, according to the agency, have collectively over-valued such power equipment imports using an identical modus operandi to the extent of Rs 10,000 crore.
In fact, after DRI findings against the Adani Group firms, the CBI and the Supreme Court-appointed special investigation team (SIT) on black money had also begun looking into alleged over-invoicing of imports by these firms.
Overvaluation of power equipment is considered to artificially raise tariff values fixed by the Central Electricity Regulatory Commission (CERC) or the respective state regulatory commissions. This, ultimately, affects consumers as they end up paying a higher cost for power.
The latest order of the adjudicating authority has quashed DRI’s contention that Adani Group firms transacted with EIF, a related party, in order to inflate the cost of the capital goods from OEMs to siphon off money abroad.
“….even though I find that EIF and APRL to be related entities through Shri Vinod Shantilal Adani @ VinodShantilal 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 the order.
Singh has based his order on submissions made by Adani Group firms that a December 30, 2016 order of the Income Tax department, Ahmedabad, did not add to the total income of APRL and APML in the assessment of financial year 2012-13 and 2013-14, the year when the transactions with EIF took place.
Singh did not seek any further comments from the DRI on this issue. Before the adjudicating authority, the Adani Group firms denied all allegations made by DRI in its show-cause notice. Email and phone calls to the official spokesperson of Adani Group did not elicit any response.