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DRI notices to ADAG, Essar, Adani for alleged violation of norms

The DRI has also sent the notices to the offices of the Customs located at ports from where these imports first entered India.

Written by Khushboo Narayan | Mumbai |
September 13, 2016 1:07:30 am

The Directorate of Revenue Intelligence (DRI) has issued show-cause notices to leading conglomerates Anil Dhirubhai Ambani Group (ADAG), Adani Group and Essar Group in two separate cases of alleged violation of norms, official sources told The Indian Express.

Sources said the DRI has issued notices of over Rs 350 crore to Reliance Infrastructure and Rosa Power Supply Co Ltd for alleged over-valuation of coal imports from Indonesia between 2011 and 2015. The DRI notices, sent to the two companies last week, asked them to explain why they should not be penalised for violating norms.

The DRI has also sent the notices to the offices of the Customs located at ports from where these imports first entered India.

Apart from the ADAG firms, the DRI is investigating at least 40 companies for overvaluation of coal imports, pegged at Rs 29,000 crore. Sources said in the first round of investigation, the agency is focusing on 25 companies. When comments were sought from the ADAG, its spokesperson said: “Reliance Infrastructure and Rosa Power have not received any notice from DRI.”

In the case of Adani Group and Essar Group, the DRI has issued notices of about Rs 1,000 crore and Rs 330 crore, respectively for alleged over-invoicing of imported capital goods (power generation and transmission), sources said. This is the second show-cause notice to the Adani Group and Essar Group in connection with the alleged over-invoicing.

Emails and phone calls to the Adani Group did not elicit any response. The official spokesperson of Essar Group denied the allegations levelled by the DRI. “All our procurements stand the strictest scrutiny of law. Our project cost compare favourably with similar projects built in India. We have received a show-cause notice by DRI, where the agency has sought our ‘clarification’ in context of invoicing issues. We are responding to the concerns raised in the notice,” the spokesperson said in an email response.

“As for your query, we reiterate that Essar group is strongly committed in adherence to law of the land. We wish to point out that all the procurements are from overseas suppliers and were made at arm’s-length price which were not only at the lower quadrant compared to peer projects built in India but also certified to be reasonable by reputed technical consultants. The so-called margins or the excess payments as the case may be, worked out by the DRI, do not take into account all the costs incurred by the overseas supplier, thereby resulting in highly inflated margins as against the normative net margins made by the supplier, thus leading to erroneous conclusions,” the spokesperson said.

“As the supplies are in the nature of project imports, suppliers had provided substantial services to the importing companies by expediting services, ensuring quality standards, timely monitoring and inspection/ testing, providing the performance guarantee to the Indian importing companies, and would have incurred substantial financial and other costs in providing these services. The net margin earned by the supplier are reasonable and in line with similar supplier margins. This is only a show-cause notice and we are confident that during the proceedings, the explanations provided will be considered satisfactory by the adjudicating authorities,” the spokesperson said.

In May 2014, the DRI first issued a show-cause notice of over Rs 5,000 crore to three Adani Group firms — Adani Power Maharashtra, Adani Power Rajasthan, Maharashtra Eastern Grid Power Transmission Company – alleging that the firms inflated the declared value of the goods imported under power and infrastructure heads, which attracts zero or less than 5 per cent duty to Rs 9,048.8 crore. The DRI said that the actual value of these goods was only Rs 3,580.80 crore. Later in March 2015, the probe agency slapped a Rs 2,600-crore notice, alleging over-invoicing of imported capital goods by three companies of Essar Group — Essar Oil, Essar Power and Essar Projects.

The DRI is also investigating six Adani Group firms and two Essar Group firms for alleged overvaluation of coal imports from Indonesia.

In March this year, the DRI issued a general alert to its field formations across India, outlining the modus operandi of over-invoicing of coal imports from Indonesia. The DRI alleged that money was being “siphoned” outside the country and the electricity generating firms were availing “higher tariff compensation based on artificially inflated cost of the imported coal”.

The DRI alleged that Indonesian coal was directly imported from ports there to India while import invoices were routed through one or more intermediaries based in Singapore, Hong Kong, Dubai and British Virgin Islands to artificially inflate its value.

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