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DRI Writes to Five Countries on Alleged Over Invoicing by Big Corporates

  • In a fresh undertaking to the Delhi high court, the finance ministry has stated that it will pursue all cases relating to over-invoicing of imported coal and power equipment to their logical conclusion. The ministry said that its customs intelligence agency is in the process of issuing letters rogatory (LR) – which seek cooperation from countries like Singapore, Dubai and Switzerland – to establish cases of funds taken out of the country through over-invoicing of imports by some of India’s biggest corporate groups.Over a dozen corporate houses including the Adani group, Essar and Reliance Infrastructure are under the Directorate of Revenue Intelligence’s (DRI) scanner for allegedly inflating prices of imported coal and power equipment to divert and launder money.The ministry has made its stand clear in reply to a petition filed by social activist Harsh Mander to seek setting up of a special investigation team (SIT) to probe all cases of “over-invoicing committed by companies and entities engaged in power sector in order to cheat consumers, stakeholders, tax authorities and also committed in violation of various laws”.As per the affidavit submitted by the finance ministry in the court, the DRI in 2014 gathered intelligence that certain private companies in the power sector are involved in over-invoicing of coal and power generation equipment sourced from overseas.The gathered intelligence indicated that while Indonesian coal was being shipped directly from Indonesian ports to India, the invoices were routed through one more or more intermediaries in various countries such as Singapore, Dubai, Hong Kong and British Virgin Islands (UK) to artificially inflate value, the affidavit said.

  • The preliminary probe, according to the affidavit, shed light on the modus operandi followed by companies for inflating the price of imported Indonesian coal.Following that, show cause notices were issued to errant companies. The adjudication cases are now at different stages. While some cases are still pending for adjudication, appeals have been filed in the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) against the orders of the adjudication authority.The finance ministry’s affidavit said that due to the scale of imports and the involvement of a large number of parties, cases have been divided into multiple investigations. Given the involvement of multiple levels of intermediaries in most cases and their overseas locations, and because of the complex nature of transactions, the details of bank accounts of all parties in India and overseas involved need to be procured, said the affidavit. Since transactions have been carried out within and outside India, legal proceedings have been initiated to recover material evidence from abroad. The affidavit said that the DRI is in the process of collecting documents from banks in India and overseas. The affidavit further stated that the DRI has either issued or is in the process of issuing LRs to courts in countries like Singapore, Dubai, Hong Kong, Switzerland and Indonesia to seek documents and gather evidence under bilateral treaties with these countries.

  • There are 17 cases of over-invoicing of imports wherein the process of getting LRs has been completed and LRs are under due process in overseas courts, the affidavit said. There are two cases where applications seeking issuance of LRs are pending before Indian courts. And finally, there are nine cases in which the process is on to file applications in courts seeking issuance of LRs, the affidavit said.It further said that though investigation is complicated and time-consuming due to the voluminous nature of these requests and multiplicity of countries, the DRI is taking all steps to ensure their expeditious completion.In response to a questionnaire sent by The Wire, the Adani Group noted that it was “not aware of any such affidavit being filed by the DRI”.“However, we would like to reiterate that the Adjudicating Authority after dealing with in detail the Show Cause Notices (SCNs), set aside all the allegations and dropped the SCNs against Adani Power Maharashtra Ltd. (APML), Adani Power Rajasthan Ltd. (APRL) & Maharashtra Eastern Grid Power Transmission Company Ltd (MEGPTCL) & others. It has been held by the Adjudicating Authority that all the imports were genuine being undertaken at arm’s length and concluded that the value declared is correct and the value not required to be redetermined,” a statement from the company noted. However, as The Wire has reported, in the case of the Adani Group, the finance ministry has appealed against the clean chit given to the group’s firms by the adjudicating authority of the DRI and has stated that the adjudication order “suffers from several contradictions which indicate either total non-application of mind or recklessness in passing of that order”.

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