With the DRI’s adjudicating authority latest order, two show-cause notices issued by the customs intelligence agency in 2014 for alleged over-valuation of imports by Adani Group firms to the tune of Rs 5,467 crore have been dropped.
New Delhi: A customs intelligence agency’s investigation into an Adani Group firm for alleged inflation of imported power equipment has been dealt a second setback, with the agency’s adjudicating authority striking down a show-cause notice that had been issued in 2014.
Three years ago, Maharashtra Eastern Grid Power Transmission Company Ltd (MEGPTCL, a subsidiary of Adani Enterprises), Ahmedabad-based PMC Projects (India) Private Limited and Mauritius-based Electrogen Infra FZE (EIF) were accused of inflating the total declared value of imported power and infrastructure goods to the extent of nearly Rs 1,500 crore.
On Saturday, The Indian Express reported that the adjudicating authority of the Directorate of Revenue Intelligence (DRI), one K.V.S. Singh, dropped all “proceedings initiated against MEGPTCL, PMC and EIF.”’
“I drop the proceedings initiated against MEGPTCL, PMC, EIF, Vinod Shantilal Adani @ Vinod Shantilal Shah…” said Singh in an order issued on October 18.
In August 2017, The Wire, drawing on another Indian Express report, noted that the DRI’s adjudicating authority had struck down another, separate 2014 show-cause notice which alleged that various Adani group firms had over-valued the value of imported power goods to the tune of nearly Rs 4,000 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,” The Indian Express report notes.
According to The Indian Express, the DRI is still in the process of appealing the August order and plans on appealing the October order as well.
The latest show-cause notice which has been struck down alleges that MEGPTCL via PMC Projects made “extra remittances of Rs 1,493.84 crore, which has 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’”.
The modus operandi of the operation, according to the DDRI, was that while equipment was bought and shipped from original equipment manufacturers 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…”
The DRI notice also writes that “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 also alleged that 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 an arm’s 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.
According to Indian Express, Singh also dismissed the DRI’s key contentions that the “activities of PMC were managed, controlled and influenced by MEGPTCL” after examining documentation produced by PMC Projects which showed their “expertise” in handling projects
Senior journalist Paranjoy Guha Thakurta, who has covered the Adani case closely, has said that the government needs to act. “It needs to be seen whether the government of India will act and appeal the order. I believe they should do so immediately,” he told The Wire.