‘Over-valuation’ of coal imports: DRI moves Supreme Court against Adani Group firms

The Indian Express|| Written by Khushboo Narayan | February 21, 2019

The Directorate of Revenue Intelligence (DRI) has moved the Supreme Court against a September 2018 order of the Bombay High Court that granted an interim stay on the use of Letter Rogatory (LR) by the agency to obtain information from foreign jurisdictions for its probe into the alleged over-valuation of Indonesian coal imports by a few firms of the Adani Group.

An LR is a formal request seeking judicial assistance from a foreign country in investigating an offshore entity.

The DRI has filed a special leave petition in the apex court against Adani Enterprises Ltd (AEL) and Adani Power Ltd and challenged the Bombay High Court order. The agency in its petition in the apex court argued that the high court order will defeat its investigations in all cases pertaining to violations of customs norms. Sources said since the Indian Customs deals with overseas transactions in case of both imports and exports, it will not be able to probe violations if the agency is not allowed to use LR to obtain information from foreign jurisdictions.

Adani Enterprises and Adani Power had submitted the reply in the case before a Supreme Court bench of Justice UU Lalit and Justice Indu Malhotra on February 19 and the apex court will now hear the case on February 26.

The official spokesperson of the Adani Group said, “Since the matter is sub judice, we are refrained from making any statement.”

The DRI is probing at least 40 companies including two companies of the Anil Dhirubhai Ambani Group (ADAG), two Essar Group firms and a few public sector power firms for alleged over-valuation of coal imports from Indonesia pegged at Rs 29,000 crore between 2011 and 2015. So far the DRI has issued 14 LRs to multiple foreign jurisdictions such as Singapore, Hong Kong, Switzerland, UAE among others seeking information in the alleged over-valuation of imports of Indonesian coal. Since the order of the Bombay High Court, the DRI’s investigations into these cases have come to a halt.

Last year in August, AEL filed a writ petition in the Bombay High Court to quash all Letters Rogatory (LRs) issued in 2017 by DRI to foreign countries including Singapore against a few Adani Group firms that are being probed for alleged over-valuation of Indonesian coal imports. AEL claimed the LRs were issued “without any notice and hearing the companies” and “no cognizance of any offence” under the Customs Act 1962 has been registered till now by the DRI against the Adani firms in the coal case.

In September 2018, the high court granted AEL’s prayer and restrained the agency “by themselves, their servants, agents and/or subordinates from in any manner whatsoever, directly or indirectly giving effect to and /or continuing to give effect to the Letter Rogatory issued by the learned metropolitan magistrate, Mumbai in relation to import of coal of Indonesian origin” till the hearing and final disposal of the case filed by AEL.

The DRI probe against Adani and other firms began, after the agency issued a general alert to its field formations across India in March 2016, outlining the modus operandi of over-invoicing of coal imports from Indonesia. DRI alleged that money was being “siphoned” outside the country and the electricity-generating firms were availing of “higher tariff compensation based on artificially inflated cost of the imported coal”. The DRI alleged that Indonesian coal was directly imported from ports in that country 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.

The agency, according to sources, found that inflated invoices received in India were issued by intermediaries, allegedly subsidiary companies of Indian importers or their fronts. The DRI alleged that in certain cases, the import value of Indonesian coal was artificially inflated by about 50 to 100 per cent by changing test reports which measure the calorific value of coal.

Artificial inflation of value of the imported coal increases the landed cost of coal, which is a primary fuel in coal fired thermal power plants. The higher tariff dispensed by the electricity regulator to the power generator enhances the cost of purchase of the power distributor, which in turn factors this artificially enhanced cost in its billing to consumers.