Centre For Public Interest Litigation And Anr Vs Union of India And Ors (Delhi High Court)
Delhi High Court held that section 61 of the Electricity Act, 2003 governs the tariff rates of electricity based which is determined through transparent process and hence no interference is required.
Facts- The petitioners have preferred the present writ under Article 226 of the Constitution of India seeking probe by Special Investigating Agency (SIT) into reports of Directorate of Revenue Intelligence (DRI) against various private power generating companies for over invoicing carried out by them.
The petitioner- Harsh Mander as a Public Interest Litigation (PIL) mainly seeks a direction to respondent No.3-Central Bureau of Investigation to investigate cases in respect of over invoicing in power projects, as reported by the Directorate of Revenue Intelligence (DRI) OR to set up a Special Investigating Team (SIT) under a retired Judge of the Supreme Court of India to probe into the over invoicing. In addition, a direction is also sought to respondents No.1 & 2 i.e. Department of Revenue and Ministry of Power, to make declaration of international market price a mandatory part of the bill of lading/ shipping at the time of presentation of the documents to Customs Authority of India (CAI) and to direct respondent No.5- Reserve Bank of India (RBI) to make it mandatory for Banks to require declaration of international market price while granting credit/discount facilities on any bill of lading/ invoice for import in India.
Conclusion- Held that under Section 61 of the Act, it is the Tariff Regulatory, which govern the tariff based upon service for generation, transmission and distribution as well as cost of project, which is determined through transparent process of bidding under the guidelines of the Central Government. Hence, on this count no interference is required.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. In the above captioned first petition [W.P.(C) 8136/2017], petitioner No.1- Centre for Public Interest Litigation, claims to be a registered Society formed for the purpose of taking up causes of grave public interest and conducting Public Interest Litigation (PIL) and petitioner No.2 – Common Cause, also claims to be a registered Society for the purpose of ventilating the common problems of the people and securing their resolutions.
2. The petitioners have preferred W.P.(C) 8136/2017 under Article 226 of the Constitution of India seeking probe by Special Investigating Agency (SIT) into reports of Directorate of Revenue Intelligence (DRI) against various private power generating companies for over invoicing carried out by them.
3. The above caption second petition [W.P.(C) 8401/2017] under Article 226 of the Constitution of India has been preferred by the petitioner- Harsh Mander as a Public Interest Litigation (PIL), seeking a direction to respondent No.3-Central Bureau of Investigation to investigate cases in respect of over invoicing in power projects, as reported by the Directorate of Revenue Intelligence (DRI) OR to set up a Special Investigating Team (SIT) under a retired Judge of the Supreme Court of India to probe into the over invoicing. In addition, a direction is also sought to respondents No.1 & 2 i.e. Department of Revenue and Ministry of Power, to make declaration of international market price a mandatory part of the bill of lading/ shipping at the time of presentation of the documents to Customs Authority of India (CAI) and to direct respondent No.5- Reserve Bank of India (RBI) to make it mandatory for Banks to require declaration of international market price while granting credit/discount facilities on any bill of lading/ invoice for import in India.
4. As common issues have been raised in these petitions, therefore, with the consent of learned counsel for the parties, these petitions were heard together and are being disposed of by this common judgment.
5. The petitioners in the above captioned first petition claim to be concerned about the increasing trend of over invoicing by the private companies in the private sector with huge public interest ramifications. According to petitioners, the modus operandi adopted is that though the coal or equipments are shipped directly to India, however, the invoicing has been routed through a different company incorporated abroad, which is directly owned and controlled by the promoters of the project in India. The petitioners have classified the over-invoicing of cases as under:-
A. Over invoicing of coal imports by several companies
B. Over invoicing of equipment by several companies belonging to Adani Group
C. Over invoicing of equipment by Essar Group
A. OVER INVOICING OF COAL IMPORTS
6. The petitioners have relied upon DRI alert dated 30/31.03.2016 in respect of investigation scrutinizing coal imports and recovered two sets of test reports issued at the load port by two different testing agencies, one, showing lower Gross Calorific Value (GCV) and the other higher The one with lower GCV were in conformity with the contracts between subsidiary companies/ intermediary agents of Indian importers and Indonesian suppliers, reflecting the actual value of the coal. The reports with higher GCV submitted to the Indian Customs at the time of import was in line with the supply of contracts between subsidiary companies/ intermediary agents of the Indian importers and the power generation companies, reflecting the inflated value of the coal. The said DRI alert dated 30.03.2016, which names 40 companies is as under:-
“Directorate of Revenue Intelligence
7th Floor, D Block, Indraprastha Bhawan, Indraprastha Estate,
New Delhi-110002
Telefax: 91-11-23378058, 23370437
DRI F. No. DRI/HQ-CI/50D/Misc-33/2016-CI Dated: 30/31.03.16
To,
All the Principal Chief Commissioner of Customs
All the Principal Chief Commissioner of Customs & Central Excise
All the Chief Commissioner of Customs,
All the Chief Commissioner of Customs & Central Excise
All the Principal Commissioner of Customs
All the Principal Commissioner of Customs & Central Excise
All the Commissioner of Customs
All the Commissioner of Customs & Central Excise
All Principal ADG/ADG of DRI Zonal Units.
Sir/Madam,
Modus-Operandi/General Alert Circular No.11/2016-CII
Sub: Import of Coal from Indonesia by resorting to Over-valuation
Intelligence developed by the Directorate of Revenue Intelligence, indicated that certain importers of Indonesia Coal were artificially inflating its import as compared to the actual value. This modus-operandi of inflating the procurement price of imported coal was adopted by power generating companies and traders who supplied the imported goods to power generating companies. The objective of the overvaluation appears to be two fold (i) siphoning –off money abroad and (ii) to avail higher power tariff compensation based on artificially inflated cost of the imported Coal. The intelligence further indicated that while Indonesia Coal was directly shipped from Indonesian ports to the importers in India, the import invoices were routed through one or more intermediaries based in Singapore, Dubai, Hong Kong, British Virgin Islands (U.K.) etc for the purpose of artificially inflating its value.
2. From the investigation conducted so far, it appears that;
(i) Indonesian Coal was shipped directly from Indonesian ports to India whereas supplier‘s invoices are routed through one or more intermediary invoicing agents based in a third country, for the sole purpose of creating layers (typical of Trade Based Money Laundering) and artificially inflating its landed value;
(ii) Export value of Indonesian Coal (on FOB basis) is duly mentioned in the Form A-I prescribed under the ASEAN-India Free Trade Area (AIFTA) Rules, notified vide Notification No.189/2009-Cus (N.T) dated 31.12.2009 as a statutory Country of Origin document required for availing duty exemption.
(iii) Comparison of Form A-I values with tire values declared before Indian Customs at die time of import, at same level of Incoterms (GIF = FOB + Actual Freight and Insurance), in the cases under examination suggest huge over-valuation to the extent of about 50% to 100%.
(iv) The inflated invoices received in India were found to have been issued by intermediary invoicing agents based in Singapore, Dubai, Hong Kong, British Virgin Islands (U.K) etc. These intermediary firms appear to be either subsidiary companies of Indian Importers or their front companies.
(v) In a significant number of cases, two sets of Test Reports (certificate of Sampling and Analysis) issued at the Load Port by two different testing agencies for the same consignment of Coal have been recovered – one showing lower Gross Calorific Value (GCV) and the other higher GCV. The test report with lower GCV appears in conformity with the contract between subsidiary company or intermediary agent of Indian importer and Indonesian suppliers, reflecting the actual value of the Coal. The test report with higher GCV, which was submitted before Indian Customs at the time of import, appears to be in conformity with the supply contract between the power generation companies/ Indian importers and subsidiary company or intermediary agent of the Indian importers, reflecting the inflated value of the coal.
(vi) Prices of various grades of Coal in International market ex-Indonesia are reported on a weekly basis in reputed trade journals such as Argus, Platts, Indonesian Coal Index etc. These prices more or less match with the prices mentioned in the Form A-I as well as invoices raised by Indonesian suppliers which may be referred for scrutiny of declared value.
(vii) As per the provisions of AIFTA, Form A-I shall comprise of one original and three copies. The Original shall be submitted to the Customs authority at the port of importation. Duplicate shall be retained by the Issuing authority of the exporting country. Triplicate shall be retained by the Importer and the Quadruplicate shall be retained by the Exporter. It has been observed that the importers are submitting the Xerox copies of Form A-I instead of Original copy which has to be mandatorily submitted to Indian Customs. In some cases, the FOB value in Form A-I submitted before Indian Customs was found to have been masked/ obliterated in order to avoid detection/conceal the actual price. In some cases, the duty exemption under AIFTA, although eligible, was not claimed CO avoid submission of Form A-I and hence to avoid detection of the actual FOB value.
3. Details of the major 40 importers currently being investigated by DRI are enclosed in Annexure. The investigation by DRI in these cases shall cover imports till 31st March 2016. Imports subsequent to this date may be scrutinized from the angle of over- valuation by the field formations and a decision be taken on merit, without referring the matter to this office. The officers under your jurisdiction may also be sensitized to follow the procedure prescribed tor drawal and testing of samples and to scrutinize and verify the documents submitted by the importer with due care and diligence. Encl: As above.”
7. The petitioners have relied upon an Article dated 26.08.2017 published in The Indian Express to submit that against the action of DRI seeking certain information in respect of subsidiaries of the Adani group from Singaporean authorities, the Adani group has moved High Court of Singapore to submit that information asked by DRI should not be supplied. The petitioners have also relied upon order dated 12.2016 passed by DRI, Mumbai/ i.e. the Appellate Authority
“5.5.5 In view of the above discussion and findings, it is established beyond doubt that the Noticee perpetrated a fraud with careful planning which included purchasing inferior coal from M/s IMR Metallurgical Resources AG, Switzerland through its own subsidiary M/s Knowledge International Strategy Systems Pte. Ltd., Singapore. On the other hand, as per the modus operandi devised, M/s Knowledge International Strategy Systems Pte. Ltd., Singapore simultaneously entered into sham contracts with intermediaries viz. M/s Rescom Minerals Trading Ltd. and M/s Spring Traders Limited, and aligned the specifications of the coal in the contract to suit the requirements of MAHAGENCO. M/s Knowledge International Strategy Systems Pte. Ltd., Singapore obtained COSA reports which portrayed the specifications of the coal to be within the range required by MAHAGENCO. Thereafter, M/s Knowledge International Strategy Systems Pte. Ltd,, Singapore raised invoices through the intermediaries to show sale of coal which was already under the control of their own subsidiary. Thereafter, coal was re- insured even though the same was already insured till the discharge port by M/s IMR Metallurgical Resources AG, Switzerland. As per the modus operandi, the second sets of documents created ensured that documents pertaining to the original M/s IMR Metallurgical Resources AG, Switzerland – M/s Knowledge International Strategy Systems Pte. Ltd., Singapore contract, the M/s IMR Metallurgical Resources AG, Switzerland invoice, the 1st COSA, the actual insurance papers and the Form AI were no longer required to be submitted to the Customs. On the other hand, declarations were presented before the Customs on the basis of the Noticee and M/s Rescom Minerals Trading Ltd./M/s Spring Traders Limited contracts along with the 2nd COSA, the invoice issued by the two intermediaries and the fresh Insurance documents. Noticee also paid the appropriate Customs duty by foregoing the duty benefit available on import of Coal of Indonesian Origin. This voluntary act of duty payment was not a loss to the Noticee, since as per contract with MAHAGENCO the duty payment was reimbursable to the Noticee. However, as discussed and found above, by adopting the modus operandi the total invoice values between M/s IMR Metallurgical Resources AG, Switzerland and M/s Knowledge international Strategy Systems Pte. Ltd., Singapore increased from US $ 15686186.25 to US $ 18256222 i.e. the invoice values between M/s Springs Trade Limited/ M/s Rescom Mineral Trading Limited and Noticee. The said ® artificial inflation value in actual terms between the two sets of invoice values works out to us $ 2570035.75 and in percentage terms same works out to approx. 16.384% in respect of all the six consignments. I find that as discussed and found above, Noticee procured inferior quality coal by adopting the modus operandi and in the course of the transactions, manipulated the actual quality parameters of Coal thereby managing to artificially inflate the value of the coal. The Noticee by adopting the modus operandi made unscrupulous gains. The above discussion and findings categorically establish that the Noticee mis-declared the correct coal parameters including the vital component of GCV of coal by suppressing the actual GCV of coal recorded in the 1st COSA and presenting incorrect and wrong 2nd COSA to the Customs authorities as part of their declarations and thus had mis-declared the value of the imported coal in the Bills of Entry. I find that this mis-declarations culminated in contravention of various provisions of the Customs Act, 1962. Noticee violated the provisions of sub- section 4 of section 46 of the Customs Act, 1962 by mis-declaring the value and quality of the goods in the Bills of Entry even though they were aware that the same were not true. I find that since the actual value and quality/ grade/ parameters of the imported coal were not true and correct and also did not correspond to the entries made under the provisions of the Customs Act, 1962, the impugned consignments of Coal are liable for confiscation under the provisions of section 111 (m) of the Customs Act. 1962. Since the said acts of commission and omissions of the Noticee, Shri Rahul Bhandare and Shri Vipin Mahajan, rendered the impugned goods liable for confiscation under section 111(m) of the Customs Act. 1962, Noticee themselves, Shri Rahul Bhandare and Shri Vipin Mahajan are also liable for penalty under the provisions of section 112 (a) of the Customs Act, 1962. Since the consignments of coal had been imported on the basis of false and incorrect declarations, statements and documents, the Noticee themselves and both Shri Rahul Bhandare and Shri Vipin Mahajan are also liable for penalty under the provisions of section 114 AA of the Customs Act, 1962.
5.5.6 Therefore, in view of the above discussion and findings, pass the following order.
ORDER
6.1 I hold that the declared GIF value of the goods under the Bills of Entry and the quality parameters declared by the Noticee in terms of the provisions of Rule 11 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 are mis-declared and hence I reject the declared GIF value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. I order the re-determination of the value of the goods covered under the respective Bills of Entry in terms of Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 from Rs. 112,23,21,671/- to Rs. 99,65,57,483/-;
6.2 I order that the goods covered under the respective Bills of Entry are liable to confiscation under Section 111(m) of the Customs Act, 1962. Since the goods neither available for confiscation nor covered under any bond. I refrain from imposing redemption fine under Section 125 of the Customs Act 1962, however the Noticee M/s Knowledge Infrastructure Systems Pvt. Ltd. are liable for penalty;
6.3 I impose penalty of Rs. 12,50,00,000/- (Rupees Twelve Crore Fifty Lakh only) under Section 112 (a) read with Section 112(iii) of the Customs Act, 1962 on the Noticee M/s Knowledge Infrastructure Systems Pvt. Ltd.;
6.5 I also impose penalty of Rs. 5,00,00,000/- (Rupees Five Crore only) under Section 114AA of the Customs Act, 1962 on the Noticee M/s Knowledge Infrastructure Systems Pvt. Ltd.;
6.6 I impose penalty of Rs. 1,00,00,000/- (Rupees One Crore only) under Section 112 (a) read with Section 112(iii) and Rs. 25,00,000/- (Rupees Twenty Five Lakh only ) under Section 114AA of the Customs Act, 1962 on Shri Rahul Bhandare; and
6.6 I impose penalty of Rs. 20,00,000/- (Rupees Twenty Lakh only) under Section 112 (a) read with Section 112(iii) and Rs. 5,00,000/- (Rupees Five Lakh only) under Section 114AA of the Customs Act, 1962 on Shri Vipin Mahajan.
B. over invoicing of equipement by adani group
8. The petitioners have claimed that DRI investigated three projects of equipment imports by Adani Group, one relating to Transmission Line Projects and second, Power Plan Projects.
9. The Transmission Line Project relates to setting up of two 765 KV S/C transmission lines in the corridor of Tiroda-Koradi III-Akola II- Aurangabad, along with associated Sub Stations and Bays. In the year 2010, the Maharashtra Electricity Regulatory Commission Mumbai issued license to Maharashtra Easter Grid Power Transmission Company Ltd., which is wholly owned subsidiary of Adani The Maharashtra Easter Grid Power Transmission Company Ltd. (subsidiary of Adani Enterprise) further awarded the contract to PMC Projects India Pvt. Ltd. DRI later found that Maharashtra Easter Grid Power Transmission Company Ltd. (subsidiary of Adani Enterprise) was the de-facto importer even though they had engaged PMC as contractor for filing bills of entry and clearing of goods in India. PMC in turn had further awarded this Contract to ABB Ltd. Banglore and even one more contract was awarded by PMC to Electrogen Infra FZE (EIF), a UAE based company of Adani Group, who had procured equipment for the project from Hyundai Heavy Industries Company Ltd., South Korea. However, DRI found that for the same goods, the contract value between PMC and EIF was almost four times higher than the value of the contract between Electrogen Infra FZE EIF and Hyundai Heavy Industries Company Ltd. Though Maharashtra Electricity Regulatory Commission Mumbai claimed that the contract was awarded through a bidding process, but DRI report disbelieved it in the absence of any sound evidence. Accordingly, DRI issued Show Cause Notice dated 15.05.2014, relevant portion whereof reads as under:-
” F. No. DRI/MZU/CI-224 (PMC)/2013 Date: 15-05-2014
Subject: Gross over-valuation in the import of goods by M/s Maharashtra Eastern Grid Power Transmission Company Limited (MEGPTCL), a wholly owned subsidiary of M/s ADANI Enterprises Limited (AEL) through the contractor M/s PMC Projects (India) Private Limited – Show Cause Notice under Section 124 of the Customs Act, 1962 –reg..
1.1 Intelligence developed by Mumbai Zonal Unit (MZU) of Directorate of Revenue Intelligence (DRI) indicated that various entities of Adani group were indulging in gross over-valuation of imported goods (zero or low duty rated) to siphon off money abroad from public listed companies. The modus- operandi followed was that for power sector imports (Power generation:- Zero % duty and Power transmission:- 5% Basic Custom Duty), while the goods from various vendors (mostly South Korean &Chinese) are sent directly to India, the documents are routed through an intermediary entity created by them in the UAE, viz. M/s. Electrogen Infra FZE, 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 activities of M/s Electrogen Infra FZE, UAE are apparently controlled and managed by the Adani Croup through one or more of its representative firms and/or personnel. 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. M/s Electrogen Infra Holding Pvt. Ltd.
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4.3.11 Since the name of M/s PMC Projects (India) Private Limited appeared under the column ‘Notify Party’ invariably in each of above listed bills of lading pertaining to individual shipments by the respective OEMs, efforts were made to identify the import particulars for each such consignment i.e to ascertain the bill of entry no. & date and port of import, from the particulars available on individual bill of lading. Examination revealed that the aforesaid bills of lading were the bills of lading pertaining to 25 consignments (Sr. No. 1 to 25 of Table-3A) imported and cleared by PMC Projects (India) Private Limited, as evident from the same bill of lading numbers featuring in the table-3A, which provides details of consignments imported and cleared by M/s PMC Projects (India) Private Limited as per the EDI data base.
4.3.12 It, therefore, appears that while the importer utilized the above-listed bills of lading for customs clearance purpose in India, the value for the purpose of assessment appears to have been declared on the basis of back-to-back invoices raised separately by EIF on M/s PMC Projects (India) Private Limited. The respective OEM invoices and packing lists do not appear to be part of the documents produced by PMC to the jurisdictional customs authorities in India, on the strength of which cargo appears to have been assessed and cleared, as was also the case with procurements by EIF from M/s Hyundai Heavy Industries Co. Ltd.
4.3.13 It, therefore, prima-facie appears to emerge in the case of these transactions also that for each shipment imported by M/s PMC Projects (India) Private Limited where EIF is the intermediary invoicing agent and one of three OEMs is the shipper, there are two sets of invoices;-
i) OEM sale invoices of the three OEM firms (Copies of the sale invoices raised by each of the three OEMs viz. M/s Dalian .Insulator Group Co. Ltd., M/s Sediver Insulators (Shanghai) Co. Ltd. and Suzhou Furukawa Power Optic Cable Co. Ltd., China, on ElF along-with corresponding packing lists;
ii) Intermediary invoices of EIF, UAE (Copies of the back-to-back intermediary invoices/packing lists raised by EIF on M/s PMC Projects India Private Limited)-Invoices raised for supplies made in pursuance of Agreement dated 05-10-2010
4.3.15 From the figures shown in Table-10 above, it appears that the price charged by EIF in the invoices raised by it on M/s PMC Projects (India) Private Limited is substantially higher than the price for corresponding shipments charged by these OEMs. The invoice price of the respective OEMs appears to have been grossly inflated in the back-to- back invoice raised by EIF on M/s PMC Projects (India) Private Limited. It, therefore, appears that consignments shipped by the respective OEMs and imported into India by M/s PMC Projects (India) Private Limited on the strength of grossly inflated invoices raised by EIF had been cleared by resorting to gross over-valuation. It is apparent that while the goods were shipped from the respective OEMs to PMC in India directly, the invoices were routed through EIF, who merely acted as an intermediary invoicing agent for facilitating invoice inflation….
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15.4 Thus, the declared values in the impugned 57 bills of entry in total amounting to Rs. 1887,06,49,088/-(CIF) declared on the basis of inflated invoice prices of the intermediary invoicing agent EIF, do not represent actual value of the goods as has been brought out by the investigation, as set out above, and the said declared assessable value is required to be rejected under the provisions of Rule 12 of the CVR, 2007 and re-determined under the provisions of Rule 4 of the CVR-2007 read with Section 14 of the Customs Act, 1962, on the basis of price available in the back-to-back OEM invoices raised on the intermediary invoicing agent i.e. EIF. Accordingly, the aggregate re-determined CIF value of the goods imported against the 57 bills of entry works out to Rs. 393,21,76,604/-(CIF)as worked out in columns K of Annexure A, on the basis of prices in OEM invoices as against the declared CIF of Rs. 1887,06,49,088/-(CIF).The quantum of over-valuation arising out of the back- to-back inflated invoicing by the intermediary-EIF on PMC, is shown in column N of Annexure A, which works out to Rs.1493,84,72,484/-(Rupees One thousand four hundred and ninety three crores, eight four lakhs, seventy two thousand four hundred eight four only which appears to have been siphoned off out of India by MEGTPCL through PMC to their overseas intermediary invoicing agent and related entity EIF, on account of invoice inflation, in the guise of outward remittances as consideration for the imports.
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16.6.3 In this case, value of the imported goods has been over-stated by the importer for the purpose of siphoning off money from India to their related entities overseas. The importer and owner of the imported goods has thus declared value which to the best of their knowledge and belief was incorrect and was over-stated, as brought out here-in-above. They have also subscribed a declaration of the truth regarding the statement of value which declaration appears to be false due to over-valuation of the goods. Also, the importer has made, signed and used and/or caused to be made, signed and used the declaration, statement and invoices of EIF for the purpose of importing the goods knowing or having reasons to believe that such declarations, statement and invoice were false in respect of the value stated therein. Further, the importer has employed corrupt or fraudulent practice of over-valuation for the purpose of importing the impugned goods.
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20.1 Now therefore, M/s Adani Power Maharashtra Limited; Adani Power Rajasthan Limited;
Electrogen Infra FZE, UAE; Shri Vinod Shantilal Adani @Vinod Shantilal Shah; Shri Jatin Shah & Shri Moreshwar Vasant Rabade – both Directors/Employees/Representatives of M/s Electrogen Infra FZE, with respect to goods imported by APML (301 consignements) through Nhava Sheva; ACC, Sahar and Mumbai Sea Port; are hereby called upon to show cause to the Commissioner of Customs (Import), Nhava Sheva having his office at Jawaharlal Nehru Custom House, Nhava Sheva, Taluka-Uran, Dist. Raigad, Maharashtra -400 707;-
(A) With respect to goods imported through Mundra Port (i.e 55 consignments – Sr. No. 1 to 44, Sr. No. 46 and Sr. Nos. 48 to 57) to the Commissioner of Customs, Custom House, Kandia, having his office near Balaji Temple, Kandla-370210
(I) M/s PMC Projects (India) Private Limited, the importer on record (as per Bills of Entry); and MEGPTCL who are the owner of imported goods and who have held themselves out as importer, are required to show cause as to why:-
i) the declared value (transaction value based on sham transaction between EIF and PMC) in respect of equipments & machinery imported under 55 bills of entry having cumulative declared value of Rs. 1867,24,06,746/- (CIF) (individual bill of entry-wise CIF value shown under column E of Annexure A) should not be rejected under Rule 12 of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962.
ii) the declared value in respect of equipments & machinery imported under 55 bills of entry listed, at Annexure A, should not be re- determined cumulative as Rs. 390,15,34,182/- (CIF)(individual bill of entry-wise GIF value shown under column K of Annexure A) on the basis of actual Transaction Value available in the OEM invoice prices shown at column J thereof, in terms of Rule 4 of the CVR, 2007 read with Section 14 of the Customs Act, 1962.
iii) Goods covered by 55 bills of entry, having aggregate declared value of Rs. 1867,24,06,746/-(CIF),as detailed at Annexure A to this notice, imported & cleared in pursuance of Agreement No. 415703 dated 01- 10-2010 by PMC, for and on behalf of the owner M/s MEGPTCL, seized under Order dated 14-05-2014 issued under proviso to Section 110(1) of the Customs Act, 1962 should not be confiscated under 111(d) and Section 111(m) of Customs Act, 1962.
iv) Penalty under Section 112 (a) & (b) of the Customs Act, 1962 should not be imposed on each one of them in relation to the above
v) Penalty under Section 114AA of the Customs Act, 1962 should not be imposed on them.
II) M/s Electrogen Infra FZE, UAE; Shri Vinod Shantilal Adani @Vinod Shantilal Shah and Shri Jatin Shah, Shri Mitesh Dani and Shri Mehul Jani, all employees of M/s Electrogen Infra FZE, UAE are required to show cause to the adjudicating authority as to why penalty under Section 112 (a) & (b) and Section 114 AA of the Customs Act, 1962 should not be imposed on each one of them in relation to the goods imported under the 55 Bills of entry.
III) Shri Jaydev Mishra, Associate General Manager, and Shri Dharmesh Parekh, Senior Manager, both employees of M/s PMC Projects (India) Private Limited, are required to show cause to the adjudicating authority as to why penalty under Section 112 (a) & (b) and Section 114AA of the Customs Act, 1962 should not be imposed on each one of them in relation to above goods imported under 55 Bills of entry.
B) With respect to goods imported through Nhava Sheva Port, (i.e two consignments – Sr.No. 45 and 47 of Annexure A) to the Commissioner of Customs, Commissioner of Customs, (Port Import), Jawahar Lai Nehru Custom House, having his office at Nhava Sheva, Taluka Uran, District Raigad, Maharashtra-400707
(I) M/s PMC Projects (India) Private Limited, the importer on record (as per Bills of Entry); and MEGPTCL who are the owner of imported goods and who have held themselves out as importer are required to show cause as to why ;-
i) the declared value (Transaction Value based on sham transaction between EIF and PMC) in respect of equipments & machinery imported under the two bills of entry (Sr. No. 45 & 47 of Annexure A) having cumulative declared value of Rs. 19,82,42,342/-(respective bill of entry- wise value shown at sr. No. 45 & 47 of column E of Annexure A),should not be rejected under the provisions of Rule 12 of the CVR, 2007 read with Section 14 of the Customs Act, 1962.
ii) the declared value in respect of equipments & machinery imported under two bills of entry (Sr. No. 45 and 47 of Annexure A) should not be redetermined cumulatively as Rs.3,06,42,423/- CIF (respective bill of entry wise value as shown at Sr. Nos. 45 and 47 of column K) on the basis of actual transaction value available in the OEM invoice price shown at column J thereof, in terms of Rule 4 of the CVR-2007 read with Section 14 of the Customs Act, 1962.
iii) Goods covered by two bills of entry, having aggregate declared value of Rs. 19,82,42,342/- (CIF) as detailed at Sr.No. 45 & 47 of Annexure A to this notice, imported & cleared in pursuance of Agreement No. 415703 dated 01-10-2010 by M/s PMC Projects (India) Private Limited for and on behalf of the owner MEGPTCL, seized under Order dated 14-05- 2014 issued under proviso to Section 110(1) of the Customs Act, 1962 should not be confiscated under 111(d) and Section 111(m) of Customs Act, 1962.
iv) Penalty under Section 112 (a) & (b) of the Customs Act, 1962 should not be imposed on each one of them in relation to goods imported under the two bills of entry.
v) Penalty under Section 114AA of the Customs Act, 1962 should not be imposed on them.
II) M/s Electrogen Infra FZE, UAE, Shri Vinod Shantilal Adani @ Vinod Shantilal Shah, Shri Jatin Shah, Shri Mitesh Dani, Shri Mehul Jani, all employees of M/s Electrogen Infra FZE, UAE are required to show cause to the adjudicating authority as to why penalty under Section 112 (a) & (b) and Section 114AA of the Customs Act, 1962 should not be imposed on each one of them in relation to the goods imported under the two bills of entry.
III) Shri Jaydev Mishra, Associate General Manager, and Shri Dharmesh Parekh, Senior Manager – both employees of M/s PMC Projects (India) Private Limited, are required to show cause to the adjudicating authority as to why penalty under Section 112 (a) & (b) and Section 114AA of the Customs Act, 1962 should not be imposed on each one of them in relation to above goods imported under the two bills of entry.
22.0 Each of the above noticee, is required to submit a written reply to the Adjudicating Authority within 30 days from the date of receipt of this notice. In their written reply, the noticees may also indicate as to whether they would like to be heard in person. In case no reply is received within the time limit stipulated above or any further time which may be granted and/or if nobody appears for personal hearing, when the case is posted for the same, the case will be decided ex-parte on the basis of evidence on record and without any further reference to the noticees.”
10. In respect of The Power Plant Projects of Adani Group, the petitioners have averred that two subsidiary companies of Adani Power , namely, Adani Power Maharashtra Ltd. (APML) and Adani Power Rajasthan Ltd. (APRL), were awarded projects for setting up 3,300 (5 x 660) MW coal based power plant at Tiroda in Maharashtra and 1,320 (2 x 660) MW project at Kawai in Rajasthan. Both these companies further awarded the project to Adani’s own company namely, Electrogen Infra FZE, UAE (EIF), who procured the equipments mostly from Chinese and South Korean companies. The petitioners claim that the invoices between OEM and EIF were at genuine rates, whereas invoices between EIF and APML & APRL were inflated. Attention of this Court has been sought to following portion of the Show Cause Notice dated 15.04.2014 issued by the DRI :-
“17.0 SUMMARY OF INVESTIGATION
17.1 From the investigations, as brought out in the foregoing paragraphs, MEGPTCL;EIF; PMC; Shri Vinod ShatilalAdani; Shri Jatin Shah, Shri Mitesh Dani, Shri Mehul Jani of EIF and Shri Dharmesh Parekh & Shri Jaydev Mishra of PMC, appear to have hatched a conspiracy to siphon off money abroad by way of indulging in over valuation in imports for projects subject to low or nil rate of Customs duty, so that the incidence/burden of duty on the over-valued amount i.e cost of fund transfer is minimal.
17.2 On the overseas front, MEGPTCL appears to have engaged the services of a closely related party EIF to arrange for procurement from various OEMs for eventual supply to M/s PMC Projects (India) Private, another firm managed and controlled by the Adani Group. M/s Electrogen Infra FZE, UAE acting as a front for PMC and MEGPTCL, appears to have acted as an intermediary invoicing agent to inflate the invoice value in procurement of equipments and machinery required for installation in the transmission line system from respective South Korean and Chinese OEMs. As a part of the modus- operandi, though the goods were shipped directly to PMC/MEGPTCL in India by the overseas suppliers who were OEMs, but for enabling inflation of invoices, it was made to appear on paper as if the goods are being supplied by EIF. Accordingly, back- to-back contracts were signed between PMC (the contractor for MEGPTCL) and EIF, UAE in one hand and EIF, UAE and the four OEMs in the other. But the facts that the back-to-back contracts of EIF with OEMs were signed in India, that too by Shri Dharmesh Parekh, an employee of PMC, clearly shows that the said supply contracts were planned, conceived and executed in India by same set of persons and that it was a sham transaction.
17.3 The value inflation over the contract price of one of the OEM M/s Hyundai Heavy Industries Co. Ltd., South Korea with Electrogen Infra FZE, UAE in the back-to-back supply agreement executed by Electrogen Infra FZE, UAE with PMC Projects (India) Private Limited, clearly shows the contract level variation of about 400% as depicted in TabIe-5, supra, which is reproduced below;-
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17.4 In so far as the scope of supplies of Auto Transformers, Shunt Reactors and spares thereof is concerned (excluding Disc Insulators and OPGW), two of the employees of the Adani Group viz. Shri Mayur Shah, ex-employee of PMC and Vice President of M/s Adani Ports 86 SEZ Limited and Shri Jaydev Mishra, Associate General Manager of PMC have admitted to the identical scope of supply in both the above agreements, during course of their statements recorded under Section 108 of the Customs Act, 1962 on 17-02-2014, thereby lending direct credence to the corresponding values depicted in the Table above and the back-to-back nature of the two contracts. EIF proceeded to raise inflated invoices from time to time on PMC under the contract no. 415703 dated 01-10- 2010 inflation being to the tune of about 400% of OEM value.
17.5 In so far as supply of Disc Insulators and OPGW fiber, hardware and accessories are concerned, investigations have clearly brought out the back-to- back nature of the sale contracts as narrated in The overall contract level over valuation is depicted in the Table-14 supra, which is reproduced below:-
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17.6 Investigations have clearly brought out that for every procurement invoice raised on M/s Pectrogen Infra FZE, UAE by the respective OEM, M/s Electrogen Infra FZE in turn have arranged to raise and issue a back-to-back invoice on M/s PMC Projects (India) Private Limited, wherein they have inflated the OEM price commensurate with the average contract level value inflation and invoiced the goods at inflated prices. M/s PMC Projects (India) Private Limited arranged for the importation and clearance of the goods on the strength of the inflated invoices, showing prices which did not represent the actual value of the goods. As per arrangement, the goods were directly shipped from the load ports in South Korea and China, to ports in India, from they were eventually cleared by M/s PMC Projects (India) Private Limited for use in the project. Since the goods have been directly shipped from the load ports in South Korea &China and utilised directly for the purpose of installation in the transmission system, there appears to have been no value-addition to the goods at any point of time from the time of their shipment from the overseas load ports till their installation in India. Therefore, value addition in the form of value inflation of about 400% (average)towards the supply of goods procured from Hyundai Heavy Industries Co. Ltd. and about 800% (average) in the case of supply of goods procured from other GEM sviz. M/s Dalian Insulator Group Co. Ltd., M/s Sediver Insulators (Shanghai) Co. Ltd. and M/s Suzhou Furukawa Power Optic Cable Co. Ltd appears arbitrary and unrealistic. MEGTPCL appears to have arranged for remittances to M/s Electrogen Infra FZE, UAE towards the inflated prices in invoices raised by it, thereby enabling extra remittances to their related entity M/s Electrogen Infra FZE.
17.7 The manner in which Consortium Agreement and the Supply Agreements for and on behalf of EIF, UAE were signed by employees of PMC obliterates the distinction between PMC &EIF and establishes commonality of their interest. They appear to have acted as per a planned modus-operandi to siphon off money from India by inflating invoices.
17.08 MEGTPCL, being a wholly owned subsidiary of Adani Enterprises Limited, the listed flagship company of the Adani Group, through PMC appears to have made extra remittances to the extent of the inflated amounts to the tune of nearly Rs. 1493,84,72,484/- which appears to have been siphoned off abroad to and for the benefit of their related party M/s Electrogen Infra FZE, UAE, in the guise of import remittances by resorting to gross over-valuation of the imported goods. M/s Electrogen Infra FZE on its part, therefore, appears to have actively connived with MEGTPCL and PMC by arranging to raise invoices with inflated prices, being fully aware that the price charged in its invoices had been grossly over-valued and did not represent actual value of the goods at any point of time.
17.9 At the time of clearance of goods imported under 57 Bills of entry mentioned in Annexure A, MEGTPCL, through PMC, arranged for presentation of the inflated invoices of EIF to the customs authorities, on the basis of which they declared value of the goods. The importer held out that the value declared therein represented the Transaction Value paid or payable for the goods imported, being fully aware that the value declared by them on the strength of inflated invoices raised by EIF did not represent the actual value of the goods. Investigations have clearly brought out that EIF has all along only acted as front for inflating the invoice value as part of the modus-operandi. The admitted fact that an employee of PMC (Shri Dharmesh Parkeh) signed agreements between EIF and the OEM, for and behalf of the overseas entity EIF fortifies the allegation that EIF is only a front created by the Adani Group for intermediary invoicing. Scanned image of relevant portions of the three contracts executed between EIF and the three OEMs showing the signature of Dharmesh Parekh on behalf of EIF is given below:-
XXXX”
11. The petitioners have averred that premised upon the aforesaid Show Cause Notice dated 15.05.2014, the CBI registered an enquiry and to their knowledge, Adani group had taken credit facilities from different Public Sector Banks for the over-invoiced imports, however, the investigation was closed without even registration of the FIR. Thereafter, even DRI absolved the Adani Group of companies of all the charges laid in the Show Cause Notice dated 15.04.2014 and the Appellate Authority also ruled against the DRI and in favour of Adani Group of companies.
12. The petitioners have alleged that in the order passed by the learned Appellate Authority, there is no indication of process of international bidding for the global tender and it seems to have assumed that Electrogen Infra FZE, UAE (EIF) is an engineering, procurement and construction (EPC) contractor for a routine trunkey project for setting up a power plant, however, there is no evidence to show that Electrogen Infra FZE, UAE (EIF) has provided any such service, beyond invoicing of supply of goods and even the goods were delivered directly to India from the manufacturers. It is averred by the petitioners that the order of the Appellate Authority justifies over-invoicing because of any extended warranty and EPC services for an extended period of 10 years but still the over invoicing to the tune of 220 per cent is not justified.
13. The petitioners have further averred that the contract between EIF and Adani Group companies is a mere paper work to cover the mega scam, as the DRI had found that for every consignment there were two set of invoices, one raised by the actual supplier and the other raised by Electrogen Infra FZE, UAE (EIF) on APML and APRL and both the invoices had same number but the different values of the cost of equipment. The allegation of petitioners is that the order of Appellate Authority ignores the corporate fraud and rather, a formal attempt has been made to cover up the connections between different companies in the entire transaction chain.
14. The petitioners have alleged that EIF is 100 per cent owned by EIFI, Mauritius. EIFI is in turn 100 per cent owned by Asankhya Resources Pvt. Ltd (AR), incorporated in the Cayman Islands, a jurisdiction which is notorious for tax evasion through shell companies. Further, Asankhya Resources Pvt. Ltd is owned by Eagie Holding Ltd, which is a nominee shareholder in Asankhya Resources Family Trust, for which, Vinod Shanti Lal Adani, brother of Gautam Adani, and a promoter of the group holding company, Adani Enterprises Ltd, is the controlling authority of the trust. Also averred that within mere two months after signing of the agreement between Adani group and EIF, Mr Vinod Adani became a Director of EIH, which is the holding company of Electrogen Infra FZE, UAE (EIF) and the clear intention was that the contract would be among the companies owned and controlled by the Adani group. The agreement was signed a few months prior to the takeover of ownership by Adani allegedly to hoodwink the Indian authorities. Though Mr Vinod Adani claims that he was never involved in the day to day functioning of EIF, a wholly owned subsidiary of EIH, however, on 19.05.2011 the Board of Electrogen Infra FZE, UAE (EIF) authorized him to sign documents and thereby his connections with Electrogen Infra FZE, were not revealed. Also averred that two individuals who were employees suddenly resigned to join SME (as EIF was then known), at the time of signing of the agreement which makes it dear that the Adani group was sending personnel to EIF prior to its takeover by Vinod Adani himself. Moreover, the shares of Adani Power Ltd and/or Adani Enterprises Ltd were pledged to ICICI for the purpose of obtaining a loan for EIF. This establishes a strong relationship between the two entities.
C. OVER INVOICING OF EQUIPMENT BY ESSAR GROUP
15. With regard to over invoicing of equipment by Essar Group, the petitioners have sought to draw attention of this Court to the following paragraphs of Show Cause Notice dated 11.03.2015 issued by DRI:-
“31.10 In the instant case contracts with inflated consideration amounts were signed between GSF and each of the four entities EPGL, EPMPL, EOL & EPIL when they were related entities. It appears from the investigation that GSF was a creation of the Essar Group to act as an intermediary invoicing agent for facilitating invoice inflation. With the contracts signed and consideration thereof sealed, GSF merely raised inflated invoices from time to time on the concerned Essar entities for the proportionate value of goods being shipped in piecemeal commensurate with Contract level inflation while the goods were shipped directly by the OEMs to India. GSF appears to have received remittances towards value of invoices raised on the Essar Group entities in India, which included the over-valued portion of the price- the money siphoned off in the guise of import remittances.
31.11 Therefore, the foundation for siphoning off foreign exchange appear to have been by the Essar Group by having its entities viz. EPGL, EPMPL, EOL and EPIL enter into contracts with inflated consideration amounts with its related entity GSF. That the inflated contracts were signed at a point of time when the Essar Group held either absolute control or majority stake in GSF not only appears to show that it was done with the intent of siphoning off, but also that it was done to ensure that the Essar Group continues to be the sole beneficiary of the siphoned off amount in the foreign exchange, given the fact that goods were to shipped in piecemeal and invoices were to be issued for partial shipment of goods spread over a period of time.
XXXX
31.23 Even looking at the above case, from the perspective of normal commercial prudence and due diligence, payment of such huge amounts running into several hundred million US Dollars over and above the actual value of the goods appears to be unusual and highly irregular. When the OEM/actual supplier is selling the goods at a much lower value, no prudent business entity would pay so much more than the actual value of goods to an intermediary with no known bona fide value addition. In the instant case, the goods have been shipped directly to India, by the OEMs/Actual Suppliers, only Invoices were routed through GSF. That, EPGL, EPMP, EOL and EPIL/Matix knowing fully well who the actual suppliers were and where the goods are coming from (as the goods were shipped directly to them), have chosen to pay such an inflated value and that too on such a large scale, appears to be contrary to all commercial prudence and due diligence. It appears that no prudent business firm/entity can be expected to be paying such overvalued amounts for goods much more than their actual value (running into hundreds of millions US Dollars) except by collusion with fraudulent intent, which is apparent from the overall facts of the case as discussed above. It appears that EPGL, EPMPL, EOL and EPIL/Matix have colluded with GSF and have been aided and abetted by various persons (as discussed elsewhere) to import impugned goods by over- valuation following a well-planned modus operandi of Trade Based money laundering.
31.24 It appears that GSF is not an independent supplier, per-se, but merely an intermediary dummy agent for invoice, inflation for enabling siphoning off of money abroad as a part of the modus- operandi.‖
16. Attention of this was drawn to the following paragraphs of Show Cause Notice dated 22.08.2017 issued by DRI:-
“31.25 It also appears that in the guise of import of equipments and machinery for setting up power projects, oil refinery and fertilizer plant, EPGL, EPM/PL, EOL and EPIL/Matix the entities of the Essar Group, appear to have indulged in over- valuation of impugned imported goods. The actual value of the imported goods is Rs. 6698,44,56,910/- CIF, whereas the same have been invoiced at Rs. 9299,32,25,110/- CIF thus leading to an over- valuation Rs.2600,87,68,200/- at the GIF level which appears to. have been siphoned off abroad through GSF, an “intermediary in the UAE, which was controlled and managed by the Ruia family through EG.L/EGFL, the ultimate holding company of the Essar Group.”
17. The petitioners has averred that rampant and excessive over-invoicing committed by power companies has a direct impact on power tariff which is being paid by millions of consumers. Besides this siphoning of money amounts to cheat the shareholders and the tax authorities as well.
18. The petitioner in above captioned second petition [W.P.(C) 8401/2017] have also relied upon news reported titled “Power Equipment Imports Huge Sources of Black money: SIT”; Second Report of the Special Investigating Team (SIT) on Black Money issued by the Press Information Bureau dated 12.12.2014; an article titled “CBI Registers preliminary probe against Adani Group” dated 25.07.2021 to submit that the coal based power generating units in India are over valuing their imports of steaming coal with the objective of higher tariff fixation/ compensation and siphoning money abroad. It is averred that the Gross Calorific Value (the bench mark pricing of coal) is also being mis-declared in the Bill of Entry by manipulating / forging the documents. This process affects the quality of coal and in turn affects the power generation process.
19. It is averred by petitioner that the DRI developed intelligence and issued Circular F. DRI/HQ-CI/50D/misc- 33/2016-CJ dated 30.03.2016, titled “Import of coal from Indonesia by resorting to Over-Valuation”. According to petitioner, the modus operandi adopted is to create multiple layers of invoicing between the country of origin (mostly Indonesia and in some cases South Africa and Australia) and India. The intermediary firms based in other countries including Singapore, Hong Kong, Dubai etc inflate the prices of coal in their billing and declare inflated price in their billing to the Indian Firms.
20. According to petitioner, the quality parameters of coal including the moisture, sulphur and the Gross Calorific Value, are subject to sampling test and certification. Petitioner has averred that the coal syndicate is obtaining manipulated certificates from different laboratorities in the country of origin, showing inferior quality of coal, which is then corroborated by a similar manipulated certificate from the Indian Laboratories. When inferior quality of coal is being shipped by mis- declaring the GCV, the value is also accordingly over invoiced and the over- valued component is being siphoned abroad.
21. The petitioner has claimed that the tariff order issued by the Central Electricity Regulatory Commission takes into consideration various factors, such like, import cost of coal, when it is used in generation of electricity and is not domestically manufactured and when the coal is overvalued/ priced, its ramification pass to the end user, who have to pay more for every unit consumed by them.
22. In view of the above, the petitioner has relied upon Show Cause Notice dated 15.05.2014 regarding M/s Maharashtra Eastern Grid Power Transmission Company Limited and Show Cause Notice dated 11.03.2015 in respect of four Essar Group of Companies issued by the DRI indicating that corporate entities namely, Adani Group and Essar Group are indulging in gross over valuation of imported goods to siphon off money abroad.
23. According to petitioner, the modus operandi followed by both these corporate houses is identical. Power and infrastructure projects which are subject to zero or low rate of duty (5% or less), are being imported by inflating the value on paper. While the goods from various Original Equipment Manufacturers/ vendors (mostly Chinese & Korean) are being shipped directly to India, however, the documents are routed through intermediary entities created by them at Dubai, who raise inflated invoices on the Indian company, against which the money is remitted from India, from where the actual invoice value is remitted to respective supplier and the inflated extra amount is sent to the accounts held in subsidiary/holding company of these corporate Houses.
24. Petitioner has averred that even the Appellate Authority, despite having a clear finding of fraud, has made no such reference in the order dated 23.12.2016. Also submitted that prima facie offence committed by these corporate companies, are cognizable offences under the Indian Penal Code, Prevention of Corruption Act and Prevention of Money Laundering Act. However, the investigation carried out by CBI in the year 2014 has produced no results and so, direction be issued to carry out investigation by Special Investigating Team, monitored by this Court.
25. The petitioner has relied upon Hinderburg Research Report dated 24.01.2023 and OCCRP report of January, 2023 to submit that the promoters of Adani Group were engaged in manipulation of stock prices of their listed companies through one Global Opportunities Fund (Emerging India Focus Fund (EIFF) and EM Resurgent Fund (EMRF), which were managed by close associates of Vinod Adani.
26. The petitioner has also relied upon another article, titled as Adani family‘s partners used ‗opaque‘ funds to invest in its stocks-media group, dated 08.2023 published in the Reuters and another article titled as Secret paper trail reveals hidden Adani investors dated 31.08.2023 published in The Big Read in support of above submissions.
27. Learned counsel appearing on behalf of petitioners in the captioned petitions submitted that these unfair practices were observed by the DRI, accordingly vide letter dated 31.01.2014 to the then SEBI Chief and thereafter, an alert was issued that there may be stock market manipulations being committed by Adani Group of companies and that more documents be obtained from Mumbai Zonal Unit of DRI. However, SEBI suppressed and concealed this vital information and never conducted the investigation based upon the DRI alert.
28. The stand of respondent – DRI is that due to large number of parties and number of intermediaries, especially those located overseas and also due to complex nature of the transactions; the investigation was divided into multiple cases. During the investigation, Show Cause Notices were issued against certain companies and Letters Rogatory through jurisdictional courts to the Foreign Courts seeking retrieval of information. The respondent – DRI, in its affidavit dated 01.11.2019 placed on record the status of five cases mentioned in these petitions, which is as under:-
Annexure-A Status of Cases mentioned in the PIL
