The Supreme Court has admitted a case moved by the Directorate of Revenue Intelligence (DRI) against a September 2018 order of the Bombay High Court that stayed the DRI’s use of Letter Rogatory (LR) from foreign jurisdictions in its ongoing probe into alleged over-valuation of Indonesian coal imports by a few companies of Adani group.
Reportedly, the apex court would begin the hearings on February 26 in this matter.
In the first half of 2018, DRI had sent at least 14 LRs (a formal request seeking judicial assistance) to foreign countries including Singapore, Dubai and Switzerland, as part of its ongoing investigation into financial fraud by companies and entities in power sector. According to reports, DRI is probing at least 40 companies, including companies of the Adani Group, two companies of the Anil Ambani’s Anil Dhirubhai Ambani Group (ADAG) and two Essar Group firms, for alleged overvaluation of coal imports from Indonesia between 2011 and 2015.
Challenging the Bombay High Court order, in its special leave petition against Adani Enterprises Ltd and Adani Power Ltd with the apex court, the DRI has reportedly argued that the high court order will defeat its investigations in all cases pertaining to the violations of customs norms.
DRI was prompted to take up the LR route in its investigations as state-owned banks including State Bank of India and Bank of Baroda among other banks had declined to share information of financial transactions lying with their overseas branches of the companies in question, which halted its investigation.
On August 28 last year, Singapore High Court agreed to grant permission to the DRI to access the documents related to financial transactions of the Adani Group for its probe. Following this, the group had approached the Bombay High Court which granted an interim stay on all LRs issued by the DRI.
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As per several show cause notices (SCN) issued by the DRI, a set of giant companies in the power sector have allegedly resorted to over-invoicing of imports of coal and power generating equipment, cumulatively amounting to more than Rs 50,000 crore. In simple words, for instance, accusations against Adani Group (in the case mentioned above) has been that its companies imported coal at inflated costs by billing through intermediaries in tax havens, and siphoned thousands of crores.
In 2014, the DRI issued two SCNs to the Adani Group of Companies, accusing them of indulging in over-valuation of imported power equipment to the Rs 5500 crore.
Consider this: According to a CAG report on Tamil Nadu’s Public Sector Undertakings, one state-owned company, Tamil Nadu Generation and Distribution Corporation (TANGEDCO), incurred heavy losses amounting to Rs. 5786.82 crore during 2012 and 2017, mainly because of its irregular policies in importing coal from foreign companies. The CAG revealed that TANGEDCO made an excess payment of amount Rs. 813.68 crore to the several coal supplier companies including one unnamed company of the Adani group, Knowledge Infrastructure Systems Private Limited (KISPL), Knowledge International Strategic Systems Private Limited (KISSPL) among others.
The DRI has been facing numerous challenges into this massive set of scandals. For example, despite substantial evidence, Central Board of Indirect Taxes and Customs, an adjudicating tribunal under the Department of Revenue of Finance Ministry, had several times in the last two years had ruled in favour of the companies halting the investigation of the DRI.
Delhi High Court is also hearing a petition filed by the NGO Common Cause, seeking a special investigative team (SIT) probe in all the cases of over-invoicing of imported coal and power equipment.
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