Adani Fiasco Continues: DRI moves to Supreme Court Challenges CESTAT Order
The government agency Directorate of Revenue Intelligence (in short DRI) in its late move has challenged the Customs, Excise
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Adani Fiasco Continues: DRI moves to Supreme Court Challenges CESTAT Order The government agency Directorate of Revenue Intelligence (in short DRI) in its late move has challenged the Customs, Excise and Service Tax Appellate Tribunal (in short CESTAT) in Supreme Court. The order of the CESTAT pertains to quashing of over-invoicing allegations levelled by the DRI against two Adani...
Adani Fiasco Continues: DRI moves to Supreme Court Challenges CESTAT Order
The government agency Directorate of Revenue Intelligence (in short DRI) in its late move has challenged the Customs, Excise and Service Tax Appellate Tribunal (in short CESTAT) in Supreme Court.
The order of the CESTAT pertains to quashing of over-invoicing allegations levelled by the DRI against two Adani group firms.
The CESTAT, Mumbai bench between July and August, while granting relief to three Adani Group subsidiaries- Adani Power Maharashtra Ltd. (in short APML) and Adani Power Rajasthan Ltd. (in short APRL) and Maharashtra Eastern Grid Power Transmission Company Ltd. (in short MEGPTCL), had upheld the adjudicating authority's order in of favor of Adani.
The DRI has filed a civil appeal before the Top Court against the CESTAT order on APML and APRL in November. Other than the Adani Group companies, three individuals are also included in the appeal alias Gautam Adani's elder brother Vinod Shantilal Adani.
The Hindenburg report had mentioned the DRI report alleging over-valuation by the Adani Group of companies. The report has also caused a huge fall in Adani Group's shares. The companies' market cap has been reduced to ₹10 lakh crore on 3rd February, 2023. It was Rs. 19.2 lakh crore on 24 January 2023.
The background of the case dates back to 2014 when DRI had issued a show cause notice (in short SCN) to APML and APRL alleging over-valuation. In August, 2017, the Adjudicating authority of DRI, set aside all the allegations and dropped the SCN. 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 is not required to be re-determined.
In July, 2022 CESTAT, Mumbai dismissed the appeal filed by the Customs Department and upheld the order passed by the Adjudicating Authority. The DRI in its 2014 show cause notice had alleged that Dubai based companies EIF, APML and APRL have a nexus.
It was alleged in the show cause notice that these companies have manipulated foreign exchange. The notice directed the respondents to justify why the declared value in respect of the goods imported by APML and APRL should not be rejected under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
According to the DRI's case, "...in the guise of import of power sector machinery and equipment, APML and APRL, the two entities of Adani Enterprises Limited, appear to have indulged in over-valuation of impugned imported goods. The actual value of the imported goods is Rs 3187.61 crore, whereas the same have been invoiced at Rs 7161.73 crore, thus leading to an over-valuation Rs 3974.12 crore which appears to have been siphoned off abroad through EIF, an intermediary at UAE, which is controlled and managed by Vinod Adani, one of the promoters of Adani Enterprises Limited (flagship company of the Adani Group)." The Adani Group has repeatedly denied that Vinod Adani is a promoter of the group.
However, the Tribunal observed that when documents are not admissible in evidence, the department cannot seek re-determination of value based on these documents.