HC Orders CBI, DRI Probe on Adani, Essar Over-Invoicing

New Delhi, Dec 19 (PTI) The Delhi High Court on Tuesday asked the CBI and the Directorate of Revenue Intelligence (DRI) to "meticulously and expeditiously" look into allegations of over-invoicing of imports by various power generating companies in India, including the Adani Group and the Essar Group, to ascertain the factual position and take appropriate action against the erring firms.

The high court passed the order while disposing of two petitions filed in 2017 by NGO Centre for Public Interest Litigation (CPIL) and former bureaucrat and social activist Harsh Mander.

The petitioners had referred to show cause notices issued by the DRI dated May 15, 2014 and March 31, 2016 that spoke of various entities of the two corporate giants indulging in gross over-valuation of imported goods (zero or low duty rated) to siphon off money abroad from public listed companies.

“In the peculiar facts of these cases, this court finds it appropriate to direct the respondents to meticulously and expeditiously look into the allegations of the petitioners to unearth actual factual position and take appropriate actions against the erring companies, if any, as per law,” a bench of Justices Suresh Kumar Kait and Neena Bansal Krishna said in its 54-page judgment.

The CPIL, represented by advocate Prashant Bhushan, sought a probe by a Special Investigating Team (SIT) into DRI reports about several private power generating entities engaging in over-invoicing.

Over-invoicing involves inflating the value of goods or services to make it appear that the companies are spending more on imports than they actually are. Over-invoicing is used for several purposes, including to evade taxes or customs duties.

Mander, in his plea, sought a direction to the Central Bureau of Investigation (CBI) to probe cases of over-invoicing by power companies, as reported by DRI, or to set up an SIT under a retired judge of the Supreme Court to go into it.

He also sought a direction to the 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 the Customs Authority of India (CAI) and to direct the 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.

The counsel for the DRI submitted due to the voluminous nature of cases, involving several stages and multiple countries, the process of investigation is extremely time-consuming and complicated, but the agency was taking all steps for their expeditious completion.

The court perused the status report filed by the DRI and noted that multiple proceedings are pending before the Customs Excise and Service Tax Appellate Tribunal (CESTAT) and other forums.

It noted the CBI has informed that two cases were registered against the erring companies and, in the first case, preliminary enquiry has been concluded. Investigation is in progress in both the cases, it noted.

The CPIL's counsel had earlier informed the court that the DRI had in March 2016 identified 40 power companies that over-invoiced coal imported from Indonesia.

The CPIL has alleged that coal and equipment required for power generation in India are bought from Original Equipment Manufacturers (OEMs) through a foreign intermediary company which is a wholly controlled/ owned subsidiary of Indian power companies. While the invoices generated by OEMs reflect the actual price of the product, those generated by the intermediary companies on Indian power entities are inflated "almost to the extent of 400 per cent".

Subsequently, the illegally inflated cost borne by Indian power companies is passed on to the consumers who pay higher tariffs on electricity consumption, it alleged.