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DIRECTORATE: OF REVENUE INTELLIGENCE, 13, SIR VITHALDAS THAKERSEY MARG, OPP PATKAR HALL, NEW MARINE LINES, MUMBAI 400 020 PH: 022-22010115; 022-22010116 F.No. DRI/MZU/C1-224 (PMC)/2013 Dat 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 (ABL) through the contractor M/s PMC Projects (India) Private Limited - Show Cause Notioe under Section 124 of the Customs Act, 1962 - ree. aa 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 dty rated) to siphon off money abroad from public listed companies. ‘The modus-operandi followed was that for power sector import (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. Blectrogen Infra F2E, who raised inflated invoices (inflating the values in origingl invoices of OEM several times) on the Indian company, against which money is remitted to UAB. The activities of M/s Blectrogen Infra FZE, UAE are apparently controlled and managed by the Adani Group 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. 12 ‘On the basis of the said intelligence, enquiries were initiated into the import of goods invoiced by M/s Electrogen Infra FZ, UAE (here-in-after referred to as ‘EIF" also), which were found to have been imported and cleared int the name of M/s PMC Projects (India) Private Limited, (IBC No. 08050044 16) (here-in-after referred to as ‘PMC’ also}, having its registered office in Ahmedabad. 1.3 Information and documents were sought from PMC vide letter dated 05- 02-2013 bearing F.No.DRI/MZU/CI-224/2013/997 (RUD-C/1). The company, vide its letter RefNo, PMC/DRil/Reply/1394/13 dated 26.02.2013, (RUD-D/1) sought extra- time of 15 days upto 15.03.2013, on the plea of being unable to compile the Page 1 of 97 a 1n time frame, Subsequently, on or, about spresentative from its Mumbai offige, sought Jiminasy scrutiny tuned, ments. The said requisitioned information within the give 18/14.03-2013, the company through 4 re to submit certain documents in two box files, which on prel out to be incomplete and did aot contain all the requisitioned docu: retumed back forthwith to the representative, since they were not incomplete but submission of crucial documents also appeared to concerned documents were only found to be have been withheld. ‘This aspect was categorically pointed out to the doputed to thie Unit with the docuiments to co-ordinate the company's respons’, a8 ‘well as verbally to one INI «= employee of PMC based at Anmedabad. Despite the documents having been retumed back to the importer’ representative with opecifc instructions, PMC proceeded to forward the same incomplete documents in two box flee by post. These facis wore brought to the notice of th > 22: asset wien tne Unit op beat of PMG, through a letter dated 26-03-2013 (RUD-C/2) bearing F.No. DRI/MZU/CI- 1224/2013/ 1889, drawing his atiention to delay in furnishing of the requisitioned information & documents M4 [A specific request was made in the letter 26-03-2013, for immediate submission of the ell Contracts/Agreemenits entered into by EIF with one or more overseas firme/entities in connection with sourcing of ‘equipments/mechinery for eventual supply to PMC. Specific mention was made in the letter for submission of a copy of the Contract No. bearing reference no. 700003, purported to be the contract number for the Contract executed between EIF and M/s Hyundai Heavy Industries Co. Ltd. , South Koree, involving supply of high voltage transformers, shunt reactors ¢tc., mention of which was found in some of the documents forwarded by the importer in the two box files. 21 ‘The information and documents forwarded by PMC under cover of letter bearing Ref ; PMC/765/DRI/REPLY/1401/13 dated 12-93-2013 (RYD-D/2), were examined. From the submissions made by the importer in the said letter, it appeared that’M/s Maharashtra Eastern Grid Power Transmission Company Limited, having ite registered office at [HEB (ere-in-after referred to as ‘MEGPTCL’ also}, a wholly owned subsidiary of M/s Adani Enterprises Limited, (here-in-after referred to as ‘AEL’ also), the flagship company of the Adani Group, under Licence from the Maherashtra Electricity Regulatory Commission, Mumbai (here-in-after referred to as ‘MERC’ also), a electricity regulatory body of government of Maharashtra, was setting up 2 765 KV intra-state transmission network in eastern part of the State of Maharashtra, to evacuate power from the upcoming five power plants. The project apparently involved setting up of two765 KV S/C transmission lines in the corridor of Tiroda~ Koradi Ill - Akola I ~ Aurangabad, alongwith associated sub-stations and bays. It further appeared that based on an application dated 18-02-2010, made by MEGPTOL to the MERC requesting for grant of transmission licence under section 14 of the Blectricity Page 2 of 97 1T9 ‘SUMMARY OF INVESTIGATION ira From the investigations, as brought out in the foregoing paragraphs, MEGPTCUZIF; PMC: Shri Vinod Shatila Adani; shri A shi 6 o o¢ 5 TT © TIT re appear to have hatched a conspiracy to siphon ‘off money abroad by way of indulging in ever-valuaion im impor for project ubjet to loy or nil rate of Customs duly, 89 that the incidence/burden of duty on the over-valued amount i.¢ cost of fund transfer is minimal, 17a On'the overseas front, MEGPTCL appears to have engaged the services of a closely related party EIP to arrange for procurement from various OFMs for eventual supply to M/s PMC Projects (India) Private, another firm managed and controlled by the Adani Group. M/s Electrogen Infra:FZE; UAB acting as a front for PMC and MEGPICL, appears to have acted as an intermediary invoicing agent to inflete the invoice value in procurement of equipments and machinery required for installation in the tranemission line system from respective South Korean and Chinese QBMs. 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 ifthe goods are being supplied by EIF. Accordingly, back-to-back contracts were signed between PMC (the gontractor for MEGPTCL) and EIF, UAB in one hand anti ElF, UAE and the four OEMs in the other. But the facts that the back-to-back contracts of EIF with OFMs werg signed in India, chat too by Shri [I HHICL 5,328,309 Value as per agreement no. 700003 dated 05-10- g 2010 between M/s Hyundai Heavy Industries Co. ; Ltd. , South Korea and M/s Electrogen Infra Page 83 of 97 e® FZE. UA DIFFERENCE | 154,041,480 - ~jayas Wat oi [ 398% In 90 far ag the scope of supplies of Auto Transformers, Shunt Reactors 1d OPGW), two of the ita land spares thereof is congerned (excluding Disc Insulators an rtopees ofthe Adan! Group vie. Shvi III ex-cmotves of Pc an ll es ly in both the PRR = 000 coe icec! scone of sur and umder Secon 108 of above agreements, during course of their statements reco! the Customs Act, 1962 on 17-02-2014, thereby lending direct credence to the Joie above and the back-to-back nature of the corresponding values depicted in the Tal : two contracts, EIP proceeded to raise inflated invoices from time to time on PMC the contract no. 419703 dated 01-10-2010 inflation being to the tune of about 400% of OEM value. 175 In so far es supply of Dise Insulators and OPOW fiber, hardware and accessories are concerned, investigations have clearly brought out the back-to-back nature of the sale contracts as narrated in above. The gverall contract level over- valustion is depicted in the Teble-14 supra, which is reproduced below:- ble-14) Contract Price as per Agreements between PMC fs EIF vis-A-vis the Agreements teow & tes oust Deaseilion oreabta[Welea ta pat Aaracmeat Wo. [Pelee ai par | DUR Cae W OT 418703/ 01.10.2010 a» per | OBM (ws) Drenkeap elven at Schecule 2 | Agreements lee Sehedule Symmary | (USD) Sheet USD) ti a o or wi wi 1) Bias Tasers OTE] SUS al EC | THEA | TRENT — PASTE POET +210 KX) (crs 2 Opt FiberGrauna | Sub taD —PSAIST 000 | BRIT TET WERT TR ‘Wire with hardware and 17.6 Investigations have clearly brought out that for every procurement invoice raised on M/s Blectrogen Infra FZB, UAE by the respective OEM, M/s Blgctrogen Infra FZE in turn have asranged 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, Page 84 of 97 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 inetallation in the transmission system, there appears to have been no value-addition to the goods wt any point of time from the time of their shipment from the overseas load ports til their installation in India, Therefore, value addition in the form of valve inflation of about 400% (average) towards the supply of goods procured from Hyundai Heavy Industries Co, LAd. and about 800% (average) in the case of supply of goods procured from other OEMs viz, M/s Dalian Insulator Group Co. LAd., M/s Sediver Insulators (Shanghai) Co. Lid. anid M/s Suzhou Purakawa Power Optic Cable Co.Ltd appears arbitrary and Lunrealistc. MEGTPCL appears (o 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 Blectrogen Infra FZE. ant ‘The manner in which Consortium Agreement and the Supply Agregments for and on behalf of BIR, UAE were signed by employees of PMC obliterates the 1 Slstinetion between PMG & BI and establishes commonality of their interest. They appear to have acted as per a planned modus-operandi to siphon off money irom 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 eppears to have made extra remittances to the extent of the inflated amounts tp 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/e Electrogen Infra FZE, UAB, 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 infleted 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. 11s At the time of clearance of goods’ imported under S7 Bills of entry mentioned in Annexure A, MEGTPCL, through PMC, arranged for presentation of the inflated invoices of EIF to the custome authorities, on the basis of which they declazed 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 BIF did not represent the actual value of the goods. Investigations have clearly brought out thet BIF 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 J Signed agreements between BF and the OEM, for and ibchalf ofthe overseas entity BF 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 Page 85 of 97 executed between BIF andl the three OBMe showing the signature o ‘on behalfof ELF is given below me wornnss 7, he Fate kre Lave oxen is Apocuat fob syped In tle pscive emu tsch nyt ses ir sho wc ntract Signed between EIF and Hyundai Heavy Industries Co, In Tess THEREOF te Pacis tate hve causa ta Agreement Co be sped ie tr especie nares ws fe ay and yew Tat above Wien, ~ Contract signed between EIF an Page 86 0f 97 IN WIFRES6 THEREOF, the Parts nerto fave cuted thy Agreement Lobe sid i Ue ‘opera mesa oe Gy and yee fst abou Wen ntract sign: 0 ELF ani Im effect, therefore, it would only be reagongble to infer that PMG, on behalf of MEQPTCL, itself has entered into and executed two distinct sets of contracts with differing consideration amounts, for the same set of goods; one set of contracts entergtl into and executed by them with EIF with inflated consideration amounts and the other entered into and executed with respective OEMs, through their employee GMM or consideration: asics: high Feptenoaped! the. setanl ‘Transaction Value"of the goods. Therefore, being privy to the progurement price of the sods though their empioyee Shri MMMM Puc were aware a all materia) times that the price shown in the invoices raised by the front erpated by the Adgni Group i.e. EIF, was velue inflation on paper and did not represent the actual price of the goods, for reasons eet out above. 17.10 A chart summarising the relationship between various contracts pertaining to the goods.imported by MEGPTCL, through PMG for the transmission lis Project from various OEMs with invoices routed through Electrogen Infra FZE, UAE is shown below: - Page 87 of 97 a] wweerral (OWNER) (owner of Tansmisson Linas 8 Substations) Order Paced far Substations ard Transmission es et eae RAC Project (nea) i (CONTRACTOR) Cont dated 01.10.2010 signed by AGM and th fon behalf of She jot lootrogen Ina PZE, UAE. Bectrogon Infra F2E UAB (INTERMEDIARY) Tneoteing Agent Dudeng 10.2010, 29.10.2010 fivundal Heavy Dalian insulator | —[Sediver insulators] Suahou Furokewa Iiudustites Co,tad. | | Group Co. Ld (Shanghai) Co.Ltd. | | Power Optie Cable || @xn (OEM) (OEM) Co. Lad. . (OEM) * = () Shri IE ss on cuployce of PC Projects (India) Lid. and not of the INTERMEDIARY. (2) Three contracts between OEMs and the INTERMEDIARY signed by Shri rx Projects (India) Ltd on behalf of Intermediary. (3) ‘Three contracts between OEMs and the INTERMEDIARY signed in India as Shri Inever visited Dubai, UAE, (@) Shri ‘was also witness on behalf of the INTERMEDIARY’s signatory for contract signed between PMC Projects (India) Ltd and INTERMEDIARY. (g) The Contract between PMC Projects (India) Ltd and the INTERMEDIARY signed in Indiaas. ti iid Dubai, UAB to witness the contract signing. The chart clearly brings out the sham neture of the transactions between the intermediary and PMC. Page 88 of 97 rat Section 111(im) of the Customs Act, 1962 provides, inter-alia, that any goods which do not correspond in respect of value or in any other pesticuler with the entry made under this Act are lable to confiscation. In the present case, the actual value of the goods is forthcoming in the back-to-back invoiges raised by various OEMS paid by it, whereas the on M/s Blectrogen Infra FZE, being the procurement price invoices raised by M/s Electrogen Infra FZE on back-to-back basis on M/s PMC Private Limiited contain the inflated prices, arbitrarily raised, which do Projects (India) not represent the actual value of the goods. The provisions of Section 111(m) are equarely applicable in the present case, as the MBGPTCL through M/s PMC Projects (india) Pvt, Ltd. , have produced inflated invoices to the custom authorities on the strength of which the goods appear to have been assessed and cleared. The fact regarding the actual prices being available in the procurement invoices of M/s from jurisdictional customs UAE, has been suppresses sctrogen Infra authorities in India with a view to facilitate the over-invoiced clearances. Aecgrdingly, the goods imported and cleared under 57 bills of entry having aggregate valye of Rs. ¢ Annexure to Order dated 14-05- 1887,06,49,088/- crores (CIF) as detailed in t 2014 (RUD/D-76) issued under proviso to Section 119 (1) of the Customs Act, 1962 to the owner M/s MEGTPCL and the importer M/s PMC Projects (India) Private Limited, were seized under proviso to Section 110(1) of the Customs Act, 1962 with epecific directions that they should not remove, part with, or otherwise deal with the goods except with the previous permission of the proper officer. Page 89 of 97