Two cases adjudicated by the same officer in the Directorate of Revenue Intelligence (DRI), eight months apart, may have carried contradictory orders. This website carries an analysis by Varun Santhosh of the order of the Adjudicating Authority in the DRI case of alleged over-invoicing in the import of power equipment by subsidiary companies of Adani Power Limited to the extent of ₹3,974 crore. K V S Singh, Additional Director General, Adjudication, DRI, who had issued an order in the Adani Power case on 22 August 2017, had delivered another order on 23 December 2016, in a case of over-invoicing of imported Indonesian coal by Knowledge Infrastructure Systems Private Limited (KIS).

While the two DRI cases are different in their scope and nature, one pertaining to imports of power equipment and the other to imports of coal, the modus operandi of alleged over-invoicing of the imported commodity is almost identical. The uncanny similarity in the methods allegedly used to over-invoice imports (albeit of two separate commodities and products) makes one wonder about the logic used by the Adjudicating Authority to arrive at the conclusions that he did.

KIS is controlled by Rahul Bhandare, grandson of Murlidhar Chandrakant Bhandare, well-known lawyer, a three-term member of the Rajya Sabha between 1980 and 1994, and former Governor of Odisha from 2007 till 2013. Rahul Bhandare's mother Sunanda Bhandare was a renowned judge of the Delhi High Court. A former employee of the public sector National Thermal Power Corporation (NTPC) Vipin Mahajan worked as a director in KIS.

In this instance, KIS imported steam coal through intermediary firms based in Hong Kong and Singapore. The coal had been shipped from Indonesian ports, whereas firms such as Knowledge International Strategy Systems Pte, Singapore and Springs Trader Ltd., Hong Kong issued the invoices submitted by KIS for import of the shipments. The coal imported by KIS was supplied to thermal power stations of the Maharashtra State Power Generation Company Limited (Mahagenco) located at Bhusawal and Chandrapur.

The DRI investigation claimed that the Singapore company was a de facto subsidiary of KIS as its promoters held majority shares in it. The documents showing the actual value and grade of the procured coal were allegedly suppressed by the Singapore company and false documents were apparently created to show that higher grades of coal were imported with the difference in prices were routed through a Hong Kong based shell company. The DRI alleged that coal of lower grade was supplied to public sector power generation companies such as Mahagenco in Maharashtra at inflated prices with the collusion of the officers of the PSUs. This meant that the cost of the production of coal was shown very high to the electricity regulator, which was subsequently passed on to the consumer.

A show cause notice was issued by the DRI to KIS, Rahul Bhandare and Vipin Mahajan on 31 August 2016. The noticees filed a petition in the Bombay High Court which was not the normal course of relief available to them. The court asked the Adjudicating Authority to pass the order within three months. The authority, that is, ADG, DRI, Singh, on 23 December 2016, upheld all the charges proposed by DRI in its notice. Thereafter, again not preferring the routine appellate course of going to the Customs, Excise and Sales Tax Appellate Tribunal (CESTAT), the noticees filed another petition before the high court which, on 23 January 2017, directed the tribunal to decide on the appeal.

Returning to the order of the Adjudicating Authority, K V S Singh ruled on the side of the DRI investigation on two crucial points. First, the intermediary companies in Singapore and Hong Kong were in fact front companies of KIS and the relation between the promoters in India and these shell companies was established beyond doubt. Second, Singh ruled that there was clear proof of over-invoicing without delivering any justified value for the markup.

This is in complete contrast to the order by the same officer in the case of Adani Power where he took a sympathetic view of the group’s alleged misdemeanors relating to over-invoicing of power equipment and the deployment of an intermediary firm as a front company to allegedly launder money. What caused this turnaround?

The other contrast between the two orders, according to reliable sources, is the that the Adjudicating Authority heard the views of the DRI's investigation team in person, before deciding on the Knowledge Infrastructure case, unlike in the Adani case. Is the conduct of the officer above board? Is there ground to ask whether the Adani Power case should be probed for possible violation of the Prevention of Corruption Act?