I-T dept begins 'inquiry' against ADAG, Knowledge Infra and Coastal Energy in coal import scam

The income tax department has initiated its 'inquiry' against four corporate entities in coal import scam worth thousands of crores, on exceptional request from the Directorate of Revenue Intelligence (DRI).

These entities are Reliance Infrastructure Ltd and Rosa Power Supply Co. Ltd of Anil Dhirubhai Ambani Group (ADAG), Knowledge Infrastructure Systems Pvt Ltd and Coastal Energy Pvt Ltd.

Few months back, the DRI had issued show cause notices (SCNs) to these four entities with an allegation of coal imports to the tune of around Rs 400 crore (ADAG), Rs 16 crore and Rs 589 crore, respectively.

During the process, the DRI submitted an additional copy of the SCN went to Central Economic Intelligence Bureau (CEIB), which is a nodal agency for economic intelligence mandated to ensure effective interaction and coordination among all the concerned agencies in the area of economic offences, such as: I-T department, Enforcement Directorate (ED) and Central Bureau of Investigation (CBI).

"Ideally, the CEIB is supposed to direct I-T department, ED and CBI for the further investigation. But in this coal import case, a confidential communication took place between the DRI and I-T department, where the former agency requested the taxmen to takeover this case and begin its probe, at the earliest", the source told Indiatoday.in.

Without wasting anytime, officials of I-T department visited Mumbai DRI's office "to understand the case" and "to seek relevant data/documents" against these four entities.

Senior I-T official in the investigation wing, Mumbai confirmed Indiatoday.in, "It's correct. In coal import case, inquiry has begun from our end. Especially against those companies that has been noticed by DRI. But, further details could not be shared, at this point of time".

Since last three years, the DRI had been investigating at least 40 companies for alleged overvaluation of coal imports from Indonesia pegged at Rs 29,000 crore, between 2011 and 2015.

Till today, investigation against four companies has been completed and notices were issued for further proceedings.

Detailed queries sent to Knowledge Infrastructure and Coastal Energy remained unanswered.

When contacted, a Reliance Group spokesperson said: "We strongly deny the allegations. All our coal imports are fully compliant with the laid down rules and regulations. The coal was imported only for captive consumption from independent suppliers under long term contracts. The purchase price of imported coal was on the basis of then prevailing widely and globally accepted highly traded coal indices on a year to year basis. We are extending our full cooperation to the authorities in the ongoing investigation."

It is a case of over-invoicing of imported coal prices. In December 2014, the DRI smelled a huge scam in coal imports from Indonesia and conducted searches across 80 locations in India.

The raids were carried out on coal importing companies, shippers, intermediaries and laboratories.

During the probe, it was noticed that even though the ships carrying coals directly from Indonesia to India, the bills were routed through fictitious and benami firms in Singapore, Hong Kong, Dubai and British Virgin Islands.

The companies involved in coal import business with the layers of shell companies inflated the prices of coal and sold it to the power projects owned by the corporate giants.

"The objective of over-valuation was to siphon off the differential amount (in thousand of crores) outside the country and to avail higher power tariff compensation based on artificially inflated cost of the imported coal", an investigator told Indiatoday.in.

It was noticed that value of coal was inflated to more than 250 per cent by these entities. Currently, 40 companies from corporate India to Public Sector Undertakings (PSUs) are under DRI's radar, where investigation is taking place at various levels.