DRI Issues Alert on Coal Import

[DRI F.No. DRI/HQ-CI/SOD/Misc-33/2016-CI Dated: 30/31.03.2016]

Modus-Operandi/ General Alert Circular No.11/2016-CI

Sub: Import of Coal from Indonesia by resorting to Over-valuation.

Intelligence developed by the Directorate of Revenue Intelligence, indicated that certain importers of Indonesian Coal were artificially inflating its import value as compared to the actual value. This modus-operandi of inflating the procurement price of imported coal was adopted by power generating companies and traders who supplied the imported goods to power generating companies. The objective of the overvaluation appears to be two fold (i) siphoning-off money abroad and (ii) to avail higher power tariff compensation based on artificially inflated cost of the imported Coal. The intelligence further indicated that while Indonesian Coal was directly shipped from Indonesian ports to the importers in India, the import invoices were routed through one or more intermediaries based in Singapore, Dubai, Hong Kong, British Virgin Islands (U.K) etc for the purpose of artificially inflating its value.

2. From the investigation conducted so far, it appears that;

(i) Indonesian Coal was shipped directly from Indonesian ports to India whereas supplier’s invoices are routed through one or more intermediary invoicing agents based in a third country, for the sole purpose of creating layers (typical of Trade Based Money Laundering) and artificially inflating its landed value;

(ii) Export value of Indonesian Coal (on FOB basis) is duly mentioned .in the Form A-I prescribed under the ASEAN-India Free Trade Area (AIFTA) Rules, notified vide Notification No 189/2009-Cus (N.1) dated 31.12.2009 as a statutory Country of Origin document required for availing duty exemption.

(iii) Comparison of Form A-I values with the values declared before Indian Customs at the time of import, at same level of Incoterms (CIF = FOB + Actual Freight and Insurance), in the cases under examination suggest huge over-valuation to the extent of about 50% to 100%.

(iv) The inflated invoices received in India were found to have been issued by intermediary invoicing agents based in Singapore, Dubai, Hong Kong, British Virgin Islands (U.K) etc. These intermediary firms appear to be either subsidiary companies of Indian Importers or their front companies.

(v) In a significant number of cases, two sets of Test Reports (certificate of Sampling and Analysis) issued at the Load Port by two different testing agencies for the same consignment of Coal have been recovered - one showing lower Gross Calorific Value (GCV) and the other higher GCV. The test report with lower GCV appears in conformity with the contract between subsidiary company or intermediary agent of Indian importer and Indonesian suppliers, reflecting the actual value of the Coal. The test report with higher GCV, which was submitted before Indian Customs at the time of import, appears to be in conformity with the supply contract between the power generation companies/ Indian importers and subsidiary company or intermediary agent of the Indian importers, reflecting the inflated value of the coal.

(vi) Prices of various grades of Coal in International market ex-Indonesia ate reported on a weekly basis in reputed trade journals such as Argus, Platts, Indonesian Coal Index etc. These prices more or less match with the prices mentioned in the Form A-I as well as invoices raised by Indonesian suppliers which may be referred for scrutiny of declared value.

(vii) As per the provisions of AIFTA, Form A-I shall comprise of one original and three copies. The Original shall be submitted to the Customs authority at the port of importation, Duplicate shall be retained by the Issuing authority of the exporting country, Triplicate shall be retained by the Importer and the Quadruplicate shall be retained by the Exporter. It has been observed that the importers are submitting the Xerox copies of Form A-1 instead of Ot1ginal copy which has to be mandatorily submitted to Indian Customs. In some cases, d1e FOB value in Form A-I submitted before Indian Customs was found to have been masked/ obliterated in order to avoid detection/ conceal the actual price. In some cases, the duty exemption under AIFTA, although eligible, was not claimed to avoid submission of Form A-I and hence to avoid detection of the actual FOB value.

3. Details of the major 40 importers currently being investigated by DRI are enclosed in Annexure. The investigation by DRI in these cases shall cover imports till 31st March 2016. Imports subsequent to this date may be scrutinized from the angle of over-valuation by the field formations and a decision be taken on merit, without referring the matter to this office. The officers under your jurisdiction may also be sensitized to follow the procedure prescribed for drawal and testing of samples and to scrutinize and verify the documents submitted by the importer with due care and diligence.

List of 40 Importers of Coal under Investigation by DRI

SNo.	Name of the Importer
1-5	Adani Group of Companies a) Adani Enterprises Ltd., b) Adani Power Ltd., c) Adani Power Rajasthan Ltd, d) Adani Power Maharashtra Ltd., e) Adani Wilmar Ltd.
6	Tamil Nadu Electricity Board (supplier: Adani, MBG Commodities Pvt. Ltd. & Knowledge Infrastructure Systems Pvt Ltd,.)
7	Jhajhar Power Ltd. (supplier: Adani)
8	Vyom Trade Link (Adani group)
9	Gujarat State Electricity Corporation Ltd.(supplier: Adani)
10	Haryana Power Generation Corporation Ltd. (supplier: Adani)
11-14	NSL Group of Companies a) NSL Sugar Ltd. b) NSL Krishnaveni Sugar c) NSL Sugars (Tunghabadra) d) NSL Textiles Ltd.
15	Knowledge Infra. Systems Pvt. Ltd.
16	MMTC
17	Tamil Nadu Newsprint Ltd.
18	Karnataka Power Corporation Ltd. (supplier: MBG Commodities Pvt. Ltd. & M/s Gupta Coal India Ltd)
19	Gupta Coal India Ltd.
20	MSTC Ltd. (supplier: MBG Commodities Pvt. Ltd.)
21-22	Gandhar Group of Companies a) Gandhar Oil and Refinery India Ltd. b) Gandhar Coal & Mines
23-24	Reliance ADA Group Companies a) M/s. Reliance Infrastructure Ltd. b) M/s. Rosa Power Supply Co. Ltd. (Subsidiary of Reliance Power Ltd.)
25	Coastal Energy Pvt. Ltd.
26	Essar Oil Ltd.
27	Essar Power Gujarat Ltd.
28	India Cements Ltd.
29	JSW Steels Ltd.
30	Laxmi Organic Industries Ltd.
31	OPG Power Generation Pvt. Ltd.
32	Phoenix Comtrade Pvt. Ltd.
33	Simhapuri Energy Ltd.
34	Suryadev Alloys & Power Pvt. Ltd.
35	Uttam Galwa Steels Ltd.
36-38	Bhatia Group of Companies a) Bhatia Global Trading. b) Bhatia Int (Asian Natural Resource) c) Bhatia Industry & Infrastructure (Hemang Resources Ltd.)
39	Aggarwal Coal Pvt. Ltd.
40	NTPC Ltd.