DRI slaps Rs 2,600-cr tax notice on Essar Group

The Mumbai wing of the Directorate of Revenue Intelligence (DRI) has slapped a R2,600-crore notice alleging over-invoicing…

DRI slaps Rs 2,600-cr tax notice on Essar Group
Essar Oil shares surged over 15 per cent after capital market regulator Sebi gave more time to the promoter of the company to finalise the delisting offer.

The Mumbai wing of the Directorate of Revenue Intelligence (DRI) has slapped a R2,600-crore notice alleging over-invoicing of imported capital goods by three companies of the Ruias-promoted Essar Group: Essar Oil, Essar Power and Essar Projects. Last year, the DRI slapped a similar notice to the tune of R5,500-crore on two companies of the Gautam Adani-led Adani Group.

The Essar Group has come under DRI scanner for alleged over-invoicing of capital good imports, two sources told FE. The notice was issued last week.

“The three Essar Group firms — Essar Oil, Essar Power and Essar Projects — have been asked by the DRI to explain certain capital good import transactions amounting to about Rs 9,300 crore.

“These relate to commissioning of its refinery and power plants, where the DRI has alleged that Essar has acquired capital goods at an inflated price. Essar’s alleged over-invoicing is believed to be around Rs 2,600 crore,” he added.

When contacted, an Essar spokesperson refuted the allegation stating that its project costs compare favourably with similar projects. The spokesperson said that the notice apparently is based on incomplete facts and incorrect extrapolation of convenient data points. “We strongly deny each and every allegation levelled therein,” the spokesperson added.

“Essar wishes to point out that all the procurements from overseas suppliers were made at arm’s length price which were not only at the lower quadrant compared to peer projects built in India but also certified to be reasonable by reputed technical consultants. The so-called margins or the excess payments as the case may be worked out by the DRI do not take into account all the costs incurred by the overseas supplier, thereby resulting in highly inflated margins as against the normative net margins made by the supplier,” the spokesperson said.

“Essar further reiterates that we have not indulged in any wrongdoing and have duly complied with applicable laws for importing the capital goods,” the spokesperson added.

On May 16, 2014, the DRI in its notice to Adani Group companies Adani Power Maharashtra, Adani Power Rajasthan and Maharashtra Eastern Grid Power Transmission alleged that the firms inflated the declared value of imported goods to Rs 9,048.8 crore. The DRI had alleged that the actual value of these goods was Rs 3,580.8 crore.

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