Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation
Date: 08.06.2026
CESTAT Mumbai Dismisses Customs Over-Valuation Allegations in Mega Power Project Imports
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Mumbai recently delivered a significant order in a high-profile customs appeal involving Adani Power Maharashtra Ltd. (APML), Adani Power Rajasthan Ltd. (APRL), and related entities. The case centered on allegations of over-valuation and inflated invoicing in the import of power plant equipment for mega power projects in Maharashtra and Rajasthan. This article provides a comprehensive overview of the case, the legal arguments, the tribunal’s findings, and its broader implications.
Background of the Case
- Entities Involved:
- APML and APRL, both subsidiaries of Adani Power Limited, undertook large-scale thermal power projects in Maharashtra (Tiroda) and Rajasthan (Kawai).
- Equipment and machinery were imported under Engineering, Procurement, and Construction (EPC) contracts, with Electrogen Infra FZE (EIF), UAE, acting as a key intermediary.
- Allegations:
- The Department of Revenue Intelligence (DRI) alleged that APML and APRL, in collusion with EIF and other related entities, over-valued imported goods by routing invoices through EIF, thereby inflating prices and siphoning off foreign exchange.
- The department claimed that the declared values were nearly double the actual payments made to the original equipment manufacturers (OEMs), based on bank remittance data.
Key Facts and Timeline
- Project Setup:
- APML and APRL set up mega power projects, inviting global tenders for equipment supply due to lack of credible domestic suppliers.
- Contracts were awarded to the lowest bidders through International Competitive Bidding (ICB), with EIF (formerly Sichuan Machinery & Equipments FZE) emerging as the lead supplier.
- Contract Registration:
- The contracts were registered under Project Import Regulations (PIR), allowing for duty exemptions and assessment of the contract as a whole rather than individual consignments.
- Show Cause Notice:
- In 2014, DRI issued a show cause notice alleging trade-based money laundering, over-valuation, and violation of customs and foreign trade regulations.
- The notice was based on bank documents showing a significant gap between the amounts invoiced by EIF and the payments made to OEMs.
Legal Arguments
Department’s Position
- Relationship and Collusion: Claimed that APML/APRL and EIF were related parties, and the relationship influenced pricing.
- Sham Transactions: Alleged that the ICB process was manipulated to legitimize inflated contracts.
- Evidence: Relied on bank remittance data and OEM invoices to demonstrate over-valuation.
Respondents’ Defense
- Genuine Bidding Process: Asserted that contracts were awarded through transparent ICB, with no manipulation.
- Comparable Pricing: Provided data showing that per MW project costs were in line with industry benchmarks and regulatory norms.
- Contractual Structure: Emphasized that EPC contracts included comprehensive services (design, engineering, installation, warranty, etc.), justifying higher prices compared to standalone supply contracts.
- Admissibility of Evidence: Challenged the admissibility of bank documents under the Customs Act, citing lack of proper certification and authentication.
Tribunal’s Findings
1. Relationship Between Parties
- The tribunal found that while there was some overlap in ownership and personnel, the contracts were signed before EIF became a related party in the legal sense for APML, and even for APRL, there was no evidence that the relationship influenced pricing.
2. Nature of Contracts
- The contracts were confirmed as EPC contracts, not mere supply agreements. The scope included design, engineering, installation, and extended warranties, which justified the lump-sum pricing.
3. Tendering Process
- The ICB process was found to be genuine, with no evidence of manipulation or sham bidding. Competing bids were received and evaluated transparently.
4. Valuation and Over-valuation Allegations
- The tribunal held that the department’s reliance on bank documents was misplaced, as these were not properly certified or authenticated as required by law.
- The comparison between EPC contract prices and OEM supply contracts was deemed inappropriate due to differences in scope, risk, and contractual obligations.
- The per MW costs for APML and APRL were found to be within or below regulatory benchmarks, further undermining the over-valuation claim.
5. Project Import Regulations (PIR)
- The tribunal emphasized that under PIR, the contract as a whole must be assessed, not individual consignments. The department’s approach of dissecting individual shipments was contrary to law.
6. Confiscation and Penalties
- As the over-valuation allegations were not substantiated, the tribunal found no grounds for confiscation or penalties under the Customs Act.
Key Data and Comparative Analysis
| Project | Year | Capacity (MW) | Total Cost (Rs. Cr) | Cost per MW (Rs. Cr) |
| APML (Phase-III) | 2009 | 1320 | 6,290 | 4.76 |
| Indiabulls-Sophia Power | 2009 | 1320 | 6,888 | 5.22 |
| GMR Chhattisgarh | 2010 | 1320 | 8,200 | 6.21 |
| JPL Dumka Jharkhand | 2010 | 1320 | 7,224 | 5.47 |
| Jaypee-Prayagraj | 2009 | 1980 | 10,780 | 5.44 |
| Moser Baer | 2010 | 1200 | 6,240 | 5.20 |
| Jindal India Powertech Ltd. | 2009 | 660 | 3,160 | 5.27 |
| APRL | 2010 | 1320 | 7,030 | 5.33 |
Conclusion and Implications
The CESTAT Mumbai’s order provides a detailed legal and factual analysis, ultimately dismissing the department’s appeal and upholding the original order that dropped proceedings against Adani Power entities. The case underscores the importance of:
- Adhering to proper evidentiary standards in customs investigations.
- Recognizing the complexity and scope of EPC contracts in large infrastructure projects.
- Ensuring that regulatory benchmarks and industry practices are considered in valuation disputes.
This decision sets a precedent for similar cases involving project imports, EPC contracts, and allegations of over-valuation, reinforcing the need for robust, transparent processes and adherence to legal standards.
Connected Matter
Source: CESTAT Mumbai
Handy Download:
Write to us at office@aadrikaalaw.com
Tel: +91-11-4999 2707 I +91-9999005379