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What happens when Customs authorities continue pursuing allegations that have already failed before adjudicating authorities, the Tribunal and even the Supreme Court? More importantly, can the declared value of imported goods be rejected merely because the importer and overseas supplier are related parties?
These questions formed the core of Commissioner of Customs (Import-I), Mumbai v. Adani Enterprises Ltd. & Ors.1, and connected matters, decided on 05 June 2026 by a Division Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai comprising Hon’ble Mr. Justice Dilip Gupta, President, and Hon’ble Mr. P. Anjani Kumar, Member (Technical).
The dispute revolved around allegations that several Adani Group entities had artificially inflated the value of imported equipment through UAE-based intermediary Electrogen Infra FZE (EIF). However, while dismissing six departmental appeals, the Tribunal reiterated settled principle of customs valuation law: suspicion and related-party allegations alone cannot displace declared transaction value unless Customs establishes, through legally admissible evidence, that the relationship actually influenced pricing under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
The dispute arose from a Directorate of Revenue Intelligence (DRI) investigation into imports made by multiple Adani Group entities involving solar modules, cranes, tugs and port infrastructure equipment. The department alleged that Electrogen Infra FZE (EIF), a UAE-based supplier, procured goods from original equipment manufacturers (OEMs) at lower prices and subsequently invoiced Adani entities at inflated values, thereby artificially enhancing the assessable value of imports under Section 14 of the Customs Act, 1962.
Based on this investigation, three separate show cause notices were issued. Two notices dated 15 May 2014 involved Adani Power Maharashtra Ltd. (APML), Adani Power Rajasthan Ltd. (APRL), and Maharashtra Eastern Grid Power Transmission Company Ltd. (MEGPTCL). A third notice dated 31 August 2016 involved Adani Enterprises Ltd. (AEL), Adani Renewable Energy LLP (AREL), Adani Hazira Port Private Limited (AHPPL), Adani Ports and Special Economic Zone Limited (APSEZL), Adani International Container Terminal Private Limited (AICTPL), and Adani Vizag Coal Terminal Private Limited (AVCTPL).
Before the adjudication of the third notice, the earlier 2014 proceedings had already concluded in favour of the Adani entities. The Additional Director General, DRI dropped the allegations in those matters. The Customs Department challenged those findings before CESTAT, but the Tribunal dismissed the departmental appeals. The department thereafter approached the Supreme Court through civil appeals, which were dismissed on 27 March 2023. Even the review petitions filed thereafter were rejected by the Supreme Court on 23 November 2023.
Despite these developments, the department continued pursuing the third show cause notice arising from the same investigation and substantially identical evidence. The Principal Commissioner ultimately dropped the proceedings on 21 December 2023, following which the department filed six appeals before CESTAT Mumbai.
An important procedural development during the hearings was the filing of a Miscellaneous Application by the Customs Department seeking withdrawal of Ground No. 7.1(b) from its appeal memorandum. Through this ground, the department had earlier argued that the Supreme Court had not examined the merits of the previous proceedings. The withdrawal of this contention significantly weakened the department’s litigation stance.
The Customs Department argued that the declared transaction value deserved rejection under Rule 12 of the Customs Valuation Rules read with Section 14 of the Customs Act. According to the department, EIF merely functioned as an intermediary entity while OEM invoices reflected substantially lower prices. The department contended that the relationship between EIF and the Adani entities had influenced pricing and that the imports had therefore been deliberately over-valued.
On this basis, the department sought confiscation of goods under Section 111(m) of the Customs Act for misdeclaration of value and imposition of penalties under Sections 112(a) and 114AA. The department’s case substantially relied upon overseas banking records, remittance details and OEM invoices allegedly obtained during the DRI investigation.
The respondents disputed these allegations by arguing that the agreements with EIF were indivisible, lump-sum Engineering, Procurement and Construction (EPC) arrangements and not ordinary supply contracts. According to the respondents, the contracts involved significant high-risk service components, including transportation, installation, commissioning, structural warranties, operational liabilities and long-term performance guarantees, including guarantees extending up to 25 years in certain power generation projects. Consequently, direct comparison between OEM pricing and the final EPC contract value was legally untenable.
The respondents further argued that the contracts had been awarded through transparent international competitive bidding processes in which EIF emerged as the lowest bidder, thereby demonstrating that the prices were commercially determined and not manipulated through related-party arrangements.
Most significantly, the respondents argued that all three show cause notices arose from the same DRI investigation and relied upon substantially identical evidence. Since earlier proceedings based on the same investigation had already been decided against the department and affirmed by the Supreme Court, the department could not repeatedly pursue identical allegations through subsequent proceedings.
The respondents also challenged the evidentiary basis of the department’s case by contending that the overseas banking records relied upon by DRI lacked the mandatory certification prescribed under Section 138C(4) of the Customs Act and therefore lacked evidentiary value.
CESTAT dismissed all six departmental appeals and upheld the Principal Commissioner’s order dropping the proceedings. The Tribunal observed that all three show cause notices originated from the same DRI investigation and relied upon substantially identical evidence and documents. In doing so, the Tribunal relied upon earlier proceedings involving Adani Power Maharashtra Ltd. (APML), Adani Power Rajasthan Ltd. (APRL)2, Maharashtra Eastern Grid Power Transmission Company Ltd. (MEGPTCL)3, and M/s. Knowledge Infrastructure Systems Pvt. Ltd.4, where substantially identical allegations had already been rejected. The Tribunal also relied upon earlier CESTAT rulings dismissing departmental appeals in those matters, the Supreme Court orders dated 27 March 2023 dismissing the department’s civil appeals, and the orders dated 23 November 2023 dismissing the review petitions. Since these proceedings had attained finality, the Tribunal held that the department could not continue re-litigating substantially identical allegations arising from the same investigation.
A particularly significant aspect of the ruling concerned the evidentiary value of the overseas banking documents relied upon by DRI. The Tribunal upheld the Principal Commissioner’s finding that the documents constituted computer printouts lacking the mandatory certification prescribed under Section 138C(4) of the Customs Act. Since the revenue failed to produce the statutory certification requirement, the documents lost evidentiary value and could not validly support allegations of over-invoicing.
On valuation, the Tribunal held that although EIF and the importers may have been related parties, Customs failed to establish that the relationship actually influenced pricing. Consequently, Rule 12 could not be invoked to reject the declared value and the transaction value therefore required acceptance under Rule 3 of the Customs Valuation Rules, 2007.
The Tribunal further accepted that the agreements in question were indivisible EPC arrangements involving obligations far beyond the mere supply of goods. Accordingly, OEM prices could not automatically replace the declared transaction value for customs purposes.
Having concluded that there was no misdeclaration or artificial inflation of value, the Tribunal further held that confiscation under Section 111(m) and penalties under Sections 112(a) and 114AA were unsustainable. The Principal Commissioner had also dropped proposed penalties against individual noticees, including Shri Vinod Shantilal Adani, Shri Jatin Shah, Shri Mitesh Dani and Shri Mehul Jani under Sections 112(a) and 114AA, which the Tribunal ultimately upheld
The Adani valuation ruling underscores that customs valuation disputes cannot be sustained merely on suspicion arising from related-party transactions or selective comparison with OEM invoices. The decision reiterates that rejection of declared value under Rule 12 of the Customs Valuation Rules cannot survive unless Customs first establishes, through reliable and legally admissible evidence, that the relationship between parties actually influenced pricing. In the absence of such proof, the transaction value necessarily requires acceptance under Rule 3.
The ruling underscores the importance of maintaining transparent bidding records, comprehensively documenting EPC obligations and rigorously testing the admissibility of evidence relied upon by investigative authorities. Equally importantly, the decision clarifies that once factual findings attain finality in connected proceedings, repeated attempts to revive substantially identical allegations may not withstand judicial scrutiny.
Citations
Expositor(s): Adv. Aparna Shukla
