The Directorate of Revenue Intelligence (DRI) has uncovered a new tactic in the investigation of a case involving misreported textile imports at special economic zones (SEZs): using the documents of previous consignments, goods valued at at least US $ 5.75 million (Rs 50 crore) were moved out of a Chennai warehouse to evade customs duty payment and official scrutiny.
In January, two directors of the warehousing firm were detained after DRI’s New Delhi office discovered the scam at a Free Trade Warehouse Zone (FTWZ) in Nandiambakkam, north Chennai. Similar investigations were also carried out in the ports of Gujarat and Mumbai.
In order to avoid paying customs duty, the agency discovered that certain knitted and crocheted fabric types—which are prohibited from being imported below a minimum import price (MIP) of US $ 3.5/kg—were falsely reported as cotton knitted fabric and viscose knitted fabric.
DRI discovered that items from the misclassified and misdeclared shipment, which had a 10th January bill of entry (BoE), were secretly taken out of the warehouse and delivered to Panipat, Haryana, on 4th January in order to deceive customs.
In order to remove imported products from a SEZ, importers are required by customs regulations to file two BoEs. The first is a Z-type BoE for transportation from the port to the FTWZ. For movement outside the FTWZ, the second is a T-type BoE.
After filing a BoE, the items cannot be taken out until duty has been paid and an out-of-charge (OOC) document from customs has been obtained, attesting to the products’ compliance with regulations.
According to sources, the products were transferred out in this instance prior to filing the T-type BoE and receiving the OOC. According to sources, the T-type BoE of a previously cleared shipment that was sent to a different importer was used to do this.
Over time, the method was utilised to pass misdeclared items for at least 180 consignments totalling between US $ 4.6 million (Rs 40 crore) and US $ 5.75 million (Rs 50 crore), resulting in at least US $ 575, 000 (Rs 5 crore) in duty evasion, according to sources. The accused confirmed this to DRI during questioning.
After Indian textile groups complained about the dumping of Chinese fabrics at Indian ports, the scandal was investigated.
Another fraudulent import of textiles was uncovered in February by the DRI at the Chennai port. In the textile fabric case, importers from Northern states allegedly claimed that certain textile types that were subject to a Minimum Import Price (MIP), such as polyester-woven fabric, were cotton-woven fabric and imported through Chennai Port, even though there were other ports nearby.
