The Directorate of Revenue Intelligence (DRI), in a month-long intelligence-led operation, has dismantled a major network involved in importing South-East Asian areca nuts into India by falsely declaring them as being of Bangladeshi origin and fraudulently availing duty benefits under the South Asian Free Trade Area (SAFTA).
The investigation has so far revealed a potential revenue loss of more than ₹2,500 crore. Nine persons have been arrested in connection with the case.
The import of areca nuts into India attracts a Basic Customs Duty (BCD) of 100%. However, eligible imports of areca nuts made under the SAFTA agreement are fully exempt from customs duty.
Areca nuts originating from Bangladesh are entitled to exemption under SAFTA if the imports meet the prescribed Rules of Origin criterion.
South-East Asian Areca Nuts Declared as Bangladeshi Origin
Intelligence gathered and developed by the DRI indicated that certain syndicates were fraudulently claiming SAFTA benefits on a very large scale on imports of areca nuts.
According to the investigation, the syndicates were importing areca nuts originating and sourced from Indonesia, Thailand, Malaysia and other South-East Asian countries. The country of origin of the areca nuts imported into India was then allegedly mis-declared as Bangladesh.
The DRI subsequently conducted simultaneous searches at multiple premises linked to importers, Customs Brokers and IEC holders in Kolkata and Visakhapatnam.
During the searches, several incriminating documents and substantial evidence establishing the South-East Asian origin of the areca nuts were recovered.
DRI officers also recovered and seized around ₹75 lakh in cash, which was believed to be the sale proceeds of the illegally imported goods.
A live consignment containing around 160 MT of areca nuts was also seized.
Customs Duty Evasion Exceeding ₹2,500 Crore
The investigation so far has revealed a huge scale of fraudulent imports of areca nuts.
According to the DRI, the exchequer has been duped of customs duty in excess of ₹2,500 crore in recent years.
The investigation revealed that the masterminds were facilitating the import of areca nuts from South-East Asian countries into one of the EPZs in Bangladesh.
The goods were thereafter routed to India after merely changing containers and bags and were passed off as areca nuts of Bangladeshi origin.
The masterminds had also fraudulently obtained SAFTA Certificates of Origin from Bangladeshi authorities.
These certificates were used in connection with the imports that were presented as being of Bangladeshi origin.
Commissions and Cash Payments
The investigation further revealed that the masterminds were charging substantial commissions from Indian importers.
The commissions were being charged for arranging the routing, documentation, clearance and transportation of the consignments.
The investigation also brought to light the massive collection of payments in cash.
According to the DRI, the investigation further brought to light the use of hawala channels and dummy entities for the movement and layering of the financial proceeds.
The findings formed part of the DRI’s investigation into the network involved in the fraudulent imports of areca nuts and the alleged misuse of SAFTA benefits.
Customs Broker’s Licence Suspended
The investigation also revealed the involvement of a Customs Broker firm in the clearance of the fraudulent imports.
According to the DRI, one Customs Broker firm was particularly responsible for the clearance of most of the fraudulent imports of areca nuts identified in the case.
Consequent to the ongoing investigation by the DRI, the Customs Broker’s licence has been suspended by the competent authority.
Nine persons have been arrested so far in connection with the case.
The investigation into the matter is ongoing.
Impact on Domestic Areca Nut Growers
The DRI stated that such illegal imports adversely impact domestic areca nut growers and legitimate trade.
According to the agency, such imports create unfair price distortion and disrupt the level playing field for legitimate businesses.
Besides causing a huge loss to government revenue, these illegal activities also undermine regulated trade practices and economic security in the border regions.
The alleged fraudulent imports therefore affected both government revenue and legitimate trade.
DRI Disrupts Well-Organised Network
With this operation, the DRI has effectively disrupted what it described as a well-organised network involved in the systematic mis-declaration of the country of origin, fraudulent availment of SAFTA benefits and large-scale evasion of customs revenue.
The investigation found that areca nuts originating from Indonesia, Thailand, Malaysia and other South-East Asian countries were being imported into India while their country of origin was allegedly declared as Bangladesh.
The network was allegedly facilitating the routing of the goods through an EPZ in Bangladesh before sending them to India, with containers and bags being changed and the goods being passed off as Bangladeshi-origin areca nuts.
The DRI also found that SAFTA Certificates of Origin had been fraudulently obtained from Bangladeshi authorities.
The operation resulted in the seizure of around ₹75 lakh in cash and a live consignment of around 160 MT of areca nuts.
The investigation has so far revealed a potential revenue loss of more than ₹2,500 crore, while nine persons have been arrested in connection with the case.
The licence of the Customs Broker firm responsible for clearance of most of the identified fraudulent imports has also been suspended by the competent authority.
The DRI has thereby disrupted a network involved in systematic mis-declaration of the country of origin, fraudulent availment of SAFTA benefits and large-scale evasion of customs revenue.
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