After 2 years, DRI starts action against NiMo firms

Surat: After nearly two years, the directorate of revenue intelligence (DRI) have initiated court proceeding against three firms of billionaire Nirav Modi in connection with the overvaluation and diversion of duty-exempted goods to the domestic tariff area case.
In the court proceedings filed jointly by DRI and customs department, Modi’s firms have been accused of causing losses in customs duty to the government by understating the value and quantity of the imported cut and polished diamonds, pearls. An official privy to the DRI probe claimed that imported, duty-free, high-value, cut and polished diamonds were being diverted to the domestic market, while cheaper low-value diamonds were being used to make jewellery for export to sectors like Hong Kong, US, Canada and UAE.

In 2015, the value of diamond-studded gold jewellery exported to Hong Kong and UAE was pegged at Rs 5 crore, which was overvalued at Rs 94 crore by Modi’s firms. Further, they are accused of diversion of duty-exempted goods to the domestic tariff area clandestinely, falsification of documents and violation of rules of special economic zones, the official said.

Modi will be prosecuted under Sections 132, 135(1)(a), 135(1)(b), 135(1)(i) of Customs Act, 1962, and Section 120 B of IPC, 1860. The punishment under the Customs Act can go up to seven years.

In June-2015, DRI’s Mumbai zonal unit had issued two show-cause notices on June 5 and June 24 to Modi and three of his firms — Firestar Diamond International Pvt Ltd, Radashir Jewellery Company Pvt Ltd and Firestar International Pvt Ltd — located in the Surat Special Economic Zone (SurSEZ). The three firms imported duty-free diamonds, pearls and gold for manufacturing jewellery at the SurSEZ exclusively for export after value addition. The show-cause notices raised a demand of Rs 37.16 crore as penalty.

As per the reports, the violation of customs act was first detected in December 2014. Acting on a specific information, DRI had stopped the group’s “several export consignments of diamond-studded gold jewellery” to Hong Kong, UAE, US and Canada. The agency claimed that jewellery meant for Hong Kong and UAE were of “very low quality”. A government-approved valuer pegged the value of consignment at one-tenth of the declared cost, according to the DRI.

Also, the DRI officials had visited the factories at SurSEZ and verified the stock of imported duty-free raw material, which had revealed huge variation when compared to cut and polished diamonds and pearl.

According to the agency, it found cut and polished diamonds worth Rs 100 crore in stock at the factories as against a declared stock of Rs 1,100 crore. The total value of pearls in stock was worth Rs 4 crore instead of the declared stock of over Rs 100 crore.