DIAMOND RACKET TO PARK CRORES
IN DUBAI, HONG KONG BUSTED

From Jal Khambata

NEW DELHI, July 15: The Directorate of Revenue Intelligence has busted a rough diamond import-export racket by a Mumbai-based syndicate to siphon off and park crores of rupees in Dubai and Hong Kong.

Three Jains, who were kingpins of the syndicate and related to each other personally and in business, were nabbed in Mumbai on July 4. They had established their offices in Mumbai, Surat, Dubai and Hong Kong to hoodwink the authorities as the diamond dealers.

They are accused of inflating the import bills to park as much as Rs 214 crores abroad in a short span of three months as already unearthed while investigations are still on to assess the staggering drain of foreign exchange and evasion of import duty involved in the racket.

The DRI suspects that the money so parked abroad can be used to pay substantial cost of other materials and then import them at gross undervaluation to cheat on the import duty.

As many as 13 consignments imported at the declared value of Rs 44.73 crores have been seized in Mumbai while six consignments that arrived by a Cathay Pacific flight on May 18 and by an Emirates flight from Dubai on May 20 have been detained at Surat's "Hira Bourse" as they are also suspected to be part of the same racket. Their valuation has not yet been completed.

The recipient of four of the 13 seized consignments valued at US$ 43,01,497 (about Rs 20.65 crores) as per the accompanying sale invoice even sought to disown them but without success. Their actual value was assessed to be only Rs 1.06 crores).

The modus operandi adopted by the three accused running four companies in Mumbai was to export rough diamonds to Dubai and Hong Kong where they were declared as items meant for re-export to get the customs duty exemption. The same were repacked with over-valuation to the tune of 10 to 20 times, imported back to India and cleared at nil rate of duty under a scheme notified in the Union Budget last year to promote the diamond trade.

"If an export is done from Mumbai, the import of the same is done through another firm of the same group at Surat and that by such device the syndicate is able to launder money, most of which is to cover differential value of other imports or the said money is meant for other unlawful dealings," the DRI sources.

They said the fraud was unearthed by the Mumbai branch of DRI which get cracking in the month of May following an intelligence tip-off about one such consignment with inflated bill arriving in Mumbai by an Emirates flight on May 18.

By the time the DRI swooped over the diamond bourse of the MMTC who are custodians of such imports, half of the consignments had already been cleared. It, however, detained the remaining 13 consignments on May 21.

The accused claimed to have sold the imported rough diamonds to traders in Surat but they could not produce any records about disposal of the rough diamonds and hence the DRI suspects that they were exporting and re-importing the same stock again and again.

The culprits arrested are Gautam Chunilal Jain, Anil Bhavarlal Jain and Uttam Jain while the DRI sources said more arrests will follow as the investigations progress. Their four companies so far identified by the DRI officials were all located in the same building called Pancharatna at Opera House in Mumbai. These are: Rainbow Expotrade Pvt Ltd, Raj Gems Pvt Ltd, Sundrem Gems Pvt Ltd and Madhur Gems Pvt Ltd.

Anil is related to Gautam while his father is the working director of Sundrem belonging to Uttam. The DRI is also looking into the business affairs of Madhur Gems run by Uttam as one of its directors, Navneet Jain, is also a director in the company of Gautam. Another firm of Navneet, Dhara Stock Brokers Pvt Ltd, is also under investigation as it was also involved in import of large quantity of rough diamonds.

The importers are required to file Bills of Entry for clearance of the consignments. Six importers had filed these to get released their imported goods. Two of these consignments belonged to the accused. Their declared value was US$ 14,72,672 (Rs 7.07 crores) while the actual value assessed was US$ 7,36,335 (Rs 3.53 crores).

The valuation of the remaining seen seized consignments carried out on June 18 opened the eyes of the DRI officials as they were only worth Rs 71,37,603 while the seized sale invoices showed them to be of the value of Rs 37,66,38,922. The DRI decided to register the case following the valuation done by the expert panel as the accused had indulged in over-valuation of the nine consignments alone to the tune of Rs 40.48 crores.

Holding these nine consignments as "mis-declared in value", the DRI has already served notices on the parties that these are "liable to confiscation under Section 111 of the Customs Act 1962."

In the case registered with the Additional Chief Metropolitan Magistrate, 3rd Court, in Mumbai, Gautam Jain is accused of swindling Rs 113.96 crores by way of imports of rough diamonds from Dubai and Hong Kong for his firm Rainbow Expotrade Pvt Ltd and another Rs 3 crores from Antwerp and Israel in the name of his proprietary firm Roshan Gems. Anil Jain, who is his relative, has been charged with huge import of rough diamonds worth Rs 90 crores while the third accused Uttam Jain is charged with the fraud of Rs 7.09 crores.

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