DRI uncovers illegal use of SAFTA agreement in arecanut imports to India

The Directorate of Revenue Intelligence (DRI), in a month-long intelligence-led operation, has dismantled a major network involved in importing arecanut from South-East Asian countries to India, falsely declaring it as being of Bangladeshi origin, and fraudulently availing concessional duty benefits under the South Asian Free Trade Area (SAFTA) agreement. 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, according to the Union Ministry of Finance.

The import of arecanut into India attracts a Basic Customs Duty of 100%. However, eligible imports of arecanut produced under the SAFTA agreement are fully exempt from customs duty. Arecanuts originating from Bangladesh are entitled to exemption under SAFTA if imports meet the prescribed Rules of Origin criteria, according to the Ministry.

Simultaneous searches were conducted at multiple premises linked to importers, customs brokers, and IEC (Importer Exporter Code) holders in Kolkata and Visakhapatnam. Several incriminating documents and substantial evidence establishing the South-East Asian origin of the arecanut were recovered.

DRI officers also recovered and seized around ₹75 lakh in cash, believed to be the sale proceeds of the illegally imported goods. A live consignment of around 160 tonnes of arecanuts was seized.

The investigations have revealed the fraudulent import of arecanut, in which the exchequer was duped of customs duty in excess of ₹2,500 crore over recent years. The masterminds were facilitating the import of arecanut from South-East Asian countries into one of the EPZs (Export Processing Zones) in Bangladesh, and thereafter routing the goods to India, merely changing containers and bags and passing them off as Bangladeshi-origin arecanut. They had fraudulently obtained SAFTA Certificates of Origin from Bangladeshi authorities.

The masterminds were charging substantial commissions from Indian importers for arranging the routing, documentation, clearance, and transportation of the consignments and were collecting payments in cash.

The investigation has also brought to light the apply of hawala channels and dummy entities for the movement and layering of the financial proceeds, according to the Ministry.

The investigation further revealed that one customs broker firm was particularly responsible for the clearance of most of the fraudulent imports of arecanut 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.

Such illegal imports adversely impact domestic arecanut growers and legitimate trade by creating unfair price distortions and disrupting the level playing field for legitimate businesses. Besides causing huge losses to the administration in terms of revenue, these illegal activities also undermine regulated trade practices and economic security in the border regions, according to the Ministry.

With this operation, the DRI has effectively disrupted a well-organised network involved in the systematic misdeclaration of country of origin, fraudulent availing of SAFTA benefits, and large-scale evasion of customs revenue, the Ministry stated on Sunday.