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

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The Directorate of Revenue Intelligence (DRI), in a month-long intelligence-led operation, dismantled a major network involved in importing arecanut from South-East Asian to India but falsely declaring them as being of Bangladeshi origin. | Photo Credit: Photo for representation only

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 to India but falsely declaring them as being of Bangladeshi origin, and fraudulently availing concessional 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, according to the Union Ministry of Finance.

The import of arecanut into India attracts a Basic Customs Duty (BCD) of 100%. However, eligible import of arecanuts made under SAFTA agreement is fully exempt from customs duty. The arecanut originating from Bangladesh is entitled to exemption under SAFTA if imports meet the prescribed Rules of Origin criterion, 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 arecanuts were recovered.

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

The investigations have revealed fraudulent import of arecanut in which the exchequer was duped of customs duty in excess of ₹2,500 crore in recent years. The masterminds were facilitating the import of arecanut from South-East Asian countries into one of the EPZ (Export Processing Zone) in Bangladesh, and thereafter routing the goods to India merely changing containers and bags and passing them off as Bangladeshi-origin arecanuts. 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 collecting payments in cash.

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

Investigation further revealed that one Customs broker firm was particularly responsible for clearance of most of the fraudulent imports of arecanuts identified in the case. Consequent to the ongoing investigation by DRI, the Customs broker’s licence has been suspended by the competent authority.

Such illegal imports adversely impact domestic arecanut growers and legitimate trade by creating unfair price distortion, and disrupting the level playing field for legitimate businesses.