Page 94 - DRI ANNUAL REPORT EBOOK

SIGNIFICANT FEATURES AND TRENDS OBSERVED:
The much needed fascilitation measures extended to importers for and intended to ease the flow of imports into the country is being taken undue advantage by some unscrupulous elements. For instance, the goods are classified under such CTH which either attracts lower customs duty or which gives them benefit of duty under some exemption notification. In 2019-20 alone, DRI booked 173 cases of misdeclaration involving a duty amount of Rs. 332 Crore where it was observed that it wasn’t just the smaller firms, but also the major importers across different sectors who have been booked for mis declaration and misclassification. Some of the largest cases booked by DRI over the past few decades have been against large multinational companies.
Mis declaration is found to be one of the most common modus resorted in commercial frauds. The trends in imports of a commodity, Origin of the consignment, the end use being declared by the importer, the profile of the importers, intelligence developed etc are some of the parameters which helped in analysing and identifying misdeclaration in imports.
Undervaluation of goods is yet another common modus of frauds in imports. In 2019-20, DRI booked 45 cases of Undervaluation of goods involving a duty amount of Rs. 106 Crore. Other than Undervaluation, Over Valuation of goods is also seen to be directly related to the issue of Trade based Money Laundering (TBML). The cross border illicit TBML is achieved through the mis declaration of price, quantity or quality of imports. The basic modus include:- false description of goods and services, Over and under invoicing of goods which are combined with techniques of trade based financial abuse ie cash flow based payment, third party payment, segmental modes of payment and advance remittance payment for import without
importing goods, remittances for services.
The menace of fake IECs as well as existing IEC holders letting their IECs to be used by those intending to smuggle is continuing unabated. In many cases of commercial frauds, DRI has seen that a single mastermind has sourced various IECs at a commission in order to smuggle goods and mislead customs. In order to improve the compliance levels, section 99B introduced in Finance Act 2019, is being made operational under the Customs act, for empowering the proper officer of Customs to carry out verification of a person for ascertaining compliance with the provision of the Customs Act. It can act as a first wall of defence against evaders and will be useful in investigations by DRI.
It is also pertinent to note that as India entered into nearly 30 trade agreements with different levels of engagement with different nations and blocs, FTA related frauds are also on the rise. For instance, various importers across the country were booked for misclassification and availing wrongful benefit of the exemptions given under the Indo-South Korea CEPA which resulted in a significant recovery of Customs duty. The ensuing international co-operation in such cases involving another sovereign nation assumes significance for DRI. For instance, in the month of August 2019, a DRI team visited Sri Lanka for a joint investigation with the COO issuing authority in Sri Lanka in a case of import of Areca Nuts and pepper leading to cancellation of 94 COOs involving an amount of Rs. 125 Crore duty evasion. Based on the past experiences in dealing with contracting countries, CBIC has notified Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 in the month of September,2020. These rules can support the efforts made by the Customs field formations in effectively preventing the mis use of trade agreements.
60 SMUGGLING IN INDIA REPORT 2019-20