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 Fraudulent use of a Combination of Advance Authorization Scheme and ASEAN-India FTA
DRI unearthed a huge duty evasion racket of around Rs 338 Crores by a Mumbai based firm. The said firm diverted around 2,200 kg of gold worth over Rs 1,000 Crores imported duty-free into the local market over the last three years. Making fraudulent use of the Advance Authorisation scheme, the Mumbai based firm was assisted by its connected firm based in Gujarat, which made fraudulent use of duty concessions available under the ASEAN India Free Trade Agreement (AIFTA) to import gold potassium cyanide (GPC).
There is a strong belief in India (bolstered by its trade policy) that Free Trade Agreements (FTAs) haven’t worked for it. Over the years, there has been a staggered reduction in preferential duties under existing FTAs along with resultant increase in the preferential trade volumes. Also, frequent instances of misuse have come to the notice of the Government, in which fraudulent traders have mis-declared Country of Origin in order to avail undue duty concessions. Such misutilization of FTAs makes the looming trade deficit of India even larger and is against long-term goals of the country, besides causing immediate loss to the exchequer and causing long-term loss to the manufacturing capabilities of the country. Misuse of FTAs places
the domestic industry at an unfair disadvantage. Experiences gained while implementing the FTAs highlighted the need to supplement the existing procedures available in the FTAs with specific domestic legal provisions to address the gaps. Accordingly, Chapter VAA and section28DAwereinsertedinthe Customs Act, 1962, vide clause 110 of Finance Act, 2020. The new section, inter alia, provides for a basic level of due diligence on the part of an importer to satisfy himself that the claimed originating criteria have been met, and that mere submission of a Certificate of Origin may not be sufficient. For this purpose, the importer is required to possess sufficient origin related information.

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