Page 144 - SMUGGLING IN INDIA REPORT FOR 2020-2021

98 2020-2021 SMUGGLING IN INDIA REPORT
Misuse of Export Promotion Capital Goods (EPCG) Scheme
The EPCG scheme enables exporters to import capital goods without payment of Customs duties, subject to the fulfilment of export obligations. DRI unearthed a case, wherein a firm had created false backdated installation certificates for the imported capital goods , and had fabricated shipping documents to obtain redemption certificates from Directorate General of Foreign Trade.
Encashing IGST Refunds Through Bogus Exports
At the time of exports, firms have the option to pay IGST on the export goods and to make this payment through accumulated input credit. However, this IGST payment gets refunded almost automatically into their bank accounts, upon completion of the export. Fraudulent entities, through a network of fake firms and use of fake invoices, generate input tax credits and encash them illegally through the IGST refund mechanism. DRI has detected several such cases.
In one of the cases, misuse of EPCG scheme was detected by DRI, wherein a company had imported certain capital goods for port operations availing IGST exemption, which was conditional on export proceeds being realised in foreign currency. The export proceeds were, however, found to have been realised in Indian Rupees, resulting in recovery of close to Rs. 69 Crore towards duty and interest.
In one instance, several bogus entities were found to be exporting cheap polyester carpets by mis-declaring them as “Indian hand-knotted silk carpets”. The goods were being overvalued to fraudulently claim IGST refunds and other export benefits.