DRI Busts Rs 2,500 Crore Areca Nut Import Scam

The Directorate of Revenue Intelligence (DRI) has successfully dismantled a significant areca nut import racket, uncovering a detected revenue loss exceeding Rs 2,500 crore. This extensive operation involved the fraudulent import of South-East Asian areca nuts, falsely declared as originating from Bangladesh to exploit customs duty exemptions.

India imposes a 100% Basic Customs Duty (BCD) on areca nut imports, but those from Bangladesh are exempt under the South Asian Free Trade Area (SAFTA) agreement, provided they meet specific Rules of Origin criteria.

Key Details of the Investigation

• Revenue Loss Detected: Over Rs 2,500 crore
• Origin of Goods: South-East Asian countries (Indonesia, Thailand, Malaysia)
• False Declaration: Bangladeshi origin to claim SAFTA exemptions
• Investigation Duration: One month
• Searches Conducted In: Kolkata and Visakhapatnam
• Cash Seized: Approximately Rs 75 lakh
• Areca Nuts Seized: About 160 metric tonnes
• Arrests Made: Nine individuals

The syndicate allegedly routed the areca nuts through an Export Processing Zone (EPZ) in Bangladesh. There, goods were transferred into different containers and bags before being shipped to India with fraudulent documentation.

Understanding the Fraudulent Mechanism

The intricate scheme involved several steps designed to bypass customs regulations and duties:

• Areca nuts were sourced from various South-East Asian countries.
• These goods were then diverted through an Export Processing Zone (EPZ) in Bangladesh.
• Within the EPZ, the areca nuts were repackaged into different containers and bags.
• Fraudulent Certificates of Origin were allegedly obtained from Bangladeshi authorities.
• These false documents enabled the syndicate to declare the nuts as Bangladeshi-origin, qualifying for SAFTA customs duty exemptions.

Masterminds involved in the racket reportedly charged substantial commissions from Indian importers for facilitating the routing, documentation, customs clearance, and transportation. The DRI’s probe also revealed the use of hawala channels and dummy entities for moving and layering the illicit proceeds from these illegal imports.

Regulatory Response and Market Impact

In response to these findings, regulatory action has been initiated against a Customs Broker firm implicated in the scheme, resulting in the suspension of its license. The Ministry of Finance stated that this activity not only caused significant revenue loss to the government but also distorted market prices.

The fraudulent imports negatively impacted Indian areca nut growers and legitimate traders, who faced unfair competition due to the artificially lower prices of the illegally imported goods. The investigation remains ongoing as authorities examine the roles of all parties involved in this extensive network.