The diamond trader also diverted diamonds imported via SEZs to the local market, while exporting overvalued low-quality diamonds to artificially inflate his books.
The Directorate of Revenue Intelligence (DRI) is set to prosecute diamond trader Nirav Modi for duty evasion, illegally diverting imported diamonds into the local market, and exporting cut and polished diamonds by overvaluing them in order to inflate his books and keep bank credit going. According to the DRI, Modi also misused benefits given to firms operating out of the country’s Special Economic Zones (SEZs).
The fraud came to light on December 5, 2014, when the DRI intercepted six consignments of diamond jewellery belonging to two Modi firms – Firestar Diamond International Private Limited and Firestar International Private Limited. The consignments, confiscated at Mumbai Airport, were to be shipped to the United States, Hong Kong, Dubai, and Canada.
A DRI officer said, “Sanction for prosecution of Modi and three of his firms was obtained under the guidelines of the Central Board of Excise and Customs (CBEC). He will be prosecuted under sections 132, 135(1) (a), 135(1) (b), 135(1) (i) of the Customs Act, 1962, and section 120-B of Indian Penal Code for false declaration and evasion of duty.”
DRI investigators found Modi would inflate the bills for the exported diamonds. In this particular case, officers found that Modi’s firms had declared the value of the six consignments to be Rs 43.10 crore, while the actual value according to government rates was Rs 4.93 crore.
DRI’s investigations into this case revealed that Modi’s units located in the Surat SEZ belonging to Firestar Diamond International Private Ltd, Firestar International Private Ltd. (FIPL) and Radhashir Jewellery Company Private Ltd were illegally diverting import-duty-exempted high-quality cut and polished diamonds, and pearls to the local markets. According to SEZ rules, importers cannot sell goods procured at lower tariffs in the local market.
The officers also found that high-quality cut and polished diamonds were being replaced by low-quality diamonds and pearls acquired from local markets in order to evade customs duty. During the investigation, officers found that cut and polished diamonds that were declared by Modi’s firms to be valued at Rs 1112.3 crore; however, the diamonds were worth only Rs 74.63 crore and were seized from an SEZ in Surat.
A senior DRI official said, “The modus operandi indicates that Modi not only evaded duty, but also laundered money, which is being investigated by the Enforcement Directorate.” If convicted, Modi faces a jail term of seven years.
Meanwhile, on Sunday, the Central Bureau of Investigation (CBI) arrested four more persons linked with the firms of Nirav Modi and his maternal uncle Mehul Choksi in the PNB fraud case. “The CBI has arrested two employees and an auditor of Nirav Modi Group, and a director of Mehul Choksi’s Gitanjali Group,” a CBI spokesperson said.
Those arrested include Manish K Bosamiya, the then assistant general manager (operations) and Miten Anil Pandya, the then manager (finance) of Firestarter International Limited. They were arrested for their alleged role in the preparation of applications for the fraudulent Letters of Undertaking (LoUs) submitted to PNB.
The agency identified the arrested auditor as Sanjay Rambhia, a partner at a Mumbai-based chartered accountancy firm. The fourth person arrested in the case is Aniyath Shiv Raman Nair, a director in Mehul Choksi’s Gili India Ltd.
The spokesperson said, “It is alleged that besides being one of the directors of the Gitanjali Group of Companies, he was the authorised signatory for the applications made to PNB for issuance of LoUs and foreign letters of credit.”