Illegal imports into the Nation - loss of revenue - there is more than what meets the eye

Today (27^th Sept 2011) Times of India – Chennai Edition has a news prominently covered. It states that the  Directorate of Revenue Intelligence (DRI) on Monday  (26^th sept) busted an international smuggling racket and seized Rs 13.54 crore worth of electronic equipment from three places in the city in a 15-day operation. Two kingpins, said to have been operating the illegal network between Singapore and Chennai port, were arrested.

There is much behind than the news than what could be read and understood.  The World is global village and now goods are being consigned to and transported between countries with less hassles.  Gone are those days, when importers had to undergo lot of trouble for obtaining import license and Govt. was always worried about balance of payment. The opening of the market has meant lot of items which otherwise are not even required do find a great market – cosmetics and other items get dumped in to so called developing countries by the marketing and coercive techniques of some advanced countries.  

Import means bringing any goods into India from a place outside India.  Goods may be imported into a country because they may not be freely available, some may be available for a lower price than what they could be manufactured in a country and then there are things which have brand value and have value to say that they are imported – seemingly classier only because it comes from other place !

As all would know, all goods imported into India have to  pass through the procedure of customs for proper examination, appraisal, assessment and evaluation. This helps the custom authorities to charge the proper tax and also check the goods against the illegal import.  Time and again, people complain that there are too many procedures.  The systems are in place to are preventive checks and ensure that there are enough filters to keep the system flowing.  Yet unscrupulous elements find ways to cut through them and use them against the interests of the Nation. 

All importers have to file a statement detailing the nature and value of goods to be imported, known as Bill of Entry.   If the clearance is done through EDI, there is no formal B/E but a cargo declaration with prescribed particulars is required for processing.  Along with B/E various documents such as Invoice, Packing list, Bill of lading, Importer’s declaration, license (if the nature of goods so require) etc., are filed.  There are some major importers who have the green channel facility (just as an individual  walks out of the Airport by merely declaring his personal luggage in case of returning from a foreign travel) – which means clearance of goods without routine examination of goods.  For other goods, physical examination of the goods is prescribed.   On scrutiny of the documents submitted, if the assessing officer finds it necessary to examine the goods first, to decide the correctness of value and classification of the goods under the customs and central excise tariffs or at the request of the importer, the officer  gives an examination order.  The assessing officer verifies the correctness of value and classifies the goods and indicates the rates of basic customs duty leviable under the customs tariff.  The approval is known as ‘Passed out of Customs Charge’.  Of course it may not be humanly possible to open all consignments and do a 100% physical check going the volume of imports, packing techniques, containerization and the wherewithal of the Government machinery.  But that cannot be an excuse of things going out of control.     

Now, getting back to the report of TOI – it is stated that DRI busted international smuggling racket and seized 13.54 crore worth of electronic equipment from 3 places in a 15 day operation and arrested some persons involved in this.   The report states that based on a tip-off, DRI Chennai zone officials intercepted a container at the Chennai port that had arrived from Singapore on September 12. An inspection found several airconditioning units in the front portion and TV sets at the back. After removing the cartons, the officials found 593 TVs, including LED, LCD, 3D varieties of different international brands, 30 Sony TV stands, 114 Sony USB adapters and 70 Sony 3D glasses. “In the documents produced for clearance, the goods had been declared as 205 pieces of split airconditioners and 273 pieces of Sanyo tape recorders,” a DRI officer said.

Further investigations revealed that the importer’s name and address were fictitious. “One address, in Tiruvanmiyur, was found to be a TNHB flat complex that had been demolished,” said DRI additional director general C Rajan.   On September 21, DRI officials nabbed kingpins J Shaik Parith (28) and J Basheer Ahamed of Royapuram. “Both admitted their involvement in the smuggling and said that earlier, too, they had smuggled in TVs, airconditioners and cosmetic items,” Rajan said.

    Based on the information given by the accused, DRI officials searched three godowns and residences belonging to them. “We found Rs 7 crore worth of TVs, airconditioners and cosmetic items at four godowns — one each on

Angappa Naicken Street

and Kalmandapam and two in Royapuram,” Rajan said. Their residential and business premises were also raided. “We seized a laptop and pen drive containing details of their transactions with people in Singapore,” Rajan, who led the search, said.  The total customs duty evaded by them was around Rs 10 crore, he said. “Our teams are investigating the money transactions. We suspect that a group dealing in hawala transactions could be involved,” Rajan said.

In an unconnected incident, (another report of TOI) mentions of Chennai Airport Police arresting 3 contract employees of Air Cargo for stealing cell phones from a Nokia export consignment.   It is stated that the theft took place after the clearance of cargo for export near the runway.  TOI reports “   A senior officer at airport police station said that about 32 cellphones were missing from the consignment and 14 pieces were recovered from a driver and two loading staff.     The police recovered the stolen boxes of 14 Nokia phones which were to be exported in a Jet Cargo freighter. They arrested 3 persons.   In the last six months, four similar cases have been cracked by the airport police.”

The DRI Officials do deserve kudos for the good work in seizing the goods illegally imported. 

But this perhaps is only a tip of iceberg and there have been many instances as reported in papers of goods being illegally imported or imported under wrong declarations.  Either the machinery is not fool-proof or the unscrupulous elements use some corrupt persons to bend or cheat the system for their personal gains.  This not only denies rightful amount by way of import duties to the Indian Government, but more importantly puts the Nation under a higher security risk.  Days are not good and there have been many heinous crimes committed against the Nation.  If people can smuggle contraband and high valued goods without the notice of the authorities, one dreads to think what will happen if arms and ammunition are brought inside the country clandestinely.  Remember the blasts at Mumbai that rocked the Nation were by RDX chemicals brought in clandestinely by hardcore terrorists.

What was found was not a personal hand baggage, which somebody had left and ran away, when security was tight ! – it was container load of goods.  For importing goods into India

a)  registration of  importer is a pre-requisite for import of goods. Procedurrally, the Customs Dept.  are not to  allow clearance of goods unless the importer has obtained IEC Number from issuing authority.  The waiver is only in respect of goods imported for personal use.  

The granting of IEC  Code Number  is through a procedure wherein the proposed importer has to submit application alongside documents which include photos, PAN no. etc.,

b) there would be documents in the nature of Bill of Entry which are filed through a recognized CHA

c)  there of course would be an Invoice with details of seller / consignor and terms of sale

d)  there would the carriage document which again will have details.

The reports suggest that the details of importer is fictitious !!  So easy to pass wool around others’ eyes.   If somebody has forged so many documents – still there could be trails not all those who were involved in the transaction such  as carrier or CHA or local transporter, agent – would have been deceived with fake identity.  Either it is not so believable story or everyone is so casual and does their work without even doing the basic check….

Regards – S. Sampathkumar.