DRI to move against Nirav Modi in 2015 case, acccused of misdeclaring exports

Documents accessed by The Indian Express show that the 2015 case was settled two years ago by Modi who paid Rs 48 crore under a provision in the law at that time. However, sources said, the official settlement order left open the option of initiating prosecution proceedings.

Sources said prosecution will now be launched under sections 135, 135A and 140 of the Customs Act 1962. These sections grant Customs the power to punish any person, a company and its directors, in case of violations, with imprisonment that may extend to three years or with fine, or both.

Modi, his firms and his uncle Mehul Choksi are under the scanner of multiple investigating agencies in connection with an alleged fraud of up to Rs 12,600 crore at PNB.

The 2015 DRI case pertaining to Modi and a few of his firms was settled and concluded under section 28 (5) and 28 (6) of the Act in March 2016.

Under theses norms, cases involving fraud, collusion, wilful mis-statement, suppression of facts or violations of any provision of the Customs Act with the intent to evade payment of duty can be settled and concluded after paying the demand, interest and penalty of 15 per cent of the duty amount alleged in the show-cause notice (SCN) within 30 days of it being issued.

The legislative intention of these sections is to provide a facility to traders for early resolution of the dispute. But while an order passed by Shrikant S Patil, commissioner of central excise, customs and service tax, Surat, on March 3, 2016 had closed the proceedings against Modi and his firms, it left open the option of initiating prosecution against Modi and his companies.

“Since all amounts specified above have been paid collectively, rest of all the proposed proceedings under subject SCN against aforesaid companies and all other persons are deemed to be concluded as per the provisions of Section 28(6)(i) of the Customs Act, 1962, without prejudice to the provisions of Section 135, 135A and 140 of the Act. This order is issued without prejudice to any other action that may be taken against the above or any other person(s) concerned with said goods under the Customs Act, 1962 or any other law for the time being in force in India,” said Patil’s order.

According to sources, the settlement laws were changed subsequently and cases where seizures are made were excluded from settlement. However, the DRI did not launch any prosecution proceedings against Modi in the last two years after the order.

In case of Modi’s firms, the DRI probe had alleged that imported, duty-free, high-value, cut and polished diamonds were being diverted to the domestic market while cheaper low-value diamonds were being used to make jewellery for export to sectors like Hong Kong and UAE.

The Indian Express had first reported that DRI had issued two showcause notices, on June 5 and June 24, to Modi and three of his firms — Firestar Diamond International Pvt Ltd, Radashir Jewellery Company Pvt Ltd and Firestar International Pvt Ltd — located in the Surat Special Economic Zone (SEZ).

The three firms import duty-free diamonds, pearls and gold for manufacturing jewellery at the Surat SEZ, exclusively for export after value addition. The showcause notices raised a duty of Rs 24.52 crore. The agency had also seized some of the “grossly mis-declared” export consignments of Modi’s firms.

The alleged violation was detected in December 2014. Following specific intelligence, the DRI stopped the group’s “several export consignments of diamond-studded gold jewellery” to Hong Kong, UAE, US and Canada. The agency claimed that jewellery meant for Hong Kong and UAE were of “very low quality”.

A government-approved valuer pegged the value of the consignment at one-tenth of the declared cost. The DRI had also searched Modi’s factories at Surat SEZ and verified the stock of imported duty-free raw material, which revealed huge variation when compared to cut and polished diamonds and pearls.