Diamond firms in sales tax fraud
Mumbai: In what has the potential to rock the diamond market, the state sales tax department is probing diamond imports worth Rs 1,000 crore for tax evasion.
An investigation carried out by the department’s vigilance wing has revealed that several importers based in Mumbai manipulated details, to evade tax payment on rough polished diamonds, imported from Dubai and Hong Kong. “At least 27 firms registered in Mumbai and operating from the diamond hub near Opera House are under the scanner following the discovery,” a senior department official, requesting anonymity, said.
The investigators have found that in order to evade tax payment on diamonds, the consignments, despite being imported locally, were shown to be transported to addresses in Surat. Diamond transactions are exempt from sales tax levy in Gujarat. The diamonds used to be cleared from the Mumbai airport by clearing agents and then shown as dispatched to Surat.
The evasion racket came to light, when a vigilance team raided two clearing agents in the Fort area and offices of some importers located. “While the agents had receipts to show that they collected the import consignments from the airport, on behalf of the importers, they were unable to produce proof to show that these had then been transported to Surat,” the official said. This discrepancy prompted the department to begin probing the matter in detail.
Teams were dispatched to Surat, where in association with the local tax authorities, raids were conducted on the addresses mentioned. “Nine locations were visited. Most turned out to be addresses of residential apartments, where there was no trace of any business activity. The rest had been locked for years,” the official informed. Interestingly, despite no business operations being performed at these addresses, the firms had managed to get themselves assessed from the local authorities. To strengthen the case, the Surat enforcement wing was requested to file the inspection report on the visits made.
Having unearthed the modus operandi to evade tax, the department probed further, only to find that the practice was being used by at least 27 firms registered in the city.
During the course of investigation, some other companies registered in Surat were brought under the scanner too.
“We are in the process of filing an assessment report and initiating proceedings for recovering the evaded tax,” an official said, adding that the firms will be given a chance to go in appeal against the proceedings.
Following the inspection reports, the department has also requested authorities in Surat to revoke the registration of the firms involved. The department began investigating the nexus in December 2008.
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