A Surat-based jewel firm operating from a 20*22 feet commercial office in a special economic zone (SEZ) has come under the radar of Enforcement Directorate (ED) for allegedly making illegal outward remittances to the tune of over ₹4,000 crore.
The agency last week filed a complaint with the agency’s Adjudicating Authority under relevant provisions of Foreign Exchange Management Act (FEMA) alleging that the Surat-based entity illegally transferred forex to foreign shores in the “garb of imports from the special economic zone”.
The complaint alleges that the agency has so far detected illegal transfers of ₹3,437 crore. According to people in the know the total amount of alleged illegal transfers is likely to reach ₹5,000 crore.
The complaint has been filed against M/s. Sharnam Jewels Limited (SJL), LLP, its partners and others. Acting under FEMA, the ED has also seized properties, in the form of plots, flats and bank balances worth ₹29.9 crore.
According to ED, the maximum foreign remittances have been made to Hong Kong. The complaint, exclusively reviewed by ET, alleges that the Surat-based entity “no infrastructure to manufacture gems and jewellery running into thousands of crores”.
Last December, ED sleuths had carried out searches at the premises of Sharnam Jewels. The agency has alleged that Sharnam Jewels claimed to have closing stock of ₹520 crore.
“However, on physical verification during the search only a meagre stock of ₹19 lakh was found,” the complaint alleges.
The agency has further alleged that the Surat-based entity adopted a unique modus operandi to make illegal outward remittances using the exemptions granted to SEZ(s).
Elaborating on the alleged modus operandi, the agency has alleged that SJL “deliberately chose SEZ since duty free imports are allowed into SEZ without any effective monitoring from the Custom authorities and those who want to send their ill-gotten money outside India can easily send it in the garb of payments for fake import to SEZ”.
The complaint alleges that the entity “was showing highly over invoiced imports of fake uncut diamonds and other precious metals and stones mostly from Hong Kong-based entities namely Sigma Diamonds Limited, Diarect Marketing Ltd; B S enterprises, Hast Impex, HS Exim Co, DVL Limited”.
The ED has further alleged in its complaint under FEMA that a total payment of $503.4 million (₹4,000 crore) was made in two years from 2021 to 2023 in the garb of fake imports.
“Payment in forex was made to these Hong Kong entities within a short period of 7-30 days from the date of imports. From the investigation it has come out that the Hong Kong-based entities are shell entities as most of them have been struck off, having meagre share capital and red flagged and are operated from the same address,” the complaint alleges.