Duty Drawback and Laundering

The duty drawback scheme has been designed to refund to exporters duties levied by Customs & Central Excise or tariffs paid by them on both imported and locally produced materials or inputs that go into the production of goods for export.

Duty Drawback and Laundering

Many countries have this scheme to ensure competitiveness of exports. Lack of competitiveness could be due to the quality of infrastructure, cost of funds, value of currency, high Customs duties, or excise duties/tariffs on inputs or intermediates that go into production of goods for exports, etc.

Misuse of the scheme is reflected in the latest case of alleged inflated export bills. There have been concerns over delays in refunds, and complaints over interpretation and the time involved.

In 2009, six accused were arrested by the Directorate of Revenue Intelligence (DRI) on unearthing of alleged fraud relating to fictitious firms and taking undue benefit to the tune of Rs20 crore from the customs department in the form of duty drawback.

Subsequently, ED came in the picture and registered an Enforcement Case Information Report (ECIR) on October 29 under the Prevention of Money Laundering Act (PMLA) to trail the illegal cash flow. For the first time after the PMLA came into being in 2002, ED has been allowed to question offenders in its custody.

The accused, during their custodial interrogation by DRI, allegedly confessed to their involvement in making bogus export firms. Most of the allegedly fake firms bear the addresses either of Delhi or adjoining areas