Evading Customs Duty, Pure Alcohol Importers Making Profits

Mumbai : Several firms across the state, including some from south Mumbai, are under the scanner of the Customs Department after a huge consignment of pure ethyl alcohol, which was misdeclared for laboratory use, was caught at Nhava Sheva Port in Uran a couple of weeks ago.

“Not only are they evading huge amounts of customs duties but also several other taxes levied by the state government. Many of the firms have been found to sell the stock to distilleries for making liquor or pharmaceutical companies, making substandard medicines,” Customs officials said on Monday.

Additionally, many of these companies have sister concerns that have been found to hold liquor licences, the officials said, adding that the effects of this ‘white collar smuggling’ can have a much bigger impact that goes beyond economics. Pure ethanol (ethyl alcohol) can be used to produce illicit alcohol by simply diluting it.

“Besides, many of the traders involved have also been found to provide this raw material to dubious pharmaceutical companies that use it to make medicines like the cough syrup linked with the deaths of several children in Africa,” the officials said.

On September 5, the customs officials from the Rummaging and Intelligence (R&I) cell at Nhava Sheva Port seized 58,000 litres of ethanol (ethyl alcohol) worth ₹95 lakh. Over the next one week, they seized 7,100 litres of the same. “Some of the traders whom we caught have had several cases registered against them over the last few years. Many of them import the chemical from the United Kingdom and China. The one imported from China is especially of bad quality as there is no standardisation for these products in that country,” a Customs official said.

Last week, he said, the Customs Department called several companies for interrogations regarding these mis-declared imports. Some of the companies being investigated are Hemant Trading Company from Solapur, K Raj and Company from the city, New Delhi-based Adarsh Scientific Corporation, Qualichem Laboratory Services from Nagpur, Jignesh Agency from Mumbai and Encube Ethicals from Mumbai, among others.

Some like Manohar Tolani from K Raj could not provide the officials any satisfactory responses. “He expressed ignorance about the wrong classification of the material, and regarding the laws governing import of alcohol. However, we later found GST records of his firms that showed the sale of alcohol and paying the necessary state excise on it,” the official said.

Another case, wherein the importer was known to have evaded ₹37 crore was sent a show cause notice by the customs officials. The owner of the company has admitted that he has misclassified his import and has taken a licence from state excise. Another company, owned by him, was again found misdeclaring the same substance as laboratory chemicals.

“A big problem here is that there are no actual consequences that any of these companies have faced up till now. None of them have been blacklisted, or the perpetrators given a heavy enough fine to dissuade them from this very profitable business,” the official said.

The customs officials have now also involved the officers from the state excise department. They have been provided with the details of the warehouses where this illegally imported alcohol is stored. An excise officer explained that the importers need a licence and permission from the State Excise department for import, export, transport, purchase, use and sale of ethyl alcohol.

“However, many of the companies being named have not got the necessary permissions. We also informed the customs not to release the consignments of imported Ethyl Alcohol without our consent,” he said, adding that many importers were secretly clearing these goods without informing the state government and evading a lot of duties of the state including GST, VAT, licensing fee, etc., which also could run into crores of rupees.

Traders import pure alcohol, claiming it to be purchased for laboratory use but using it in other ways. This means that they end up paying 10% customs duty on the product instead of 150% if they were to declare the actual use. They are also evading a lot of duties that earn crores of rupees worth of revenue to the state excise department. The pure alcohol imported is used to make illegal alcohol or sell it to distilleries for huge profits as well as to dubious pharmaceutical companies that make substandard medicines with them.

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