Customs busts Rs 12cr duty drawback scam at Tuticorin VOC port.

CHENNAI: Customs officials have busted a scam at VOC port in Tuticorin where a gang managed to earn Rs 12 crore by claiming drawback duty without exporting anything. A few customs officials at Inland Container Depots (ICD) and Container Freight Stations (CFS) in the port area were allegedly hand-in-glove with the gang, said officials, adding that five people were arrested on Wednesday.

A number of private companies in Tirupur and Hosur, registered as textile units, are under the scanner, said sources, adding that a network of shell companies was used to swindle crores from the government.

Duty drawback is a government incentive for exporters, an 8%-10% rebate of all the duty paid from the time goods are manufactured till they are sent out. This is deposited into their bank accounts based on the Import Export Code (IEC) as soon as the container is cleared for export by a CFS or ICD. 

Sources say this is the first time such a modus operandi has been detected. "In earlier recorded cases, exporters would send garbage, but declare it as valuable goods and get the drawback. This is the first time drawback is being claimed without exporting anything," said a top source.

In this case, the gang managed to get the User ID and password at the St Johns ICD near Tuticorin port and enter details of non-existent export goods based on which the drawback duty was received. "This is why there is a strong suspicion of collusion of customs officials, a few of who have been transferred. There is a Government of India directive that the password should not be shared with anyone," a source said.

Customs officials on the ground are supposed to physically verify the containers during the registration before they are released for export, a source familiar with the process said.

Investigators are looking into data prior to 2015 to see if this fraud had been carried out for more than two years.

The gang used the IEC of five companies, believed to be shell firms, the source added, but many more companies are under the scanner.

Though drawback fraud cases are registered, a scam of this magnitude has not been reported in the recent past.