According to an ET report, final week, the company filed a criticism with its Adjudicating Authority under the related provisions of the Foreign Exchange Management Act (FEMA), alleging that the Surat-based entity illegally transferred international alternate to international shores under the “garb of imports from the special economic zone”.
The criticism says that the company has detected unlawful transfers of Rs 3,437 crore to date. However, individuals acquainted with the matter counsel that the entire quantity of alleged unlawful transfers is prone to attain Rs 5,000 crore.
The criticism has been filed towards M/s. Sharnam Jewels Limited (SJL), LLP, its companions, and others. Acting under FEMA, the ED has additionally seized properties, together with plots, flats, and financial institution balances value Rs 29.9 crore.
The ED has alleged that almost all of the international remittances have been made to Hong Kong. The criticism, which ET has reviewed, alleges that the Surat-based entity “no infrastructure to manufacture gems and jewellery running into thousands of crores”.
FEMA Violation Case
In December of the earlier yr, ED officers carried out searches on the premises of Sharnam Jewels. The company has alleged that Sharnam Jewels claimed to have a closing inventory of Rs 520 crore. “However, on physical verification during the search only a meagre stock of Rs 19 lakh was found,” the criticism alleges.
ED has accused SJL of using a distinctive methodology to illegally switch funds overseas by exploiting the privileges granted to SEZs. According to the company, SJL strategically chosen SEZs because of the lack of stringent monitoring by customs authorities on duty-free imports, enabling these looking for to switch illicit funds out of India to take action under the guise of funds for fictitious imports to SEZs.
The criticism additional alleges that SJL “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 claims that between 2021 and 2023, a complete of $503.4 million (Rs 4,000 crore) was remitted under the pretext of these fraudulent imports.
Moreover, the ED’s criticism under FEMA states that the funds to those Hong Kong entities have been made in international foreign money inside a quick timeframe of 7 to 30 days from the date of import. Investigations have revealed that the Hong Kong-based firms are shell entities, with most of them having been struck off, possessing minimal share capital, and working from the identical deal with, elevating crimson flags about their legitimacy.
ED has filed a criticism towards SJL alleging that the firm exported pretend gems and jewelry out of the SEZ in compliance with SEZ Rules. However, SJL didn’t carry again the obligatory inward remittances to India, amounting to $431 million (roughly Rs 3,500 crore) between 2021 and 2023.
According to the criticism, “SJL made exports to Hong Kong-based entities namely Chi Kar Trading Co; Daehan Trading Limited, DJS International, DVL Limited, Faith Jewellery Limited, Fortune Trading, Global Star, Mini International, My Worldwide Limited, Premier Trading Limited etc. These entities are also found to be shell entities. No efforts were made by the partners of SJL to bring back forex into India for which they have shown exports”.
When confronted with the discrepancies associated to the alleged pretend imports and forex transfers, the companions of SJL and different linked individuals have been unable to offer a passable clarification. The ED carried out a thorough investigation, analyzing greater than 750 financial institution accounts and over 250 entities to determine the cash path.
The company additional alleges that SJL acquired funds from Indian entities engaged in varied companies similar to oil, heavy metals, iron & metal, and scrap, which is in distinction to SJL’s claimed enterprise of manufacturing gems and jewelry.
The criticism states that “SJL did not actually sell any goods or services to Indian entities for which it received payments through a complex web of transactions which in turn SJL sent outside India in the garb of fake imports.”
