Under the provisions of FEMA, 1999, the Directorate of Enforcement (ED) has carried out search operations at the locations of M/s. Sharanam Jewels LLP, its promoter Avadh Harshad Yagnik and its associates, M/s. Vansh Marketing, an Ashik Patel proprietorship concern, and others in Ahmedabad, Surat, and Dhubri.
Based on reliable information, the ED launched an investigation that showed the aforementioned entities were involved in the large-scale sending of foreign exchange outside of India and had made suspicious outward remittances totalling Rs. 2,284 crores as payment for the import settlement of invoices.
It was discovered during the search that M/s. Sharanam Jewels LLP is managing a unit at the Surat Special Economic Zone and engaging in the import-export of jewellery and diamonds.
Surat Special Economic Zone
Surat Special Economic Zone (SurSEZ) is a designated area that facilitates and promotes economic activities, particularly the import-export of jewellery and diamonds, in the city of Surat, India. Businesses operating within Surat SEZ enjoy customs-related benefits, making the import and export processes smoother. In 2015, the Surat Special Economic Zone (SEZ), a major centre for diamond cutting, polishing, and trade, came under scrutiny for potential misuse by diamond traders.
Diamond traders were suspected of inflating the value of imported rough diamonds on invoices. By showing higher import costs, they could reduce taxable profits in India and shift them to overseas entities in low-tax jurisdictions.
Higher import values could potentially secure larger loans from banks based on inflated collateral values. Illicit funds could be disguised as legitimate diamond imports, entering the financial system through overvalued invoices.
Re-exporting at Lower prices
In 2015, Diamonds processed in Surat SEZ were allegedly exported at artificially low prices, then re-imported into India at inflated prices. By undervaluing exports, traders could avoid paying customs duties on re-imports. Lower export values could reduce taxable income in India, while inflated import values could create artificial losses for tax benefits. Illicit funds could be channelled out of India through undervalued exports and back in through overvalued imports.
Role of Sharanam Jewels
The business has imported and exported goods worth Rs. 3,700 crore during the last two years. Although the entity’s books of account indicate a closing stock of Rs. 520 Crore, meagre stock worth Rs. 19.70 lakh was discovered during physical verification.
The ED probe also showed that M/s. Sharanam Jewels LLP and its associate M/s. Vansh Marketing, with the assistance of other shell companies, had given accommodation entries totalling more than Rs. 5,000 Crore to a variety of people and businesses through a complicated network of import-export transactions.
Various digital gadgets and damning documents have been discovered and confiscated during the search. The bank accounts of the concerned entities, with a total amount of Rs. 1.14 Crore, have been blocked. More research is currently being conducted. If you wish to review older enforcement actions please check our enforcement section.
