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Surat-based jewellry firm under scrutiny: The Enforcement Directorate (ED) is investigating a Surat-based jewellry company, Sharnam Jewels for alleged illegal foreign remittances of over ₹4,000 crore.
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Illegal forex transfers under FEMA: A complaint was filed under the Foreign Exchange Management Act (FEMA), with the total illicit transfers potentially reaching ₹5,000 crore.
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SEZ misuse for illicit remittances: The company allegedly exploited SEZ exemptions to carry out fraudulent foreign transactions under the pretense of imports, mainly to Hong Kong.
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Fake imports and shell companies involved: SJL is accused of inflating import values and sending payments to Hong Kong-based shell entities with minimal capital.
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Non-realization of export payments: Despite exporting goods from the SEZ, the company failed to bring back $431 million (₹3,500 crore) from exports made to shell companies abroad.
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Complex financial network uncovered: The ED investigation revealed that SJL received funds from unrelated Indian businesses, using a web of transactions to disguise the illegal transfers.
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Seizures and ongoing investigation: The ED has seized properties worth ₹29.9 crore, with further scrutiny as the investigation continues.
More and more cases of involved jewellers have come before the spotlight with Surat-based a small 20x 22 feet office in Special Economic Zone (SEZ) jewellery firm attracting the Enforcement Directorate to scrutinize its alleged involvement in illegal foreign remittances of over ₹4,000 crore. The firm is alleged to have been transferring money abroad in the garb of imports from the SEZ.
ED Files Complaint Under FEMA
Last week, the Enforcement Directorate also lodged a formal complaint with its Adjudicating Authority under the Foreign Exchange Management Act, or FEMA, alleging that this firm in Surat had illegally transferred foreign currency out of the country. An investigation has already tracked ₹3,437 crore of these illegal transactions, and the total figure could run up to ₹5,000 crore.
The ED also complains against M/s. Sharnam Jewels Limited (SJL), LLP, its partners, and others. Besides, properties including plots, flats, and bank balances amounting to ₹29.9 crore have also been attached. During the investigation, it was found that the majority of the remittances were sent to Hong Kong.
Alleged Over Invoicing and Fake Imports
This complaint suggests that Sharnam Jewels was not equipped to manufacture high-value gems and jewels, as it claimed. How could it have shut its shop at a closing stock of Rs. 520 crores when, in fact, the December 2023 search by the ED found that on-site, there was only stock worth Rs 19 lakh?
The company was accused of exploiting its status as an SEZ to carry out illegal remittances, making it impossible for the customs authority to monitor imports. The ED has accused SJL of inflating values of fake imports which, in most cases, consist of uncut diamonds and other precious metals with high-value export claims from Hong Kong-based entities like Sigma Diamonds Limited, and Direct Marketing Ltd, among others.
Shell Companies and Fake Exports
The company is said to have paid forex worth $503.4 million (about ₹4,000 crore) for these fictitious imports through the firm between 2021 and 2023. Remittances were to shell companies in Hong Kong that had minuscule amounts of capital and common addresses red flags.
During the same time, ED uncovered that SJL made outward remittances amounting to approximately $431 million or ₹3,500 crore as inward remittances for fake gems and jewels exported from the SEZ. The payments were given to the shell entities located in Hong Kong, including Chi Kar Trading Co, Daehan Trading Limited, Faith Jewellery Limited, and other related entities without any attempt for recoveries.
Web of Compressed Financial Network
Analysis of over 750 bank accounts and more than 250 entities led the ED investigation into a maze of transactions. Here, the ED found that SJL was receiving money belonging to Indian businesses dealing with oils, metals, and scraps that had absolutely no relation to SJL's gem and jewelry trade. The said money was sent out of the country in what appeared to be fake import payments.
SJL's business partners could not explain the discrepancies in their financial transactions satisfactorily when questioned. Further investigation by the ED.
Inputs by Agencies
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