Mumbai: The Customs Rummaging and Intelligence (R&I) Cell at Nhava Sheva Jawaharlal Nehru Port recently found that several companies were smuggling in potable ethyl alcohol from China by misdeclaring their consignment as laboratory chemicals, and diverting the undenatured ethanol to pharmaceutical companies and distilleries.
The cell found that the companies were evading customs levies and state excise duties of up to ₹40 crore per month through their illegal activities.
Rules of import
The import of 99.9% pure ethyl alcohol under the ‘harmonised system code 9802’, which attracts a customs tariff of 10%, is exclusively meant for laboratory chemicals, while import for medicinal, pharmaceutical, manufacturing, and distillery purposes attracts 150% customs levy, with additional state excise duties of ₹200 per liter.
Customs’ investigation found that Hemant Trading Co, K Raj and Co and Chemilab Corporation were importing pure ethanol from China for testing purposes and diverting them to pharma companies and distilleries for huge profits.
The investigation into the imports of Hemant Trading Co revealed that an average of 1,16,000 litres of pure ethyl alcohol has been imported every month for the past five years. The company declared the consignment as ‘Lab Chem’, and paid 10% customs duty and zero state excise levies.
Officials busted the racket last weekend and seized 58,000 litres of purity ethyl alcohol in two containers at the GDL Container Freight Station.
“The undenatured ethanol with 99.9% purity should have been classified under customs tariff code 220710 for pharmaceutical, distillery, manufacturing, and medicinal use. The consignment imported from China was being diverted to major pharma companies and distilleries, causing major revenue loss to the customs and state excise,” a customs official said.
Customs alerted Maharashtra State Excise Depart
The customs alerted the Maharashtra State Excise Department of the seizure and asked it to join the investigation. In a confidential letter to the customs, the excise department named top pharma companies, including Teva Api, Sun Pharmaceuticals, Alembic Pharmaceuticals, Serum Institute, amongst the many recipients of diverted consignments.
“It is a major scam and the state excise loses a lot of revenue. The directorate of foreign trade has been asked to block the import-export codes of the importers to prevent misuse and evasion of customs and state levies,” an excise official privy to the investigations said.
The excise department has exclusive control over the sale, purchase, import, export, transport, and possession of potable ethyl alcohol and importers need permission from it to divert imported consignments for domestic use in pharma and distilleries.
Customs had issued a show cause notice to Nariman Point-based K Raj and Co for customs duty evasion in July 2022 and fined it ₹34 crore for misdeclaring imported ethyl alcohol.
“Despite earlier customs show cause notices, importers continue to brazenly smuggle ethyl alcohol, misdeclaring the consignments as lab chemicals for research and testing,” another customs official said.
List of companies
1. Hemant Trading Co
3.5L litres
2. K Raj & Co
4L litres
3. Chemilab Corporation
3.5L litres
4. Associated Instruments
7L litres
5. Tirupati International
1Llitres
6. Miscellaneous
1Llitres
Total litres of imports
Approx 20L litres
Total revenue lost
Approx ₹40 crore per month
