Interview/ Vivek Johri, former chairman, Central Board of Indirect Taxes and Customs
The Central Board of Indirect Taxes and Customs (CBIC) is the apex body under Union finance ministry for formulating policies and collecting customs and central excise duties and indirect taxes in India. Every year for the past few years, the CBIC has been interdicting smuggling cases in the range of Rs17,000 crore to Rs22,000 crore. Apart from these are cases of export-import fraud involving evasion of Customs duties.
In the 2023-24 fiscal year (up to November 2023), as many as 4,040 cases of gold smuggling involving 2,984kg of the precious metal were registered. Former CBIC chairman Vivek Johri says illicit trade and smuggling not just adversely impact the economy, but threaten national security as well.
Excerpts from an exclusive interview:
Q/ There seems to have been a rise in gold smuggling. How worrisome is the trend?
A/ The number of seizures have increased in recent years. We have seen a variety of methods being deployed―body concealment, and attempts to smuggle gold as powder, paste and foil. After many years, seizures of gold have also been made near the coastline, pointing to the possibility of sea routes being used. The alertness of Indian law enforcement agencies has compelled gold smuggling syndicates to adopt new methods and strategies. Increased surveillance at international airports has forced a change of route from West Asia by air to land route―that is, through the land borders in the northeast.
Q/ There is a debate on whether the rise in gold import duty leads to more smuggling. Is there a pattern?
A/ Smuggling is often seen as a function of demand. Demand is linked to a number of factors; [import] duty is just one of them. Other factors may include quantitative restrictions or other domestic imperatives. Since gold is treated as a liquid asset, smuggling also depends on the relative asset prices that influence investment decisions, and hence, the demand for gold. The pattern of smuggling, as expressed by seizures, therefore, is often seen as mirroring the consumption-demand cycle.
Q/ What policy interventions are being taken to tackle the gold smuggling menace?
A/ In addition to the measures on the enforcement side, the policy related to the import of gold, jewellery and precious stones is being calibrated keeping in view the emergent trends in trade and the demand for these items. For example, the duty on gold doré bars (a semi-pure alloy of gold and silver) has been pegged at a lower rate than gold so as to encourage domestic value addition.
Q/ What operational steps are being taken by the Customs and the Directorate of Revenue Intelligence to keep a tight vigil?
A/ The alertness of Indian law enforcement agencies has compelled gold smuggling syndicates to adopt new methods and strategies. In recent times, coastal as well as land routes have been used to smuggle gold. In order to further improve the efficacy of our response, we have been working on using data analytics and enhancing the use of technology for screening passengers. This helps us sharpen the focus of our enforcement endeavour.
Increased surveillance at international airports and risk-profiling of passengers using data triangulation have produced good results. The department has also invested heavily in non-intrusive technology such as X-ray screening of baggage and marine containers to detect concealment of gold and other contraband. Likewise, infrastructure for body-scanning of passengers is also being ramped up at airports.
Q/ Besides smuggling by carriers, there is misuse of export promotion schemes, special economic zones and other end-user based exemptions. How are we handling it?
A/ We have been working to improve not only the number, but also the quality of our interventions. This has been done by enhanced use of data analytics, use of artificial intelligence and machine learning, data triangulation and extensive coordination with our international partners.
The introduction of the system for processing of import documents on the ICEGATE platform (Indian Customs Electronic Data Interchange Gateway), coupled with the automation of the process for duty-free imports of items under the Import of Goods at Concessional Rates of Duty Rules, has led to not only greater facilitation but also better targeting of likely evasion. There has been a constant endeavour to counter the smuggling of gold through enforcement and legal interventions, which include strengthening surveillance with the latest technology and tools, risk profiling, intelligence gathering and incentivising informers, and increasing inter-agency and international cooperation at land borders and on sea routes.
Q/ The biggest drawback in the crackdown on smuggling is that big fish get away and poor carriers get caught.
A/ One of the objectives of the provision related to controlled delivery in the Customs Act was to apprehend the mastermind behind the syndicate. (A ‘controlled delivery’ is the procedure of allowing the delivery of an illegal consignment so that the individuals who commissioned the offence could be identified.) Efforts are also on to triangulate data from our partners such as airlines and financial institutions. In certain cases, especially those involving coastal landing efforts and seizures in open seas, efforts have been made to trace the overseas sources of origin in coordination with our partner agencies.