DRI unearths scam; Canola oil was imported as rapeseed oil from Bangladesh to evade taxes

The Directorate of Revenue Intelligence (DRI) has unearthed a major scam involving import of canola oil of Candian origin by wrongly declaring it as rapeseed oil from Bangladesh to evade taxes, finance ministry sources said on Thursday.

Certain importers misused provisions of the SAFTA (South Asian Free Trade Agreement) to evade around Rs 25 crore of customs duty by disguising import of canola oil as rapeseed oil.

Further investigations are in progress, the sources added.

According to the sources, intelligence developed by DRI indicated that certain unscrupulous firms were importing crude canola oil of Canadian origin by wrongfully declaring it as 'Crude Rapeseed Oil/Mustard Oil/Rice Bran Oil' of Bangladeshi origin through Ghojadanga Land Customs Station (LCS) at the Indo-Bangladesh border in West Bengal.

Customs duty of about 35 per cent is applicable on import of canola oil of Canadian origin. However, these importers were showing the goods to be of Bangladeshi origin and thereby enjoying fraudulently the benefit of full exemption of customs duty available under SAFTA.

During December-January, around 15,000 tonnes of ostensible 'crude rapeseed oil' were imported through Ghojadanga LCS from Bangladesh availing duty exemption under SAFTA -- a conspicuous spurt.

Sources said analysis of the imports of the same goods for 2017, 2018 and 2019 (up to November) indicated that only a minimal quantity of imports had happened throughout the country (all ports included) from anywhere in the world.

The quantum of these imports has been to the tune of around 500-1,500 tonnes per year.

Therefore, this sudden spurt in import of the ostensibly declared 'crude rapeseed oil' from Bangladesh under SAFTA raised suspicion.

Sources said investigations found a trader using his drivers as proxies to run an import company and another one using two different firms to import the oil.

To claim the benefit of full duty exemption, the modus operandi of these importers was to submit SAFTA Certificates of Origin after showing the 'Origin Criterion' as Category 'A', that is wholly produced in Bangladesh.

Canola oil is a completely different product than natural rapeseed oil. Canola oil is a 100 per cent genetically modified (GM) product, whereas rapeseed oil is made from a naturally found plant. Canola oil cannot have its origin in Bangladesh, as that country has only one GM food crop -- eggplant aubergine (brinjal).

Major producers of canola oil are Canada, US, Australia and Germany.

Canola oil is a vegetable oil derived from a specific variety of rapeseed (GM crop) that is low in erucic acid (maximum of 2 per cent). The change in name serves to distinguish it from natural rapeseed oil, which has much higher erucic acid content (30-60 per cent), making the latter inedible.