The case goes back to 2014, where the diamond merchant had pleaded guilty, though indirectly, for mis-declaration of exports of diamonds.
Among the plethora of charges stacked up against fugitive businessman Nirav Modi, there is one that could stick with the foreign courts to compel his extradition.
A top officer of an investigative agency said the case dates back to 2014, where the diamond merchant had pleaded guilty, though indirectly.
The problem with the main charges against Nirav in all the other cases of buyers credit is that they can be demonstrated as crimes only if it can be proved that he would have not met his obligations. It is a charge his lawyers are expected to contest vigorously.
The exception is a case where Nirav’s three companies -- Firestar Diamond International, Firestar International and Radhashir Jewellery Company -- were hauled in for mis-declaration of exports of diamonds from their units at Surat SEZ. It was a case that made no waves then, yet it could prove to be the lynchpin to the successful prosecution of the Rs 127 billion fraud.
In that case, the duty with the penalty amounted to Rs 480 million, which Nirav’s three companies paid up. The rules under which they paid the penalty were the result of a set of changes made by the customs department to make life easier for traders.
But it has had the opposing effect on the diamantaire’s fortunes. One of the clauses said the department would only prosecute companies above a threshold of Rs 10 million for deliberate “mis-declaration in value”. Here, too, the companies could use an escape route. Before a prosecution is launched, the company can decide to plead guilty and pay the dues with the penalty.
The three companies used this escape clause in response to the charge sheet from chief commissioner of Surat SEZ. But since they came clean only after a seizure of their diamonds at the Mumbai airport, they fell foul of penal provisions in the Indian Customs Act.
The provision said that the exemption from prosecution would be available only to the three companies. Nirav or any other person associated with the companies as directors or otherwise could not get any exemption from the states’ right to prosecute them.
This year, the government has revived the case. Since those charges against Nirav are live, the case is the only weapon available with the government now to base its extradition request against him. That the sum is puny is not important, say Directorate of Revenue Intelligence officials.
It also has an advantage since the companies had pleaded guilty without the customs department having had to prove the charges in a court of law.
It now gives the government the fuel to prove in foreign courts that Nirav is a criminal under the Indian Customs Act. Those courts which might look askance at cases that are under process will be far more willing to support the Indian government on a case where the verdict has been pronounced. Also, the party in question has admitted his guilt.
There is an advantage, too, as unlike other tax laws, Customs laws are recognised by most countries because they come under the rubric of the International Customs Union. So, they have an automatic validity under double taxation treaties even where the extradition rights of India are liable to be contested.
For this, the tax department for once can feel satisfied that the usual delay in signing off on cases has come to its advantage.
Photograph: Courtesy, Nirav Modi on Facebook.