CBI Director seeks details of corporates routing money abroad

Central Bureau of Investigation Director Ranjit Sinha has written to Finance Ministry seeking details of all the cases from the Directorate of Revenue Intelligence in which corporates have allegedly over invoiced their imports thereby causing losses to banks which extended loans to them.

Sinha has written to Secretaries of Banking and Revenue Department in the Finance Ministry, saying this model of over invoicing by a front company of a business group abroad is being largely misused by corporate groups to illegally route funds from abroad, official sources said.

The modus operandi highlighted by CBI says that while the corporate strikes a deal for imports with a company in one country, the billing is done at inflated prices in other country by the front company of the corporate group, they said.

This helps the group to take loan from banks against the inflated bill while the actual price paid to the exporter firm is much less.

The difference is pocketed by the corporate group which also manages to save on duties as such imports in some infrastructure related sectors do not have any import duties, the sources said.

In his letter, Sinha said many corporate are indulging in such third party transfers in which their front companies are located in tax haven countries in violation of the Reserve Bank of India guidelines.

In the letter to Revenue Secretary SK Das, Sinha has said the cases under Directorate of Revenue Intelligence related to such third party transfers.

The CBI Director did not name any particular case or a corporate house.

Sinha has requested Das to provide all information available with DRI and customs on cases in which practice of routing money using tax havens or front companies has been detected, the sources said.

The agency has recently filed a preliminary enquiry on the basis of a reference from Directorate of Revenue Intelligence alleging that a company purchased power sector equipment from South Korea and China as power sector imports attract very less duty.

These inflated invoices were allegedly submitted to the banks to avail credit facilities of equivalent amount.

The sources said since public sector banks were allegedly duped by over invoicing, the case was referred by Directorate of Revenue Intelligence on the basis of which a preliminary enquiry was registered by the agency last month.