India: High in Demand Foreign Brand Cigarettes Fuelling Smuggling

Source from:  The Times of India 11/17/2015

The lure of puffing a foreign brand cigarette is now not only limited to metros but also in small cities people want to have it leading to high demand. This demand is being fuelled by cigarettes brought illegally in the country. These foreign-made cigarettes are in high demand among youngsters, especially girls in the metros. These cigarettes are sold to the wholesalers on the profit margin of around 45% on the import value. Cigarette of different brands like Malimbo Superslims, Marso Superslims, Mond Superslims, Richman Superslims, Gudan Garam, Luvin Fresh and Djarum Black are in huge demand in the country and are also the most smuggled.

Huge margin, increasing demand in local markets and high customs duty has led to exponential increase in cigarette smuggling in last few months. Gujarat is fast becoming a transit point for smugglers to illegally bring in cigarettes in the state.

Since March 2015, around 4.96 crore cigarette sticks worth Rs 37.29 crore have been seized by DRI and Customs in Gujarat with over 90% of the hauls coming from Mundra port.

In last fortnight, in two different seizures, around 86 lakh cigarette sticks worth Rs 6 crore has been seized by the Ahmedabad zonal unit of the Directorate of Revenue Intelligence (DRI).

Last month Federation of Indian Chambers of Commerce and Industry's (FICCI) Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) had claimed that the illicit trade of tobacco is rapidly growing in Gujarat. "Gujarat is one of the fastest growing markets for illegal cigarettes and auto components in the country. The supply of legal cigarettes shows a decline, the illegal players have taken over this market and is growing at a higher rate," said PC Jha, Adviser FICCI CASCADE and former Chairman, Central Board of Excise and Customs while unveiling a report on ''Illicit Market: A Threat to Our National Interest'.

In case of auto components and computer hardware, the illegal market in the state is also growing significantly in terms of value and volume. These sectors are amounting to more than hundreds of crores in loses to the Gujarat Government.

"High VAT (Value Added Tax) makes legally traded cigarettes expensive. This is the reason for rapid- growth of illegal cigarette industry in the state," added S. S. Trivedi, IGP (Economic Offenses Wing, CID Crime), Government of Gujarat.

The longest coastline with a number of ports and international airport make Gujarat vulnerable to smuggling of cigarettes.

Modus operandi-

Explaining the modus operandi, sources said that illegal cargo is generally hidden behind legitimate cargo that is declared to customs in documents. According to sources, declared cargo is usually furniture, plastic or paper in case of cigarettes. Sources further said that just 1% containers are subjected to close checks and that too on a random basis.

"One container with 70% cigarettes concealed with 30% of other cargo could generate as much as Rs 3-5 crore," said sources. "It is difficult to seize such containers without any specific tip-off. Also scanning of containers is restricted to major ports only which can help prevent concealment of illegitimate goods," added sources.

According to experts, cigarettes can be imported under open general licence, a permit that does not impose any export obligation on the importer after payment of the relevant duty.

In a case earlier this month, the DRI had held a container of Jamnagar based firm which had declared 'mixed brass scrap with other impurities' but had concealed cigarettes.

Smoking High in India-

Across India, in 2012-13, a total of 41.3 million sticks valued at Rs 37 crore were seized, in 2013-14 over 12.3 million sticks (valued at Rs 11 crore) and in 2014-15 more than 89 million sticks (valued at Rs 71 crore), were impounded by DRI, which has done over 90% of the seizures in the country.

Major cases of cigarette smuggling in Gujarat-

March 30- In what could be termed as largest ever single haul, DRI had seized 3.21 crore of foreign-made cigarette sticks worth Rs 23.29 crore from Hazira port in Surat.

June 6- Around 10 lakh cigarette sticks worth Rs 50 lakh from Air Cargo Complex of Ahmedabad airport seized by DRI

June 26- DRI and Coast Guard seize 14,400 cigarette sticks worth Rs 1 cr from boat Al Safina Meraj

September 12- DRI and Customs seize 40 lakh cigarettes worth Rs 4 crore at Mundra port.

September 18- Around 43 lakh cigarette sticks worth Rs 4 crore seized by Mundra Customs, three people arrested.

November 4- DRI seized 25 lakh cigarette sticks worth Rs 1.5 crore at Mundra Port.

November 11- Around 61 lakh cigarette sticks worth Rs 4.5 crpre headed to Delhi were detained and later seized by DRI at Mundra port. Enditem