Why a Surat-based jewel agency with a 20 by 22 toes workplace is beneath ED radar for ‘unlawful’ foreign exchange remittances of over Rs 4,000 crore

A jewel agency based mostly in Surat, working from a small business workplace measuring simply 20*22 toes in a particular financial zone (SEZ), has come beneath the scrutiny of the Enforcement Directorate (ED) for allegedly making unlawful outward remittances amounting to over Rs 4,000 crore!
In response to an ET report, final week, the company filed a grievance with its Adjudicating Authority beneath the related provisions of the International Trade Administration Act (FEMA), alleging that the Surat-based entity illegally transferred overseas trade to overseas shores beneath the “garb of imports from the particular financial zone”.
The grievance says that the company has detected unlawful transfers of Rs 3,437 crore up to now. Nevertheless, individuals conversant in the matter counsel that the overall quantity of alleged unlawful transfers is more likely to attain Rs 5,000 crore.
The grievance has been filed in opposition to M/s. Sharnam Jewels Restricted (SJL), LLP, its companions, and others. Performing beneath FEMA, the ED has additionally seized properties, together with plots, flats, and financial institution balances price Rs 29.9 crore.
The ED has alleged that almost all of the overseas remittances have been made to Hong Kong. The grievance, which ET has reviewed, alleges that the Surat-based entity “no infrastructure to fabricate gems and jewelry working into hundreds of crores”.

In December of the earlier 12 months, ED officers performed searches on the premises of Sharnam Jewels. The company has alleged that Sharnam Jewels claimed to have a closing inventory of Rs 520 crore. “Nevertheless, on bodily verification in the course of the search solely a meagre inventory of Rs 19 lakh was discovered,” the grievance alleges.
ED has accused SJL of using a particular technique to illegally switch funds overseas by exploiting the privileges granted to SEZs. In response to the company, SJL strategically chosen SEZs as a result of lack of stringent monitoring by customs authorities on duty-free imports, enabling these in search of to switch illicit funds out of India to take action beneath the guise of funds for fictitious imports to SEZs.
The grievance additional alleges that SJL “was displaying extremely over invoiced imports of faux uncut diamonds and different valuable metals and stones principally from Hong Kong-based entities specifically Sigma Diamonds Restricted, Diarect Advertising Ltd; B S enterprises, Hast Impex, HS Exim Co, DVL Restricted”. The ED claims that between 2021 and 2023, a complete of $503.4 million (Rs 4,000 crore) was remitted beneath the pretext of those fraudulent imports.
Furthermore, the ED’s grievance beneath FEMA states that the funds to those Hong Kong entities had been made in overseas foreign money inside a brief timeframe of seven to 30 days from the date of import. Investigations have revealed that the Hong Kong-based corporations are shell entities, with most of them having been struck off, possessing minimal share capital, and working from the identical tackle, elevating pink flags about their legitimacy.
ED has filed a grievance in opposition to SJL alleging that the agency exported pretend gems and jewelry out of the SEZ in compliance with SEZ Guidelines. Nevertheless, SJL did not carry again the obligatory inward remittances to India, amounting to $431 million (roughly Rs 3,500 crore) between 2021 and 2023.
In response to the grievance, “SJL made exports to Hong Kong-based entities specifically Chi Kar Buying and selling Co; Daehan Buying and selling Restricted, DJS Worldwide, DVL Restricted, Religion Jewelry Restricted, Fortune Buying and selling, International Star, Mini Worldwide, My Worldwide Restricted, Premier Buying and selling Restricted and so on. These entities are additionally discovered to be shell entities. No efforts had been made by the companions of SJL to carry again foreign exchange into India for which they’ve proven exports”.
When confronted with the discrepancies associated to the alleged pretend imports and foreign exchange transfers, the companions of SJL and different linked individuals had been unable to supply a passable clarification. The ED performed a radical investigation, analyzing greater than 750 financial institution accounts and over 250 entities to ascertain the cash path.
The company additional alleges that SJL obtained funds from Indian entities engaged in numerous companies similar to oil, heavy metals, iron & metal, and scrap, which is in distinction to SJL’s claimed enterprise of producing gems and jewelry.
The grievance states that “SJL didn’t truly promote any items or companies to Indian entities for which it obtained funds by means of a posh net of transactions which in flip SJL despatched exterior India within the garb of faux imports.”