Mumbai, Jun 17 (PTI) Authorities have unearthed a sophisticated customs duty evasion racket involving fraudulent imports of walnuts through the Nhava Sheva Port in Navi Mumbai which caused a revenue loss of Rs 138.84 crore, officials said on Wednesday.

Five persons have been arrested in the case so far, they said.

Based on specific inputs, the Central Intelligence Unit (CIU) of Jawaharlal Nehru Customs House (JNCH) at Nhava Sheva conducted 'Operation CO-FIND' which uncovered the syndicate, the officials said.

Consignments originating from China, the US and Chile were routed via Jebel Ali, UAE, and falsely shown as Afghanistan-origin to wrongfully claim preferential tariff benefits under the South Asian Free Trade Agreement (SAFTA), according to officials.

Under SAFTA, the effective duty on walnuts has been reduced from about 110 per cent to roughly 5 per cent, an official said.

The fraudsters prepared forged transit bills of lading indicating movement from Bandar Abbas, Iran, to Jebel Ali to establish a fictitious transit trail and support the false country-of-origin claims, he said.

Coordinated searches at multiple locations in Mumbai led to the recovery of substantial digital and documentary evidence, the Customs official said, adding that five persons have been arrested so far.

On June 12, officials arrested Sneh Dipakbhai Kakadiya, son of Surat businessman Dipakbhai Kakadiya, one of the alleged "masterminds" controlling financing, procurement, customs clearances and sale of the goods through proxy importers. He was remanded to judicial custody for 12 days, the official said.

A country-wise import trend analysis for in-shell walnuts at JNCH showed an abnormal spike in Afghanistan-origin declarations during the period under probe, followed by an abrupt fall. The pattern was inconsistent with normal trade patterns, he said.

The fraud also distorted the market by enabling underpriced imports that harmed genuine traders and domestic walnut growers in Jammu and Kashmir, Himachal Pradesh, Uttarakhand and Arunachal Pradesh, and caused significant revenue leakage, the official said.

In a related development, the Bombay High Court, in a writ petition, recently declined a blanket order for the release of seized consignments claimed to be from Afghanistan, he said.

The court allowed conditional release only on deposit of the full differential duty of Rs 2.78 crore or furnishing a bank guarantee of equivalent amount, endorsing the revenue's authority to secure recovery before clearance, the official said.

Further investigations were underway to identify all beneficiaries, facilitators, financial linkages and connected consignments, the official added. PTI DC KRK

Country-of-origin fraud in walnut imports triggered customs duty evasion, arrests, and conditional release of seized consignments. Fraudulent walnut imports were allegedly routed through Nhava Sheva Port by falsely declaring non-Afghanistan consignments as Afghanistan-origin to claim preferential tariff benefits under SAFTA, using forged transit bills of lading and proxy importers. Five persons were arrested and searches yielded digital and documentary evidence. In a related writ petition, conditional release of seized consignments was permitted only against deposit of the full differential duty or a bank guarantee of equivalent amount.