MRO arrests on repeat offence: DRI

Sathya Mithra

BANGALORE: The arrest of two senior MRO-TEK officials including the company chairman and the director of Rad-MRO was a result of an earlier similar show cause notice issued to the company and its executives in January this year. According to the Department of Revenue Intelligence additional director KS Bhat, who is heading the investigation and also made the arrest, 'This was a repeat offence. We had issued a show cause notice to MRO-TEK in April but they went to the Settlement Commission (SC), confessed to the crime (evasion of customs duty) and got away with merely paying back duties and interest.'

On June 25, the DRI called in the chairman and MD of MRO TEK S Narayanan, CFO R Ramaswamy and Rad-MRO director H Nandi and arrested all the three at its office. RAD- MRO Manufacturing Pvt Ltd is a joint venture between MRO-TEK and the Israeli company RAD Data Communications, which has also been implicated. All three were produced in court and later left off on a bail of Rs one lakh and cash surety of Rs 20,000 each. The court has also instructed them not to leave the country, not to tamper with the evidence and to co-ordinate with DRI personnel for the investigation.

According to the DRI, RAD-MRO had evaded Rs 1.7 crore customs duty. Bhat said that the company regularly under-billed the value of datacom equipment–mostly modems imported from its Israeli partner RAD Data Communications–in order to evade duty. It then paid RAD Data Com partner the rest of the money by later importing a whole lot of 'junk'–mostly useless CDs–as software that do not attract any duties.

Tracing the investigation process Bhat said that the DRI office in Bangalore began investigations into the company in November based on a tip off. 'Though there was no official communiqué informing the company of the investigation, we did ask them to produce certain documents for verification. The documents increased our suspicions and we decided to conduct a search,' he said.

DRI officials then searched the factory and office premises of MRO-TEK and its subsidiary on January 14, 2003. According to Bhat, the search produced several incriminating documents. Though the DRI official would not specify what these documents were, he said that they included email correspondence that proves the charges.

Finally, the department issued a show-cause notice to MRO-TEK on April 25 for wrong declaration of goods.

The case would have ended there but for continuing investigations by the DRI which revealed that RAD MRO, the JV set up of MRO TEK and RAD Data Communication, Israel were also using similar tactics to evade taxes. 'We realized that this was a case of repeat offence by the same individuals both here as well as in Israel. And one has to keep in mind that this has been happening for the past five years. So we decided to take action,' Bhat said.

Meanwhile, in a statement issued on Thursday, MRO-TEK clarified that the DRI allegations were against its subsidiary RAD-MRO and not MRO-TEK itself. 'As regards MRO-TEK, the department had already issued a show cause notice claiming Rs 6.4 crore towards short-payment of customs duty on certain imports effected by the company, in the normal course of its business, pertaining to software component in goods so imported during the period April 1998 to March 2000. This matter is now sub-judice,' the company statement said.

The company also said that the financial implication of this matter 'even if it devolves, shall not affect the finances and/or operations of MRO-TEK Ltd.' The statement said that the current DRI claim is based on the same grounds and findings from the same records as were taken in possession in January 'and not on any further searches or fresh evidences.'

Replying to a question on future proceedings, Bhat said, 'Departmental proceedings have nothing to do with court proceedings. We will be issuing a show cause notice to the company within the next ten days after which we will hear their statements. Depending on these procedures, we will decide on the penalty to be paid. As far as the judicial system goes, we will be filing a detailed charge statement based on which the court will conduct a trial.'

According to Bhat, 'Investigation into these crimes is a long, painstaking process. We have to literally put them under the microscope and survey them meticulously. You have to keep in mind that if we make any mistake, we will be infringing on the fundamental rights of people. So the investigating agency has to be really careful. Arrest is the absolute last step.' Bhat also said that routine investigations on export and commercial fraud were also being conducted against various other companies.

(CNS)