Nirav Modi: A History of Overvalued Gems and Hoodwinking Officials

Nirav Modi has a history of fraud and slipping under the agencies’ watch before as well.

The first time that celebrity jewellery designer Nirav Modi had come under the radar of investigative agencies for fraud was not on 13 February 2018 . In fact, Modi has a history of fraud and slipping under the agencies’ watch before as well.

According to a report by The Hindu, in December 2014, one of the companies owned by the diamantaire – M/s Firestar Diamond International Ltd – was pulled up by the Directorate of Revenue Intelligence for overvaluing diamond jewelry meant for export, when the gems studded in the design were of a lower value than declared.

Quoting an unnamed source who was aware of the DRI probe, the report stated that the company was diverting imported, high-quality diamonds to the domestic market while also using lower quality diamonds for export to markets in Hong Kong and Dubai. During the probe, the DRI reportedly intercepted eight consignments headed towards Canada, US, Hong Kong and Dubai.

Of these, it was discovered that the consignments meant for Hong Kong and Dubai were heavily misdeclared in terms of value and quantity.

The consignments were named under two companies – M/S Firestar Diamond International Ltd (FDIL) and M/S Firestar International Pvt Ltd. While the value of the consignment was mentioned as Rs 43.10 crore, the DRI discovered that in reality, the jewellery was worth only Rs 4.93 crore.

The DRI then issued two show-cause notices to Modi and three of his companies – DIL, FIPL and Radashir Jewellery Companies Ltd – on 5 June and 24 June 2015.

The Hindu reported that the three companies were located in the Surat Special Economic Zone, and specialised in importing diamonds, pearls and gold for manufacturing jewellery and preparing them for export after value-addition.

The show cause notices demand that the three companies pay up Rs 37.16 as duty, Rs 5.48 crore as interest at 15 percent and Rs 5.57 crore as penalty.

In two letters dated 3 July and 23 July 2015, Modi urged the commissioner of Central Excise and Service Tax Department in Surat to close the matter, after paying up Rs 48.22 crore as penalty in total.

However, upon visiting the factories of the three companies, DRI officials found a massive variation in the manner in which gems are cut and polished.

The DRI had found that while the actual value of the diamonds in the factories totaled roughly up to Rs 100 crore, they were declared at a whopping Rs 1,100 crore. Similarly, the pearls were also overvalued at Rs 100 crore, when the ascertained value was only Rs 4 crore.