Luxury furniture smuggling case highlights serious customs duty evasion
In a major crackdown, the Directorate of Revenue Intelligence (DRI) has exposed a luxury furniture smuggling racket involving massive customs duty evasion. Importers allegedly undervalued luxury furniture items by 70% to 90%, leading to estimated revenue losses of over ₹30 crore to the Indian exchequer.
This case once again highlights how importers manipulate invoices and misdeclare product values to avoid customs duties under the Customs Act, 1962. Let’s break down how the fraud unfolded and what it means for Indian importers and taxpayers.
How the smuggling operation worked
As per DRI investigations:
- High-end luxury furniture was imported from China and other countries
- Invoices were grossly undervalued to pay minimal customs duty
- Actual sale prices in India were 3–10 times higher than declared import values
- Payments were routed via overseas shell entities to suppress real transaction value
- The entire scheme violated Section 14 of the Customs Act, which mandates duty based on the transaction value of imported goods
Undervaluation is a punishable offence under the Customs Act, and attracts both monetary penalties and prosecution.
Legal provisions invoked by DRI
The DRI has invoked the following provisions:
| Provision | Description |
|---|---|
| Section 14 of Customs Act, 1962 | Duty to be levied on transaction value (fair price at arm’s length) |
| Section 111(d) | Goods liable for confiscation if imported contrary to any prohibition |
| Section 113 | Misdeclared goods liable to seizure |
| Section 135 | Criminal prosecution for evading customs duty |
In this case, the declared value was ₹12 crore, while the actual market value of goods imported was nearly ₹100 crore – a massive undervaluation that resulted in evasion of over ₹30 crore in customs duties.
What this means for importers
Importers should take note of the following compliance red flags:
- Never under-invoice imported goods — the DRI uses market data and global benchmarking tools
- Beware of supplier collusion — overseas parties may be part of the fraud
- Ensure documentation is genuine — invoices, bills of lading, and purchase orders should match actual transactions
- Maintain audit trails — especially for high-value imports, to explain valuation logic
- Declare actual transaction value under Rule 3 of Customs Valuation Rules
Failing to comply can lead to seizure of goods, heavy penalties, and even arrest under Section 135.
Expert view: Valuation scrutiny will tighten
“Cases like this show that valuation fraud is no longer easy to get away with. DRI and customs authorities are using AI-based tools to compare import prices across countries. Importers must maintain full transparency or risk major enforcement action.”
— Indirect tax expert, Mumbai
How to stay compliant with customs duty laws
Here’s a quick compliance checklist for importers:
✅ Declare full transaction value, including commissions and packing costs
✅ Maintain correspondence with supplier to prove arm’s length pricing
✅ Avoid third-party payment structures unless declared to RBI and customs
✅ Don’t rely on informal agreements — use proper purchase contracts
✅ Use authorized customs brokers for documentation
You can also refer to CBIC Customs Manual for detailed compliance guidance.
Link to GST? Yes — undervaluation impacts IGST too
Remember, undervaluation of imports not only evades basic customs duty (BCD) but also lowers the Integrated GST (IGST) payable at the time of import. This also leads to lower input tax credit and impacts revenue collection under GST laws.
As per Section 3(7) of the Customs Tariff Act, IGST is payable on transaction value + BCD, so any underreporting affects GST too — inviting double trouble from both CBIC wings.
Conclusion: Transparency is your best protection
The luxury furniture smuggling case is a reminder that undervaluation is a serious offence, and the DRI is actively cracking down on such practices. For importers and business owners, the message is clear: stay compliant, document every transaction transparently, and pay the correct customs and GST dues.
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FAQs
1. What is undervaluation in customs?
Declaring a lower value than the actual price paid to reduce the duty liability. It violates Section 14 of the Customs Act.
2. How does undervaluation impact GST?
It reduces the base for IGST calculation, leading to lower GST input and revenue loss for the government.
3. What are the penalties for undervaluation?
Seizure of goods, up to 5x penalty under Section 114A, and possible prosecution under Section 135 of the Customs Act.
4. Can importers be jailed for customs duty evasion?
Yes, under Section 135, imprisonment can go up to 7 years depending on the amount and intent.
Summary
Luxury furniture smuggling case: ₹30 crore duty evasion
DRI uncovers massive undervaluation scam in luxury furniture imports. Over ₹30 crore customs duty evaded. Learn how importers can stay compliant.