Surat's textile tycoons on the run: duty evasion

Setting up a 100 per cent export-oriented unit (EoU) was the easiest way to earn millions for the Big Boys of Surat's textile industry.

However, with the Central Excise and the Directorate of Revenue Intelligence (DRI) cracking the whip against large scale duty evasion by textile industrialists, many leading EoU operators in Surat and south Gujarat have almost gone underground.

The modus operandi was simple. Set up an EoU, import yarn, sell it off at a heavy premium in the local market, export a container which contains nothing, earn all the benefits and laugh all the way to the bank.

On Tuesday, the Vapi-based anti-evasion wing of the Central excise arrested Suresh Naik of the Laxmi Tex EoU-based at the Sachin GIDC estate on the southern outskirts of Surat. Naik has been sent to a 14-day judicial remand, official sources said.

With the arrest of Naik, the authorities have put seven leading EoU operators behind the bars in the past 10 days.

Official sources described the strategy as a three-pronged one with the Central Excise department, the anti-evasion unit based at Vapi and the Surat-based DRI launching combined operations following directives from Delhi.

The series of raids and arrests have created panic and apprehension among EoU operators with most of them scurrying for cover and moving out of Surat.

Many of the EoUs have also downed their shutters, highly placed sources said.

According to industry sources, out of the 240 big EoUs operating in Surat, at present hardly 44 are operating. Following the raids, investigations into the cases by different agencies are expected to lead to another round of arrests. The authorities have also started questioning almost all EoU operators.

"Many EoU operators have been subjected to rigorous questioning and interrogation," a senior official said.