A company based in Ahmedabad is at the centre of a major international investigation for allegedly masterminding a complex trade fraud that cheated the South Korean government of nearly $1 million and simultaneously evaded customs duties in India.
KOTRA Flags Sophisticated Fraud Network
The Korea Trade-Investment Promotion Agency (KOTRA) has brought the alleged scam to light, submitting detailed complaints to Indian authorities including the Enforcement Directorate (ED), the Directorate of Revenue Intelligence (DRI), and Customs. KOTRA described the operation as a "large-scale and coordinated network of international trade fraud, customs duty evasion and money laundering."
The network reportedly involved multiple India-registered firms and their foreign affiliates in China, South Korea, and Hong Kong. Investigators have also uncovered fake import chains where fully finished goods were imported, rebranded, and sold in India as domestically manufactured products.
The Mechanics of the Dual Fraud
According to officials, an Ahmedabad businessman registered with KOTRA in 2020-21 as a legitimate importer of Korean goods. He later allegedly collaborated with Chinese partners to set up a shell company in South Korea that claimed to manufacture two products. Investigations showed this company had no actual manufacturing facility in Korea and was instead importing goods from China.
The Ahmedabad firm is accused of placing import orders with this Korean shell entity. This allowed it to claim duty-free benefits under the India-Korea Comprehensive Economic Partnership Agreement (CEPA). Concurrently, the scheme allegedly misused the Korean government's export subsidy scheme for small businesses by routing Chinese goods through Korea and falsely declaring them as Korean-origin exports to India.
Unravelling of the Scheme and Wider Allegations
This dual fraud is believed to have operated between mid-2024 and mid-2025. Korean authorities grew suspicious when the newly formed company secured high-value export orders every month despite having no visible manufacturing capacity. "The unusually high volume of export orders raised suspicion. Our investigation confirmed that there was no manufacturing unit, following which bank accounts of the company were frozen," officials stated.
Further allegations include inflating invoice values to siphon funds to China and Hong Kong. Investigators say multiple entities were floated in Gujarat to conduct circular trading, artificially inflate turnover, and enhance eligibility for bank loans. There are also claims of misclassifying imported goods to evade Indian customs duties.
In a related revelation, the Gujarat-based company was licensed to manufacture solar inverters. However, inspections reportedly found only an office at the registered address, with no manufacturing facility. Finished goods were allegedly imported through associated firms, rebranded locally, and sold with Indian labels.
Impact and Ongoing Investigation
KOTRA officials expressed shock at the episode, given their otherwise positive experience with Gujarat-based companies since starting operations in the state in 2019. An official confirmed, "We have thoroughly investigated the matter and shared all relevant findings with Indian authorities for appropriate action."
The case now involves multiple Indian investigative agencies probing the deep layers of alleged trade fraud, duty evasion, and money laundering, marking a significant breach of international trade agreements.
