The extensive raids at Calcutta's Posta Bazar, the biggest commodities market in eastern India, led to the seizure of around 50 tonnes of imported palmolein. The importers had picked up the palmolein from the Budge Budge and Haldia jetties after furnishing Form C and falsely stating that the goods were meant for sale in Bihar.

Goods thus despatched under Form C attract central sales tax (CST) and are exempt from sales tax levied by the states. For palmolein, the CST rate is four per cent. MMTC was merely playing its role of financing bulk purchases by the small importers, and was releasing the oil in good faith. According to a highly-placed officials in the commercial tax department, the palmolein was meant for sale in West Bengal only. To evade the seven per cent sales tax in this state, the importers, all Calcutta-based, were furnishing Form C with places in Bihar marked as the points of sale.

The state government was thus, losing the entire revenue as the palmolein was actually being sold here. The material seized were understood to be part of a $40 million consigment imported by MMTC. The market value was around Rs 3,000 crore including all central duties.

By evading the state sales tax, the importers could have caused the state a loss of Rs 210 crore on the entire consignment. The official said, MMTC usually imports edible oils as a financing agent of small importers, and issues bills against the production of Form C to buyers from outside the state at their request. "We cannot blame the MMTC in this malpractice, as they make bills only after receiving Form C from the importers," officials said.

The working president of the All India Oil & Seeds Foreign Traders Association, Mr R Mansinghka, said he has no information about the raids.

But Mr Mansinghka, who is also a bulk importer of edible oils, admitted that local sales tax can be evaded in this way and that he has information that some unscrupulous traders were doing it.

Mr Mansinghka said, such unethical trade practices can be eliminated if the state government bring sparity in the sales taxe being charged on the different edible oils. For instance, sales tax for rice bran and mustard oils is four per cent. While the sales tax rate for all other edible oils is seven per cent. Such difference in the tax charged only spurs the traders and importers to avoid local sales tax and collect Form C, said Mr Mansinghka. But if the sales tax on all edible oils is lowered to four per cent, traders will desist from falsifying C forms, Mr Mansinghka said.