The re-look at the policy follows detection by the Directorate of Revenue Intelligence (DRI) of large-scale misuse of the scheme. In its report to the ministry, the DRI has proposed either removal of the 1600-cc condition or enhancement of duty on such imports to check the misuse.

The commerce ministry in 1997 had allowed Indians working abroad to import a car above 1600 cc by paying the required duty in foreign currency provided the vehicle was in use for one year on their return to the country. The same vehicle can be sold in India without any restriction.

According to a senior revenue department official, the DRI unearthed a major racket during September-December last year by seizing about 80 such foreign-made cars at the Mumbai and Chennai ports. The total value of the cars seized was around Rs 15 crore.

The officialsaid that in most of the cases, the cars were imported into India immediately on their import into the United Arab Emirates (UAE), without having been used by the importer in UAE for a period of one year as specified in the public notice.

The importers were obtaining fraudulent registration papers from Road Transport Authorities in UAE to show that the car was in use for more than one year, he added. It was found that most of the cars imported were of an engine capacity exceeding 2000 cc. The reasons for chosing UAE for the fraud were easy availability of persons to import cars as per the conditions imposed by the notice and convenience in obtaining documents used.

It was also discovered that the persons importing cars from UAE did not have the means to purchase cars. "This clearly indicated that some racket was working," the official said.The Road Transport Authorities at UAE were conniving for issuing documents to show that the cars were in use for one year.

The person, who ultimately bought the carfrom the importer paid Rs 1 lakh extra to the brokers. "It was found that the brokers operating from UAE were helping the prospective buyers of these cars in India by delivering them the cars at an extra price.

The imported cars were not being used by the eligible importer but was being purchased by a third person, unknown to him.

"Four persons were questioned in this regard and they were let off after payment of penalty," the official said.