* Head at exporting company in Cochin arrested-official
* 10.5 kg of gold was being smuggled out of tax-free zone-official
* Arrest is second known example of exporters smuggling gold
By A. Ananthalakshmi
SINGAPORE, Aug 14 (Reuters) - An Indian gold-exporting company has been raided over suspicions it was trying to smuggle gold out of a special economic zone, in a sign of a crackdown on the practice in the world's second-biggest bullion consumer.
The managing director of jeweller, Ashwin Gold, was arrested last week after the firm allegedly trying to smuggle 10.5 kg of gold meant for export into the domestic market, said Safeena AN, development commissioner of the Cochin special economic zone (SEZ), where the company's office is located.
"Based on intelligence that customs officials received we raided the company's office," Safeena said. "The bill of entry for imports was recorded in the ledger. But they were trying to move the gold out without any proper intimation to us."
The gold was being moved out of the SEZ in a car, she said.
The contact number listed for Ashwin Gold on the Cochin SEZ website was unreachable, while customs officials declined immediate comment.
India - whose demand for gold is only exceeded by China - last year imposed a record 10 percent import duty and made it mandatory to export a fifth of all bullion imports, seeking to curb bullion demand that has blown out the trade deficit.
With the lure of big profits from avoiding duty, smugglers have come up with innovative ways to bring in gold ranging from swallowing nuggets to hiding bars in dead cows.
Smuggling by exporters appears to reveal a more sophisticated scam to get gold into the local market.
The first arrest of an exporter trying to divert gold into the local market was made in June in the Surat SEZ, Reuters reported previously.
An official at the exporting company was caught with 25 gold bars as his car was leaving the tax-free zone.
Government authorities are aware of such practices and have been increasing scrutiny sources have said.
But Indian authorities are struggling to hold back the tide of smuggled gold.
The World Gold Council estimated on Thursday that about 200 tonnes of gold could be smuggled into India this year due to the restrictions, which are likely to persist till the first quarter of 2015. (Editing by Ed Davies)