New Delhi, June 12 -- For decades, crafty smugglers brought in gold, hidden in body and baggage, evading duties and outwitting customs authorities. Today, some importers are coming in through the front door, legal and duty-free, exploiting a loophole in the system.

called liquid gold have surged since savvy importers discovered a novel method to skip customs duty nearly five years ago, import data showed. After the last budget plugged another tax-evasion route, such shipments have accelerated even more.

Compounds of gold with other elements-also called liquid gold-are used mostly in industrial processes. Importers ship them at zero duty from countries such as the UAE, Japan and Australia that have trade treaties with India, compared wit...