ESSAR OIL LTD. Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) The above appeals arise out of a common adjudication order of the Commissioner of Customs, Kandla and are hence heard together and disposed of by this common order.

(2.) The brief facts leading to the filing of the appeals are that M/s. Essar Oil Ltd. (hereinafter referred to as EOL) imported plant and machinery for setting up a petroleum refinery project and stored the goods in two private bonded warehouses located at their project site, one of them an open warehouse and the other a closed warehouse. The dispute in the present case relates to the open bonded warehouse. In June, 1998, there was a severe cyclone at Vadinar which caused substantial damage to the project as a result of which project cost increased. The project was thus facing a financial set back and funds required for debonding of the warehouse were not available, though the project management consultants were pressing for supply of imported materials to continue with the erection of the refinery. Due to this, pent up requisitions were taken up for clearance, when ICICI indicated its willingness to sanction a bridge loan of Rs. 100 crores in February, 1999. As per ICICI letter dated 18 -1 -1999 and 8 -2 -99 on the above basis, EOL decided to process papers to ensure timely clearance of warehoused goods before the commencement of the budget to avoid any project cost increase due to any possible changes in the rate of duty. On 20 -2 -99, the Board of Directors of EOL resolved the availment of loan facilities of Rs. 100 crores and non -convertible debentures of Rs. 70 crores being offered by ICICI and thereafter EOL filed total 84 ex -bond bills of entry which were assessed. However, duty could not be paid immediately as funds were yet to be disbursed by ICICI. The Manager (Imports) of EOL, Shri Nitin Bhatt, informed Shri S.R. Agarwal, Director (Finance) of EOL, that Customs duty of little over Rs. 60 crores was payable on goods lying at the bonded warehouse, that duty of Rs. 37 lakhs approximately was payable against goods lying at the Jetty and Rs. 2,72,50,000/ - was payable on goods lying at the Kandla Port and requested that a demand draft for Rs. 60,03,10,000/ - be sent for release of the goods from the bonded warehouse. On 24 -2 -99, EOL wrote to ICICI requesting for immediate release of the loan so that the warehoused goods could be released before the budget and also agreed to give an undertaking furnishing securities. On the same date, i.e. 24 -2 -99, EOL at Jamnagar received a copy of Vadodara Commissionerate Trade Notice No. 73/85, dated 30 -4 -85 containing the special procedure to be followed for payment of duty on days when banks were on strike (An all India strike of Bank employees on 25 -2 -99 and 26 -2 -99 had been declared). On 25 -2 -99, EOL requested permission for submitting cheques covering the duty payable on the warehoused goods, together with bank collection charges, so that the goods could be debonded. Application seeking such permission was also made, in which it was declared that EOL has sufficient funds in its bank to cover the amounts indicated in the cheques. The Asstt. Commissioner (Technical) endorsed the application for acceptance of the cheques which were thereafter duly accepted on 25 -2 -99. The acknowledgement of the cheques was shown to the Range Supdt. who issued out of charge order for the goods. The order cancelling the warehouse licence was passed on 26 -2 -99.

(3.) On 27 -2 -99, the effective rate of duty on goods such as those imported by EOL was enhanced from 10% to 16.05%, by introducing basic Customs duty at the rate of 5% on the goods. ICICI did not release funds either on 25 -2 -99 or on 26 -2 -99. The cheques submitted by EOL on 25 -2 -99 were credited to the Revenue Account on 17 -3 -99 and EOL also paid interest at the rate of 20% for delay in realization of cheques to the extent of approximately Rs. 65.70 lakhs. On 13 -4 -99, the DRI officers seized the goods stored in the delicensed premises of EOL, and recorded the statements of the officers of EOL who were arrested and subsequently released on bail by the Gujarat High Court. EOL paid differential duty of approximately Rs. 36.23 crores, as per undertaking given to the High Court.