SC upholds Essar Oil penalty

The Supreme Court has upheld the penalty imposed on Essar Oil Ltd, three of its executives and three customs officers.

The apex court thus reversed the Cegat order exonerating them of financial irregularities. Three company executives had earlier been arrested and released on bail.

The company imported plants and machinery worth Rs 600 crore for its refinery. In the payment of the customs duty, the commissioner found there was fraud.

In order to beat the increase in duty in the Union Budget, there was misdeclaration of the bank balance. Since the rate was enhanced before the encashment of the cheque issued, the company was liable to pay the enhanced rate. However, it was not done through a complicated process.

The commissioner found that there was "evasion of duty with mala fide intent, willful misdeclaration and suppression of facts."

He further held that the goods were liable for confiscation as their removal was contrary to the permission and with clear intent to defraud the revenue department.

He further found the company officials and three customs officers guilty of fraud. The revenue officers named are A C Sharma, A K Thaker and S P Chaudhuri.

However, the Mumbai branch of Cegat set aside the findings of the commissioner on all six counts listed by him. The Commissioner of Customs, Kandla, appealed to the Supreme Court.

In a detailed judgment describing the nature of the dealings, a bench consisting of Justice Arijit Pasayat and Justice C K Thakker restored the commissioner's ruling after criticising Cegat.

Regarding the Cegat judgment, the Supreme Court said: "Cegat did not consider the aberrations highlighted by the commissioner and in a very cryptic manner dealt with the issues. No plausible reason has been indicated as to why the allegations which are quite serious in nature and the conclusions of the commissioner were not to be maintained. Only an abrupt conclusion was reached that Thaker and Chaudhuri had absolutely no connection with the acceptance of cheques. There was not even any reference to the allegations regarding accepted backdating or acting contrary to specific directions. Sharma was given a clean chit..."

The Supreme Court stated that the manipulative roles of the executives and the officers were clearly established.

"They were active participants in the well-planned deception and fraudulent acts leading to evasion of duty. They had played major roles in the whole game of fraud and deception," the judgment written by Justice Pasayat stressed.