`Bounced’ cheque costs Essar Rs 72 crore

AHMEDABAD, MAY 3: A `bounced' cheque is likely to cost the Essar Group Rs 72 crore. The cheque in question was issued for customs duty ju...

AHMEDABAD, MAY 3: A `bounced’ cheque is likely to cost the Essar Group Rs 72 crore. The cheque in question was issued for customs duty just a couple of days before the Union Budget changed them, but since the cheque bounced, the group will now not only have to pay the higher import duty, but also a huge amount of penalty. The company has indicated its willingness to pay this, if determined by the competent authority, the Customs Tribunal.

On February 25, the Essar Group imported equipment worth Rs 600 crore for its refinery, and had to pay an import duty of around Rs 62 crore on this — while the duty itself was nil at this time, the countervailing duty and surcharge added up to a little over 10 per cent. On February 27, Yashwant Sinha upped the import duty to 5 per cent. Normally, this wouldn’t have affected Essar, which had issued a cheque for the amount of duty and had cleared its goods by then.

Unfortunately for Essar, it didn’t have the required funds in the State Bank of Saurashtra account on whichit issued the cheque — it had Rs 12.2 lakh in the account. The day the cheque was issued, however, was a bank strike and so was the next. For one reason or another, it was only on April 13, that the bank intimated that there were insufficient funds in the account.

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On March 16, Essar paid the Rs 62 crore to the customs to square up the matter. Unfortunately, by then, customs officials said that Essar would have to pay the post-budget import duty of Rs 98 crore, as well as a fine for getting the goods released without paying the duty earlier — since the balance due was Rs 36 crore, a penalty of a similar amount has also been levied on Essar, taking the total they will now have to pay to Rs 72 crore.

In an official statement, Essar Oil Ltd general manager K B Makadia said that in February, the company cleared a part of equipment by filing valid bills of entry by paying a duty of Rs 62 crore. He said that due to some technical reason, a doubt arose with the Government authority as to whether additionalduty of 5 per cent amounting to Rs 30 crore would be payable for goods imported and cleared prior to the Budget. He said that the dispute between the company and the authorities was purely of a legal nature. “Nevertheless, the company has conveyed its willingness to pay additional duty, if any, determined as payable by the competent authority,” the statement added.

Meanwhile, the Directorate of Revenue Intelligence (DRI) has begun an investigation into how Essar managed to clear the goods in the first place, till it had been verified from the bank as to whether the cheque would be honoured. Moreover, how did the bank take 20 days to intimate that there were insufficient funds in the account? The conduct of the bank officials is also being investigated.