The Supreme Court in its order has said the differential duty of Rs 120 crore is not sustainable against Reliance. These charges were levelled by the customs department, since in their opinion, the actual production of polyester filament yarn (PFY) achieved at the Patalganga plant was higher than the licenced capacity.

The judgment on December 7, 1999, by the Supreme Court has dismissed an appeal filed by the collector of customs, Bombay against Reliance alleging import of four additional PFY machines and setting up a plant having larger capacity. The issue before the Supreme Court was whether Reliance had imported four additional machines which were not covered by the import license granted to Reliance and whether the fact that the company had achieved higher production, by itself, conclusively established that the imported plant had a capacity larger than what it had been licenced to set up and, consequently, the import was unauthorised.

A three-judge bench comprising justice SP Bharucha, justice RC Lahoti and justice N Santosh Hegde in a recent judgment said the import was in conformity with the terms of the import license.

"The authorities below and the tribunal after considering the case of the (customs) department as well as that of the respondent (Reliance) and taking into consideration the entire material concurrently arrived at the conclusion that the import in question was in conformity with the terms of the license".

The court also held that it is well settled law that the authorities had power to decide the legality of imports based on description of the goods imported. Reliance was issued five licences for importing plants and machinery to manufacture PFY at patalganga. On the basis of these licences, the company imported 23 items of machinery. A team of customs officers visited the plant in December 1986 and noticed certain machinery which in their opinion was imported by Reliance in contravention/mis-declaration of the import license granted to them.