The factual matrix was that a show cause notice was issued on April 30, 1997 on the ground that the company had indulged in fraudulent export of polyester fabrics and duty free import in contravention of the Customs Act.
During the course of investigation, a raid had been conducted at the premises of the company.
The directors of the company were arrested and they alleged that they were compelled to pay an amount of ₹68 lakh on August 10, 1995 after which the customs department officials agreed not to oppose bail. On subsequent occasions too, the directors were forced to cough up ₹32 lakh and ₹1 crore.
The show-cause notice sought to recover a sum of ₹2 crores, which the company alleged they were compelled to deposit and adjust the same against the total demand of ₹4,99,53,772 mentioned in the show cause notice.