The Hindu Business Line : ITC excise case: India Inc urges Govt to review Ordinance

CRITICISING the Government's move of taking the ordinance route to recover Rs 450 crore from ITC, industry today urged the Government to review the Ordinance.

Terming the event unfortunate, the CII President, Mr Sunil Kant Munjal, said that the move would have a negative impact on the industry morale. "It would have been more appropriate for the Government to have waited for its review petition to have been heard out in the Supreme Court. Such a step would have been in keeping with the high respect that is always accorded by one and all to the judicial process and system in India," stated the CII. Mr Munjal has urged the Government to review the Ordinance.

Reacting on the issue, the Assocham President, Mr Mahendra K. Sanghi, said that the entire process had taken "unduly long time". "The Supreme Court had given its verdict and it is unfortunate that the Government has adopted the retrospective legislation route to negate the Rs 803-crore excise relief that was granted to the company. Indian industry is very much concerned about it and urges the Government to even now explore an alternate route so that justice is done to ITC," he stated in a release.

According to PHDCCI's President, Mr K.N. Memani, the promulgation of Ordinance in ITC case would dent the environment of faith created over the years by the Government in the industry.

"While the Government has to continue to ensure voluntary compliance with taxation and explore new avenues, the methods adopted should be fair, logical and transparent. Changing the concept of retailing with retrospective effect after the Supreme Court decision does not enthuse confidence and brings uncertainty," Mr Memani said. The methodology adopted causes concern in the business world and sends negative signals to investors, he added.

Experts differ: The former West Bengal Chief Minister and noted barrister, Mr Siddhartha Sankar Ray, feels that ITC has the right to challenge the Ordinance in any High Court or even the Supreme Court.

The former Union Minister and barrister, Mr Ajit Panja, is of the view that the Ordinance, dated January 25, 2005, in the name of the President of India, was a fit case for contempt proceedings since it nullifies the Supreme Court verdict.

Two other former Union Ministers and noted counsel, Dr Debi Pal, and Mr S.B. Mukherjee, feel that the Ordinance has violated the smooth functioning of the judiciary.

The taxation expert, Mr Narayan Jain, says the Ordinance may have an adverse impact on the inflow of foreign direct investment into the country. "As it is, foreign companies are sceptical and doubtful of Indian taxation laws. Here is an instance where the judiciary has passed a verdict in favour of a corporate house and which goes against the Government. And then the Government, through improper use of its power, issues an Ordinance to this effect. If the Government does not accept a judgment that is delivered by the highest court of the land, how can you expect the common man to have faith in the judiciary," he said.

Another tax consultant feels that the Ordinance can be challenged as being unconstitutional because it states that no claim or challenge can be made in, or entertained by, any court or tribunal or authority on the ground that the Central Government did not have at the material time the power to amend retrospectively the notifications issued under Rule 8 (I) of the Central Excise Rules, 1944.

The Government has issued an Ordinance to recover Rs 450 crore from ITC. The company is required to pay the money within 30 days, failing which it will have to pay a penalty by way of 15 per cent interest. The Supreme Court had earlier ruled in favour of ITC in the Rs 803-crore excise duty case.

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