The Hindu Business Line : ITC, Centre settle excise case

ITC has agreed not to claim the Rs 350 crore it paid as deposit to the exchequer in 1996 and that the Government in turn has agreed to withdraw its claim of another Rs 453 crore.

New Delhi , April 4

ITC Ltd on Monday said that its Chairman, Mr Y.C. Deveshwar, had signed a deed of settlement with the Revenue Secretary, Mr K.M. Chandrasekhar, to bring an end to a long-standing excise dispute between the Government and the company.

A communiqué sent by ITC to the Bombay Stock Exchange held that the company has agreed not to claim the Rs 350-crore it paid as deposit to the exchequer in 1996 and that the Government in turn has agreed to withdraw its claim of another Rs 453 crore.

Tax experts and industry observers view the patch-up between the two sides as a Government effort aimed at avoiding any confrontation with the judiciary in the Rs 803-crore alleged excise evasion case.

The United Progressive Alliance Government had come in for criticism from some chambers of commerce and industry for the manner in which the relief provided to the company by the Supreme Court was negated through an Ordinance issued on January 25.

Consequent to the promulgation of the Ordinance, the Revenue Department had asked the company to fork out Rs 450 crore in the next 30 days, beyond which the payment would attract a penal interest of 15 per cent per annum. Subsequently, however, the Government allowed the Ordinance to lapse by not bringing it before Parliament during the first part of the Budget session.

The ordinance had amended the Central Excise Act to empower the Government to make rules, including rules conferring the power to issue notifications with retrospective effect, to "carry into effect the purposes of this Act".

The amendments made through the Ordinance were valid only for the specified period during 1983-87 (March 1, 1983 to February 28, 1987). The Ordinance had amended the definition of "sale price" in various cigarettes related excise notifications issued by the Revenue Department during 1983-87.

This was done to enable the Department to recover the disputed excise duty relating to that period.

Further, the Ordinance also provided that no claim or challenge could be made in or entertained by any court or tribunal or authority under the ground that the Central Government did not have at the material time the power to amend retrospectively the notifications issued under Rule 8(1) of the Central Excise Rules, 1944.

The Supreme Court had in September 2004 quashed an order passed by the Customs, Excise and Gold (control) Appellate Tribunal (CEGAT), which had rejected ITC's plea in the Rs 803-crore excise duty case pertaining to the period 1983-87.

The CEGAT had in 1998 held that the company had short-paid excise levies during the relevant period (March 1, 1983 to February 28, 1987) even as it quashed the penalties levied on the company by the Revenue Department. The CEGAT (now CESTAT) had then ordered recomputation and the company had paid Rs 350 crore following this order.

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