The Hindu Business Line : `ITC settlement as per SC suggestion'

THE settlement reached between the Union Government and ITC Ltd in the Rs 803-crore alleged excise duty evasion case was in accordance with the "suggestion" made by the Supreme Court, the Union Finance Minister, Mr P. Chidambaram, said here on Tuesday.

Briefing newspersons about the settlement, the Finance Minister highlighted that the apex court had, even while reserving judgment in early 2004, suggested that the Government and ITC should settle the matter with each other. "Even the lines of settlement were suggested by the Supreme Court after hearing both sides," he said.

Mr Chidambaram said that it was ITC that had approached the Government with a proposal for settlement (after the ordinance was issued). "The main factor that weighed with us was that the proposal of ITC was in accordance with the suggestion that fell from the Supreme Court," he said.

Mr Chidambaram added that the Union Cabinet had granted approval to the Finance Ministry's proposal that the offer for settlement made by ITC be accepted. The Union Cabinet gave its approval for the settlement on March 16.

After the Cabinet decision of March 16, the Government told ITC that it was willing to accept the company's offer "provided they go through the process of recording the settlement in proper form."

The Finance Minister mentioned that the memorandum of settlement has been filed with the adjudicating officer here on Tuesday. He said that the adjudicating officer would be passing orders for dropping further proceedings under the show cause notice issued earlier and which was revalidated by the ordinance subsequent to the adverse Supreme Court judgment.

With the passing of the adjudication order, a long-standing excise dispute between the Government and ITC Ltd would stand resolved. The dispute related to the value of cigarettes manufactured by the company between 1983 and 1987 for the purpose of excise duty liability.

The Government contended that the duty was payable on the actual price at which cigarettes were bought by retail customers. It had accordingly raised a demand in excess of Rs 800 crore as arrears of tax for this period and on which it had even succeeded in receiving from the company a sum of Rs 350 crore as deposit.

The company disputed this by saying that the duty was payable only on the retail price printed on the carton (cigarette), even though the retailer might have, in specific instances, charged a higher price.

Now, as per the memorandum of settlement, ITC agreed not to claim refund of the Rs 350 crore it paid as deposit to the exchequer in 1996 and the Government agreed to give up the claim of another Rs 453 crore.

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