The Hindu : National : Court rejects review of excise duty relief to ITC

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Saturday, Mar 05, 2005

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National

Court rejects review of excise duty relief to ITC

By J. Venkatesan

NEW DELHI, MARCH 4. The Supreme Court on Thursday dismissed a petition filed by the Centre seeking a review of a September 2004 order granting Rs. 803 crores excise duty relief to the tobacco major Indian Tobacco Company (ITC) Limited.

A Bench of Justice Ruma Pal and Justice P. Venkatarama Reddi rejected the review petition in their chambers. On September 9, 2004, the same Bench had quashed the orders passed by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) rejecting the plea of the tobacco company and ordered refund of the amount. The revenue department had alleged that ITC had colluded with retailers in selling cigarettes at a price higher than the maximum retail price printed on the package and levied excise duty on the effective price. However, ITC maintained that it was not permissible to levy the duty on the basis of MRP.

On the allegation that retailers were compelled to sell the goods at a higher price because of the low margin, ITC said they could refrain from selling the goods. The Government and the company filed appeals in the Supreme Court against those portions of the CEGAT order that went against them. Since during the pendency of the appeals, the ITC had deposited Rs. 354 crores, the court ordered refund of this amount. The Government, instead of implementing the order, filed a petition in December last seeking review of the judgment. Even as this was pending consideration the Government issued an ordinance on January 25 with powers to modify past excise rules in an apparent attempt to recover arrears of Rs. 449 crores (after deducting the amount the ITC had already paid) from the company.

The Ordinance amends the Central Excise Act empowering the Government to make rules retrospectively. With the review petition dismissed, the Government has suffered a major setback.

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