The Hindu : Business : ITC signs deal with Centre to settle excise issue

Online edition of India's National Newspaper
Tuesday, Apr 05, 2005

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Business

ITC signs deal with Centre to settle excise issue

By Our Special Correspondent

KOLKATA, APRIL 4. The ITC Chairman, Y. C. Deveshwar, has just signed a deal with the Revenue Secretary to settle the ongoing dispute with the Government over the excise issue.

According to the deed of settlement, "ITC has agreed not to claim the Rs. 350 crores it had paid to the Government in 1996 as pre-deposit . In return, the Centre has agreed to withdraw its claims under the ordinance promulgated on January 25." This was stated in an announcement posted on the stock exchanges today. It may be mentioned that the ordinance had nullified an earlier Supreme Court order in favour of ITC with regard to the excise case. The Government had adopted the retrospective route to neutralise the Rs. 803 crore relief that was granted to the tobacco major in 2004 by the apex court.

Under this ordinance, ITC was to have paid Rs. 450 crores to the Government which had, through the ordinance, redefined sale price in various cigarette related excise notifications issued by the revenue department between 1983 and 1987. This enabled the Government to raise a demand of the balance amount of the duty. ITC's scrips took a beating after this announcement which took almost everyone by surprise.

The original case, a 17-year-old one, pertained to a notice issued to ITC and its contract manufacturers, asking them to show cause as to why they should not be required to pay duty at a higher slab of excise rates corresponding to the actual price of cigarettes (which were allegedly sold loose and at higher prices by retailers). This amounted to a demand of Rs. 803.78 crores. iTC went on appeal to the Customs Excise and Gold (Control) Apellate Tribunal (CEGAT) against the order which was raised by the Commissioner of Central Excise, Delhi only in December 1995. However during the pendency of the appeals in CEGAT, ITC made a pre-deposit of Rs. 350 crores.

ITC went to the Supreme Court saying that it had no excise liability to pay any differential duty.

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