The Telegraph
Since 1st March, 1999
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Duty demon back for ITC
- Ordinance seeks to close law door

New Delhi, Jan. 31: The Empire has struck back ' cigarette maker ITC Ltd will have to cough up another Rs 450 crore in excise dues to the government within 30 days.

President A.P.J. Abdul Kalam has passed an ordinance that tweaks excise laws retrospectively to force the Calcutta-based cigarette-to-hotels conglomerate to pay the unpaid amount arising from a case that goes back to 1983.

A claim of Rs 803 crore had been made on the ground that ITC had sold cigarettes at a price higher than the maximum retail price printed on the packets.

ITC had deposited Rs 350 crore in an account while it fought the excise claim legally.

Last September, ITC had come out triumphant from a bruising 17-year legal battle when the Supreme Court struck down the Rs 803-crore excise tab.

The court threw out the case, saying that having decided once to charge the levy on the maximum retail price, the government could not change course and ask the company to pay the duty on the price at which the cigarettes were sold.

In the ordinance, the government has introduced the clause that excise will be charged on the price that is higher.

Justices Ruma Pal and P. Venkatrama Reddi had ruled that the government should refund the Rs 350 crore the company had deposited pending the outcome of the case.

Far from refunding, the government has now asked the company to pay the remaining Rs 450 crore.

If ITC fails to make the payment, it will have to pay a penalty interest of 15 per cent a year on the outstanding amount after the 30-day deadline. Since the ordinance was published in the official gazette of the Union of India on January 25, the clock will start ticking from February 24.

The ITC stock plunged 2.7 per cent on the Bombay Stock Exchange to close at Rs 1361.85.

There was no word from ITC on the sudden turn of events, though it is widely expected to mount a legal challenge.

The ordinance carries provisions designed to head off such a possibility. It says: 'No suit or other proceeding shall be instituted, maintained in any court, tribunal or authority for the refund of any duty levied under the notifications.'

In the light of the Supreme Court verdict, the ordinance mentions: 'No court shall enforce any decree or order directing the refund of any such duties levied.'

To top it all: 'No claim or challenge shall be made in, or entertained by, any court, tribunal, or other authority on the ground only that the central government did not have, at the material times, the power to amend retrospectively...'

Tax experts say this is the first time the government has tried to pre-empt a legal challenge while issuing an ordinance.

Legal eagles believe ITC can contest the presidential ordinance on the ground that it seeks to nullify the effect of the Supreme Court verdict.

'This is a clear violation of judicial function,' said corporate lawyer P.H. Parekh.

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