Monday, February 7 2005 13:32 Hrs (IST) - World Time -

New Delhi: BJP (Bharatiya Janata Party) has termed as "loot" UPA (United Progressive Alliance) Government's Ordinance to amend the past excise laws for recovering Rs 803 crore from tobacco major ITC Ltd, but Finance Ministry has justified the move saying it is "permissible under law".

"It is nothing but a loot," Jagdish Shettigar, a former member of Prime Minister's Economic Advisory Council, said in New Delhi today (Feb 07, 2005).

However, Finance Ministry officials justified the action saying that laws can be amended retrospectively through "validating legislation", which is legally permissible.

"There are several instances in the past, when such a provision has been applied," a Ministry official said, adding the action of the company of selling cigarettes over and above the maximum retail price cannot be condoned.

"It was a question of ethics. The company cannot shift the blame on to the retailers as it was responsible for ensuring the cigarettes are sold at a price within the MRP," he said.

Shettigar, however, said that such amendments of law retrospectively sent wrong signals to investors.

"There was no need for Finance Minister to come out with budget proposals every year if he has to amend a past legislation to recover dues," Shettigar, an active member of BJP's economic think-tank, added.

The price of ITC scrips took a beating at the bourses following the ordinance. The share price of the company had fallen from Rs 1,400 on January 28 to Rs 1,342 last week.

Government had issued an ordinance on January 25 to amend Central Excise Act empowering Government to make rules retrospectively.

The ordinance came in the wake of a legal battle between Excise department and ITC in Supreme Court, which gave a verdict in favour of the Kolkata-based cigarette maker last year when NDA (National Democratic Alliance) was in power.

The Apex Court had quashed an order passed by Customs, Excise and Gold Tribunal (control) Appellate Tribunal (Cegat). Cegat had rejected ITC's plea for Rs 803 crore excise duty relief for the period 1983-87.

Based on information from Revenue Intelligence, Excise department had slapped the duty on grounds that ITC had sold cigarettes at a price higher than the maximum retail price printed on the packets.

The definition of "sale price" was bone of contention and Cegat found that ITC was actually printing a lower MRP than it actually charged from customers on cigarette packets and it was not permissible.

But Supreme Court took a different view by observing that the notification has introduced a system of levy on an experimental basis. If the experiment was a failure for whatever reason, it was for the Government do away with it by some other definition as it did in 1987, the court said.

The recent ordinance has amended Section 37 of Central Excise Act to change the definition of "sale price" and implement it on a retrospective basis from March 1, 1983 to February 28 1987.