ITC wins excise case after 17 yrs

Rs 803 cr relief for tobacco major.

The Supreme Court delivered its judgment in the ITC excise case this morning, but there were no surprises. The hotels and tobacco giant has won a 17-year-old legal battle.

A Bench consisting of Justice Ruma Pal and Justice P V Reddi set aside the demand of Rs 803 crore from the excise department.

The same judgment was delivered yesterday, but it was recalled and listed today because ITC's lawyers had taken the judgment out of the court without the permission of the judges. The stock market fluctuated for some time yesterday following the delivery of the judgment.

ITC's shares rallied 3.2 per cent to a near six-month high of Rs 1,114.90 at the Bombay Stock Exchange following the verdict, but were off their highs at Rs 1,099.65 in mid-day trade.

ITC, which makes two out of every three cigarettes in India, was alleged to have evaded excise duties for four years from March 1983. Tax authorities had claimed that retailers had sold cigarettes at a higher price than what was printed on the packaging, making the company liable to a higher slab of excise duty.

The excise department's claim included penalties. ITC has already paid Rs 305 crore following the demand and will now apply for a refund, which will take up to six months. The company could also apply for interest on the payment.

ITC has a long list of investments lined up with the funds released after the dismissal of the excise demand. The reach of ITC's e-choupal initiative will be raised from 4,100 installations covering 25,000 villages at last count to 20,000 installations covering 100,000 villages.

The capital employed in ITC's agri-business division was Rs 167 crore till June 2004 and investments in the sector are growing at 50 per cent year on year.

ITC's paper, paperboards and packaging business had absorbed Rs 1,526 crore worth of capital till June 2004. The growth in capital employed in the business is around 20 per cent year on year.

ITC has been on the lookout for acquisition of both properties and hotel companies. In the pipeline are new hotels in Bangalore, Hyderabad and Chennai, besides renovation of properties in centres like Delhi and a second hotel in Mumbai.

The retailing business is another segment that needs investments as ITC is aiming to take its Wills brand to markets like the US after quotas are dismantled in the textiles trade from 2005. The capital employed in ITC's retail business was Rs 227 crore for the quarter ended June 2004 and has been doubling every year.