Tax on ITC loot, says BJP

Laws can be amended retrospectively: Govt

The Bharatiya Janata Party (BJP) has opposed the promulgation of an ordinance to amend excise laws for recovering Rs 803 crore from tobacco major ITC Ltd. According to Jagdish Shettigar, a member of the BJP economic think-tank, "is loot, plain and simple."

Finance ministry officials, however, justified the move saying it was permissible under the law. "Laws can be amended retrospectively through 'validating legislation', which is legally permissible," said finance ministry officials.

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

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

Shettigar, however, said such amendments of law retrospectively sent wrong signals to investors. "There was no need for the finance minister to come out with Budget proposals every year if he has to amend a past legislation to recover dues," Shettigar said.

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.

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

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

The definition of "sale pri-ce" was the bone of contention and Cegat found that the ITC was printing a lower MRP on packets than it actually char-ged from customers, and that it was not permissible.

But the Supreme Court took a different view by observing that the notification had introduced a system of levy on an experimental basis. If the experiment was a failure for some reason, it was for the government to 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.