Electronics Corporation of India Ltd. Vs. Union of India & Ors.
Email[Arising out of SLP (C) No. 2538 of 2009]
With
Civil Appeal No. 1903 of 2008
[From the Judgement and Order dated 13.12.2008 of the High Court of Andhra Pradesh at Hyderabad in Writ Petition No. 26573 of 2008]
[Arising out of SLP (C) No. 2538 of 2009]
With
Civil Appeal No. 1903 of 2008
[From the Judgement and Order dated 13.12.2008 of the High Court of Andhra Pradesh at Hyderabad in Writ Petition No. 26573 of 2008]
Mr. Goolam E. Vahanvati, AG, Mr. P.P. Tripathy, ASG, Mr. Arijit Prasad, Mr. Kumal Bahri, Mr. D.D. Kamath, Mr. Rohit Sharma, Mr. Amey Nargolkar, Mr. B.V. Balaram Das, Ms. Anil Katiyar, Mr. Rupesh Kumar, Mr. Parijat Sinha, Ms. Reshmi Rea Sinha, Mr. Anil Kumar Mishra, Mr. Vikram Ganguly, Mr. S.C. Ghosh, Mr. B. Krishna Prasad, Mr. E.C. Agrawala, Advocates, with them for the appearing parties.
Central Excise Act, 1944
Section 4(4)(b) – Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, Rule 7 – Reversal of CENVAT/MODVAT – Credit taken on inputs, whose value stood written off vide AS-2, as pleaded – If benefit is still available and reversal cannot be allowed – Mechanism set up by Supreme Court in various decisions. Held that in view of changed scenario and said mechanism causing delay, all directions passed earlier are recalled.
The above Orders have outlived their utility and in view of the changed scenario, as indicated hereinafter, the aforestated Orders are required to be recalled. (Para 6)
In ONGC-II case (supra) this Court directed the Government of India ‘to set up a Committee consisting of representatives from the Ministry of Industry, Bureau of Public Enterprises and Ministry of Law, to monitor disputes between Ministry and Ministry of Government of India, Ministry and public sector undertakings of the Government of India and public sector undertakings between themselves, to ensure that no litigation comes to Court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation’. (Para 7)
Thereafter, in ONGC-III case (supra), this Court directed that in the absence of clearance from the ‘Committee of Secretaries’ (CoS), any legal proceeding will not be proceeded with. By another order dated 20.7.2007 (ONGC-IVth case) this Court extended the concept of Dispute Resolution by High-Powered Committee to amicably resolve the disputes involving the State Governments and their Instrumentalities. (Para 8)
The idea behind setting up of this Committee, initially, called a ‘High-Powered Committee’ (HPC), later on called as ‘Committee of Secretaries’ (CoS) and finally termed as ‘Committee on Disputes’ (CoD) was to ensure that resources of the State are not frittered away in inter se litigations between entities of the State, which could be best resolved, by an empowered CoD. The machinery contemplated was only to ensure that no litigation comes to Court without the parties having had an opportunity of
conciliation before an in-house committee. (Para 9)
However, the mechanism has led to delay in filing of civil appeals causing loss of revenue. For example, in many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there could be overlapping of jurisdictions between, let us say, SEBI and insurance regulators. Civil appeals lie to this Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court in its various Orders reported as (i) [1995 (Suppl. 4) SCC 541] dated 11.10.1991, (ii) [2004 (6) SCC 437] dated 7.1.1994 and (iii) [2007 (7) SCC 39] dated 20.7.2007. (Para 9)
2.ONGC v. CCE [2004 (6) SCC 437] (Para 5)
3.ONGC v. CCE [1995 (Suppl. 4) SCC 541] (Para 5)
4.ONGC and Anr. v. CCE [JT 1991 (4) SC 158] (Para 6)
1. Leave granted.
2. Electronics Corporation of India Ltd. (‘assessee’ for short) is a Central Government Public Sector Undertaking (‘PSU’). It is registered as a Government Company under the Companies Act, 1956. It is under the control of Department of Atomic Energy, Government of India. A dispute had been raised by the Central Government (Ministry of Finance) by issuing show cause notices to the assessee alleging that the Corporation was not entitled to avail/utilize Modvat/Cenvat Credit in respect of inputs whose values stood written off. Accordingly it was proposed in the show cause notices that the credit taken on inputs was liable to be reversed. Thus, the short point which arose for determination in the present case was whether the Central Government was right in insisting on reversal of credit taken by the assessee on inputs whose values stood written off.
3. The adjudicating authority held that there was no substance in the contention of the assessee that the write off was made in terms of AS-2. The case of the assessee before the Commissioner of Central Excise (adjudicating authority) was that it was a financial requirement as prescribed in AS-2; that an inventory more than three years old had to be written off/derated in value; that such derating in value did not mean that the inputs were unfunctionable; that the inputs were still lying in the factory and they were useful for production and therefore they were entitled to Modvat/Cenvat credit. As stated above, this argument was rejected by the adjudicating authority and the demand against the assessee stood confirmed. Against the order of the adjudicating authority, the assessee decided to challenge the same by filing an appeal before CESTAT. Accordingly, the assessee applied before the Committee on Disputes (CoD). However, the CoD vide its decision dated 2.11.2006 refused to grant clearance though in an identical case the CoD granted clearance to Bharat Heavy Electricals Ltd. (‘BHEL’). Accordingly, the assessee herein filed Writ Petition No. 26573 of 2008 in the Andhra Pradesh High Court. By the impugned decision, the writ petition filed by the assessee stood dismissed. Against the order of the Andhra Pradesh High Court the assessee has moved this Court by way of a special leave petition.
4. In a conjunct matter, Civil Appeal No. 1903 of 2008, the facts were as follows.
4.1. Bharat Petroleum Corporation Ltd. (‘assessee’ for short) cleared the goods for sale at the outlets owned and operated by themselves known as Company Owned and Company Operated Outlets. The assessee cleared the goods for sale at such outlets by determining the value of the goods cleared during the period February, 2000 to November, 2001 on the basis of the price at which such goods were sold from their warehouses to independent dealers, instead of determining it on the basis of the normal price and normal transaction value as per Section 4(4)(b)(iii) of Central Excise Act, 1944 (‘1944 Act’ for short) read with Rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. In short, the price adopted by the assessee which is a PSU in terms of Administered Pricing Mechanism (‘APM’) formulated by Government of India stood rejected. The Tribunal came to the conclusion that the APM adopted by the assessee was in terms of the price fixed by the Ministry of Petroleum and Natural Gas; that it was not possible for the assessee to adopt the price in terms of Section 4(1)(a) of the 1944 Act; and that it was not possible to arrive at the transaction value in terms of the said section. Accordingly, the Tribunal allowed the appeal of the assessee. Aggrieved by the decision of the Tribunal, CCE has come to this Court by way of Civil Appeal No. 1903 of 2008 in which the assessee has preferred I.A. No. 4 of 2009 requesting the Court to dismiss the above Civil Appeal No. 1903 of 2008 filed by the Department on the ground that CoD has declined permission to the Department to pursue the said appeal.
5. The above two instances are given only to highlight the fact that the mechanism set up by this Court in its Orders reported in (i) [1995 (Suppl. 4) SCC 541] ONGC v. CCE dated 11.10.1991; (ii) [2004 (6) SCC 437] ONGC v. CCE dated 7.1.1994; and (iii) [JT 2007 (9) SC 382 : 2007 (7) SCC 39] ONGC v. City & Industrial Development Corpn. dated 20.7.2007 needs to be revisited.
6. Learned Attorney General has submitted that the above Orders have outlived their utility and in view of the changed scenario, as indicated hereinafter, the aforestated Orders are required to be recalled. We find merit in the submission made by the Attorney General of India on behalf of the Union of India for the following reasons. By Order dated 11.9.1991, reported in [JT 1991 (4) SC 158 : 1992 (Suppl. 2) SCC 432] ONGC and Anr. v. CCE, this Court noted that ‘Public Sector Undertakings of Central Government and the Union of India should not fight their litigations in Court’. Consequently, the Cabinet Secretary, Government of India was ‘called upon to handle the matter personally’.
7. This was followed by the order dated 11.10.1991 in ONGC-II case (supra) where this Court directed the Government of India ‘to set up a Committee consisting of representatives from the Ministry of Industry, Bureau of Public Enterprises and Ministry of Law, to monitor disputes between Ministry and Ministry of Government of India, Ministry and public sector undertakings of the Government of India and public sector undertakings between themselves, to ensure that no litigation comes to Court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation’.
8. Thereafter, in ONGC-III case (supra), this Court directed that in the absence of clearance from the ‘Committee of Secretaries’ (CoS), any legal proceeding will not be proceeded with. This was subject to the rider that appeals and petitions filed without such clearance could be filed to save limitation. It was, however, directed that the needful should be done within one month from such filing, failing which the matter would not be proceeded with. By another order dated 20.7.2007 (ONGC-IVth case) this Court extended the concept of Dispute Resolution by High-Powered Committee to amicably resolve the disputes involving the State Governments and their Instrumentalities.
9. The idea behind setting up of this Committee, initially, called a ‘High-Powered Committee’ (HPC), later on called as ‘Committee of Secretaries’ (CoS) and finally termed as ‘Committee on Disputes’ (CoD) was to ensure that resources of the State are not frittered away in inter se litigations between entities of the State, which could be best resolved, by an empowered CoD. The machinery contemplated was only to ensure that no litigation comes to Court without the parties having had an opportunity of conciliation before an in-house committee. [see : para 3 of the order dated 7.1.1994 (supra)] Whilst the principle and the object behind the aforestated Orders is unexceptionable and laudatory, experience has shown that despite best efforts of the CoD, the mechanism has not achieved the results for which it was constituted and has in fact led to delays in litigation. We have already given two examples hereinabove. They indicate that on same set of facts, clearance is given in one case and refused in the other. This has led a PSU to institute a SLP in this Court on the ground of discrimination. We need not multiply such illustrations. The mechanism was set up with a laudatory object. However, the mechanism has led to delay in filing of civil appeals causing loss of revenue. For example, in many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there could be overlapping of jurisdictions between, let us say, SEBI and insurance regulators. Civil appeals lie to this Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court in its various Orders reported as (i) [1995 (Suppl. 4) SCC 541] dated 11.10.1991, (ii) [2004 (6) SCC 437] dated 7.1.1994 and (iii) [2007 (7) SCC 39] dated 20.7.2007.
10. In the circumstances, we hereby recall the following Orders reported in:
(i) [1995 (Suppl. 4) SCC 541] dated 11.10.1991
(ii) [2004 (6) SCC 437] dated 7.1.1994
(iii) [2007 (7) SCC 39] dated 20.7.2007
11. For the aforestated reasons, I.A. No. 4 filed by the assessee in Civil Appeal No. 1903/2008 is
dismissed.
