Penalties On Itc Waived

The Central Excise and Gold Control Appellate Tribunal (Cegat) yesterday asked the excise department to "requantify" the duty demand of Rs 682 crore against ITC Ltd, according to a formula listed in the judgement.

The department will now have to reassess the duty by subtracting certain local taxes from the original demand. It will then have to inform Cegat about the new figure arrived at.

The tribunal also dropped all penalty charges against ITC Ltd's serving chairman and board of directors during 1983-87. It also dropped the duty demand of Rs 117 crore raised against seven ITC job workers along with the penalty charges against them.

 

However, the excise department's decision to invoke the extended period of limitation from 1983-87 was accepted.

Under Central excise rules, a company can pay duty till up to six months after the deadline without any penalty being imposed. However, failure to pay the duty even after that period is treated as deliberate suppression of facts and a penalty is imposed upon the company.

Clarifying Cegat's decision to accept the extended limitation while waiving penalty imposition, the counsel for the central excise department, Chandra Shekharan said: `The considerations of invoking extended limitation under section 11 (A) of the CE Act are not the same as those for imposition of penalty under Section 9 (ii) of the Act. Hence there is no apparent discrepancy in the judgement."

ITC executives refused to comment on the issue before studying the judgement. However, sources said the company would consider approaching the Supreme Court in order to protect the interests of its shareholders.

The excise department could veer around to fixing the duty demand at Rs 582 crore, about Rs 100 crore less than the original demand of Rs 682 crore after applying the formula prescribedrequirements, strict enforcement of disclosure norms and the introduction of a safety net or exit options in order to revive investors' confidence by ensuring transparency. The recommendations also state that the concept of "at par" should be dispensed with in equity shares. New instuments such a "puttable equity" - essentially a hybrid debt/equity instument - with the conversion option held by the investor and "equity committment notes" could also be allowed.

The Informal group has also recommended that the cost of equity issues should be reduced by popularising book building and reducing the number of mandatory collecton centres.

It wants public offers mandated through the depository to ensure paperless allotment and favours printing of application forms in newspapers to reduce the cost.

For entering into the primary market, the committee has recommended that the norms could be made stricter with either pre-conditions relating to minimum networth and profitability calculated by generally accepted accounting prinicpals (GAAP) or in consulation with the Institute of Chartered Accountants (ICAI). It has also said that the existing condition of getting the project appraised and funded by banks and financial institutions should be continued. However, it has recommended that a company going for a public issue should not have any outstanding warrants or prefernce shares.