Electronics Corp.Of India Limited vs Union Of India & Ors

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1883 OF 2011

(arising out of S.L.P. (C) No. 2538 of 2009)

Electronics Corporation of India Ltd. ...

Appellant(s)

versus

Union of India & Ors. ...Respondent(s)

with

Civil Appeal No. 1903 of 2008

O R D E R

S.H. KAPADIA, CJI

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

2

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

3

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.

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)

4

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) 2007 (7) SCC 39 (ONGC v. City &

Industrial Development Corpn.) dated 20.7.2007 needs to be

5

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 1992 Supp (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

6

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

7

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

8

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 Supp (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 Supp (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.

.................................CJI

(S. H. Kapadia)

...................................J.

(Mukundakam Sharma)

9

...................................J.

(K.S. Panicker

Radhakrishnan)

...................................J.

(Swatanter Kumar)

...................................J.

(Anil R. Dave)

New Delhi;

February 17, 2011