[Electronics Corporation of India Ltd. v. Union of India & Ors., Civil Appeal No. 1883 of 2011 (arising out of S.L.P. (C) No. 2538 of 2009) dated 17-2-2011]
By Order dated 11-9-1991, reported in 1992 Supp (2) SCC 432 (ONGC and Anr. v. CCE), the Supreme 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”. This was followed by the order dated 11-10-1991 in 1995 Suppl. (4) SCC 541 (ONGC v. CCE) where the Supreme 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 came to a Court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation”. Thereafter, in 2004 (6) SCC 437 (ONGC v. CCE) dated 7-1-1994, the Supreme 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, 2007 (7) SCC 39 (ONGC v. City & Industrial Development Corpn.) the Supreme Court extended the concept of Dispute Resolution by High-Powered Committee to amicably resolve the disputes involving the State Governments and their instrumentalities. 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 came to Court without the parties having had an opportunity of conciliation before an in-house committee.
In CCE v. Bharat Petroleum Corporation, a two-Judge Bench of the Supreme Court held that the working of the COD had failed and that the time had come to revisit the law. The matter was referred to a Larger Bench for reconsideration.
The matter came up before a Constitution Bench of the Supreme Court consisting of five Judges, which noted that :
Electronics Corporation of India Ltd. (‘assessee’ for short), is a Central Government Public Sector Undertaking (‘PSU’) 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/utilise 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 was whether the Central Government was right in insisting on reversal of credit taken by the assessee on inputs whose values stood written off. The Adjudicating Authority held that there was no substance in the contention of the assessee that the writeoff 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 the 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 filed a writ petition No. 26573 of 2008 in the Andhra Pradesh High Court. The writ petition filed by the assessee stood dismissed. Against the order of the Andhra Pradesh High Court the assessee moved the Supreme Court by way of a special leave petition.
In a conjunct matter, 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 the 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 went to the Supreme Court by way of Civil Appeal No. 1903 of 2008 in which the assessee 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 had declined permission to the Department to pursue the said appeal.
The Supreme Court observed that the above two instances showed that the mechanism set up by the Supreme 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, needed reconsideration.
The Supreme Court held that whilst the principle and the object behind the aforestated orders was unexceptionable and laudatory, experience had shown that despite best efforts of the CoD, the mechanism has not achieved the results for which it was constituted and had in fact led to delays in litigation. The two examples given hereinabove indicated that on the same set of facts, clearance was given in one case and refused in the other. This has led a PSU to institute a SLP in the Supreme Court on the ground of discrimination. The mechanism had led to delay in filing of civil appeals causing loss of revenue. For example, in many cases of exemptions, the Industry Department gave exemption, while the same was denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there was overlapping of jurisdictions between authorities, such as SEBI and insurance regulator. Civil appeals lied to the Supreme Court. Stakes in such cases were huge. One could not 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 had outlived its utility. In the changed scenario indicated above, the Supreme Court was of the view that time had 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. In the circumstances, the said orders were recalled.
