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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

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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

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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)

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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

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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

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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

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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

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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)

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……………………………..J.          (K.S.  Panicker  

Radhakrishnan)

……………………………..J.              (Swatanter Kumar)

……………………………..J.              (Anil R. Dave)

New Delhi;  February 17, 2011