HC raps Govt for protecting Colfax

| 27 June 2000 17:44 IST

The high court has rapped the Goa government for trying to seek a compromise in an unlawful manner in the case of waiving of excise duty of over Rs 29 crore by Colfax Laboratories, the manufacturers of Old Spice and Blue Stratos after shave lotions.

While passing an interim order in this regard, the Panaji bench of Bombay high court has also ordered the Colfax Laboratories to deposit in the court Rs 14 crore, divided equally into cash and a bank guarantee within eight weeks.

The 15-year long controversy is still not fully resolved where the Colfax had managed to get their after shave lotion classified as medicine and not cosmetics. It made a big difference. The Colfax was paying only Rs 10 per bulk litre on it as medicinal preparations while toilet preparations are charged 100 per cent advalorem duty.

The scandalous reclassification was made during Pratapsing Rane's Congress regime in March 1985 but came to light in 1991 after the Rane government was toppled. The excise commissioner's order to pay the arrears was then challenged by the company in the high court, who redirected the matter to the excise commissioner to take final decision.

The excise commissioner in 1998 decided that both the products were licensed as cosmetics and thus cannot be considered as medicine simply because it contains some medicinal components. The company was accordingly asked to pay Rs 18.5 crore towards the arrears till '91. But this order was also challenged in the high court.

The high court in its interim order over it has strongly objected to the state government's interference into the matter stating that the Medicinal and Toilet Preparations (Excise Duties) Act is a central legislation on which the state government has no powers to decide upon.

The high court has expressed surprise over the government decision to appoint a high powered committee comprising of majority of MLAs instead of experts, that too to work out a compromise. "The high court cannot give its consent to a compromise which is not permissible in law", states the interim order passed by Justice Ferdin Rebello and Justice V C Daga.

"To cover an illegality by attempting to get consent of this court in an unguarded moment only strengthens our impression that the action was not bonafide. It also cannot be said to be in public interest", stated the interim order.

Though the amount of duty waived was initially calculated at Rs 29 crore, the high court in its order comes down to Rs 14 crore calculated from 1991 onwards, when the reclassification was challenged, stating that the classification list prima facie is in dispute from '91.

It appears that the famous cosmetic firm may then get a benefit of evading the excise duty for the period of six years from 1985 onwards, when it had actually paid the excise duty for the medicine and not cosmetic, amounting to over Rs 15 crore.

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