MoF demands Rs 25 cr from food ministry

The food ministry was forced to raise the prices of levy sugar during this period when the Supreme Court delivered a judgment in September, 1993 in favour of the sugar mills. As a result of the higher levy prices, there was an additional burden of excise duty paid on an ad valorem basis which arose. After protracteddiscussions between the sugar industry and the ministries of finance and food, it was decided in August 1996 that the liability of this extra excise duty would be borne by the food ministry. The food ministry on its part was supposed to make this payment on a consolidated basis through book transfer during 1997-98 which was provided for by the budgetary allocations made by the finance ministry.

However, matters reached a flash when sugar mills received notices from the Department of Revenue, late last year, for clearing the outstanding excise duty payments pertaining to the period 1974 to 1980. Faced with these notices sugar mills dragged the food ministry to court yet again in December, 1997. At this stage the food ministry went back on its earlier commitment and informed the High Court that it did not accept the liability of repaying the Rs 25 crore.

Revenue Secretary’s letter dated February 3, has stated that the food ministry’s decision to withdraw from its earlier commitment has come as a "greatsurprise". Especially as this reversal in stand came, through a food ministry communique of December 5, 1997, soon after the modalities of the book transfer of the payments was arrived at only two months before this, in September last year.

Highly placed sources in the finance ministry say that the food ministry flip flop on the issue of excise duty reimbursements is in keeping with its earlier confusion on countervailing duties (CVD). Initially the food ministry supported the move to impose CVD to place domestic producers at an even keel with imported sugar. However, dispute pressure from the commerce ministry and chief minister of Andhra Pradesh, the food ministry later opposed the move in November last.

Both these issues, excise duty payments and the imposition of CVD on imported sugar are now expected to be taken up by the cabinet once the new government is installed.