ITC counsel Ravindra Narain, by admitting that the company's liability is unlikely to exceed Rs 400 crore, has for all practical purposes thrown the company's case out of gear.

The observers said it runs counter to ITC's consistent stand that the entire demand raised by the excise department is not tenable in law and would be "virtually extinguished".

The counsel's stand is also being interpreted as a subtle hint at ITC's efforts to strike a compromise with the excise department.

ITC has already made a pre-deposit of Rs 350 crore with Cegat and, if the excise liability is arrived at Rs 600 crore as claimed by the government's counsel M Chandrashekaran, the company has to make a provision for the balance of Rs 250 crore in the accounts for 1998-99 inthe worst case scenario, sources said.