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Suppliers to Mega Power Projects face silly excise demands

AIT News Network

MUMBAI. 13th May 2012

Those manufacturers who are supplying the goods to Mega Power Projects are being slapped with silly demands. The supplies made to Mega Power Projects are exempted from excise duty under Central Excise Tariff Notification No.

6/2006-CE (serial no.91) which grants exemption from excise duty to all goods supplied against international competitive bidding. The show cause notices are based on the sole ground that power project has two different units of 500 MW each, which is below the minimum capacity of 1000 MW as prescribed under notification no. 21/2002-Customs  as amended vide notification no.49/2006-Cus. So the goods cannot be treated as exempt from duties of customs. Hence condition no.19 of the notification no. 06/2006-CE dated 01.03.2006 does not  get fulfilled.

A power project having 2 units of 500 MW each is to be treated as power project of 1000 MW capacity for the purpose of exemption to supplies made for setting up Mega Power Projects under Central Excise Tariff Notification No.6/2006  read with serial no. 400(condition no.19) of Customs Tariff Notification No. 21/2002.

Further, the Notification nowhere provides that a Mega Power Project should have a single unit of 1000 MW and cannot have 2 units of 500 MW each. What is to be seen is the total capacity of the project which should be 1000 MW.

The exemption from central excise duty under serial no.91 of Central Excise Tariff Notification No.6/2006 dated 1.3.2006 as amended is admissible  to “All goods supplied against International Competitive Bidding” subject to condition that in case  the same goods are imported into India, they are exempted from customs duty. Serial No.400 of Customs Tariff Notification No.21/2002 exempts from customs duty, goods required for setting up of a Mega Power Project, so certified by Joint Secretary Power, that is to say thermal power plant of a capacity of 1000 MW or more.

It is patently wrong to suggest in the show cause notices that 2X 500 MW each cannot be treated as power project of 1000 MW.

It is a case where brilliant IRS Officers who lost their entry into IAS by few marks are not aware that in all Mega Power Projects ; the units are of 500 MW each and there is no power project in India  having a single unit of 1000MW. This could have easily been confirmed from Power Ministry before issue of show cause notices . If the exemption is denied on the ground that it is a case of 2x 500 MW; and not of a single unit of 1000MW; the exemption provision will become otiose. The intention of the Legislature or the Government is to grant exemption from excise/customs duties to goods supplied to Power Projects   having the status of Mega Power Project for which criteria of total project capacity of 1000 MW has been notified.

It is learnt that an audit objection was received by central excise department on this issue and immediately on receipt of objection; the demands were issued without application of mind. In case there was any doubt in the mind of the Officers;  a reference should have been made to Power Ministry and a suitable clarification should have been obtained by now. Since Power Ministry has certified the Projects as Mega Power Project; it is the domain of Power Ministry to comment and clarify the doubt about the status of the project.

How many demands will be issued and how many years will be taken by the concerned officers in sorting this silly issue only the time will tell. But it is time for FM and Revenue Secretary to take action against the Officers who are slapping silly demands on manufacturers without any logic and sense. All such demands will be dropped but who will bear the cost of litigation.

Why not make a strict rule that whenever a demand is dropped being illegal; the Officer who issued the demand should be liable to pay the cost of litigation borne by the taxpayer. But if it is implemented; almost all IRS Officers may find their whole salary going towards such compensation. There are many who may even like to work in IRS without taking any salary because of the perks involved. Half  of IRS Officers are IIT/IIM Boys and could have been getting 10 times salary in Corporates. When they joined IRS; salary was never an issue for consideration. What was the real consideration; is known to everybody.       


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