Engineering giant Bhel, which is lobbying with the government for imposition of import duty on power equipment, has got a taste of its own medicine with the taxman serving a notice on the company for recovery of R 519 crore of excise duty savings made by it on sale of equipment under the government?s ??mega power policy??.
The policy allows duty-free supply of equipment to power projects from domestic or overseas companies. To qualify for the mega status, a power project must meet the threshold capacity condition ? 1,000 mw for thermal and 500 mw for hydro project.
In the case of BHEL, taxmen interpreted the policy such that eligibility for tax exemption is reliant on the unit size of equipment being used rather than the overall project capacity. Based on this assumption, a showcause notice has been served on the PSU asking it to explain why applicable duty along with penalty should not be recovered from it. The central board of excise and customs (CBEC) made claims of R519 crore on equipment supplied by Bhel during the last five years.
??The claim is unjustified as mega power status is given to power projects that get the benefit of duty free imports. Equipment suppliers should not be penalised for no fault of theirs,?? said an official of the PSU.
??We have sought the intervention of department of heavy industries to resolve the issue at the earliest,?? the official added.
As per official sources, the finance ministry has agreed to issue clarification after the issue was raised by the power ministry. The CBEC has also agreed to withdraw the showcause notice realising its mistake. However, Bhel management is still not assured and has asked taxmen to give in writing that issuing the showcause notice was a mistake on its part.
Bhel, along with other power equipment manufacturers like Larsen &Toubro, JSW and Bharat Forge, has been lobbying with the government for slapping customs duty on power equipment to provide the indigenous industry a level playing field against cheaper Chinese imports. Complying with the domestic?s industry demand will require withdrawing mega power policy notification issued by the Union power ministry as duty is already applicable on equipment supplies to non-mega projects.