Reliance Infrastructure Ltd (RInfra) promoted by Anil Ambani is being investigated by the Directorate General of Central Excise Intelligence (DGCEI) for alleged non-payment of service tax of over Rs 250 crore, multiple sources familiar with the development told The Indian Express. The Pune wing of DGCEI has also searched the offices of RInfra in Mumbai and summoned its chief executive officer, Lalit Jalan, to record his statements in connection with the alleged non-payment of tax, said sources.
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The DGCEI probe has alleged that RInfra has not paid service tax on three separate streams of income of the company in Mumbai since July 2012. The three services include — street light maintenance charges billed to municipal corporation and other agencies in Mumbai, wheeling charges and cross subsidy charges collected by RInfra from Tata Power Company for distribution of electricity in Mumbai.
According to an official who spoke on the condition of anonymity, the DGCEI has allegedly recovered incriminating internal email exchanges between the top officials of Reliance Infrastructure during the searches on the company.
“The emails show that RInfra hid the concepts of the three services in question as it apprehended that these services are subject to service tax. The company did not respond to the notice of the anti evasion wing of the service tax department in Mumbai directing the firm to declare its income streams in December 2015 ,” said the official.
Both RInfra and Tata Power have the right to sell electricity in Mumbai and its suburbs. However, Tata Power does not have the electricity distribution infrastructure and it uses the infrastructure of RInfra to supply electricity to the consumers. For this Tata Power pays wheeling charges to RInfra for its services. RInfra has contended before the DGCEI that the three services provided by it in Mumbai are directly towards or related to supply of electricity, which is covered under the negative list of service tax.
“Government of India has exempted electricity distribution business activities from service tax, to avoid its burden on the electricity consumers and to promote competition through Open Access. As per DGCEI’s recent interpretation, some activities of the electricity distribution business, including wheeling and cross subsidy, should come under service tax. If appropriate authority mandates imposition of service tax, it shall be applicable to all the electricity distribution Companies in the country. Further, since taxes are pass-through in this business, it will increase tariff to the consumers. This will also kill the concept of Open Access. We have given detailed representation to the Department elaborating that this is industry-wide practice pan India. Nevertheless, we will abide by the decision of the appropriate authority,” said the official spokesperson of Reliance Infrastructure.
The DGCEI has, however, said that Reliance Infrastructure gets wheeling and cross subsidy charges for acting as a common carrier to provide distribution infrastructure to Tata Power, which supplies electricity to consumers in Mumbai. According to the agency, distribution infrastructure provided by RInfra is equivalent to renting of immovable property, which attracts service tax. After the probe RInfra, according to excise officials has under protest paid about Rs 20 crore as service tax on street maintenance charges received by them from different municipal bodies in Mumbai and its sub urban areas.
“Interestingly, RInfra’s group company BSES Rajdhani Power Ltd that is engaged in street light maintenance at Delhi is paying service tax for the last 10 years on this activity,” said another official familiar with the probe.