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3 firms to be served show-cause notices

3 firms to be served show-cause notices
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First Published: Wed, Aug 26 2009. 12 46 AM IST
Updated: Wed, Aug 26 2009. 12 46 AM IST
Mumbai: A recent service tax audit of Gammon India Ltd, Tata Teleservices Ltd (Tata Tele), and Reliance Telecom Infrastructure Ltd (RTIL) has found that these three firms collectively owe the government Rs126 crore in unpaid taxes for 2007-08 and 2008-09, according to two officials of the department of service tax.
The companies will shortly be served with show-cause notices to explain their positions, said one official, who, like the other, did not want to be identified.
A show-cause notice is not an indictment but it seeks an explanation from a company for certain activities, typically within a time frame.
“The audit report will be acted upon by various divisions of the service tax department, depending on the jurisdiction,” the official added.
The department of service tax is a division of the department of revenue in the Union ministry of finance. Service tax audits are conducted by the department to detect evasion and improve compliance with norms.
Under a 2007 rule, a company has to pay service tax on advances received for any contract for services to be offered.
“Gammon has not paid service tax of Rs67 crore on advances which they take for contracts,” the official said. Gammon India has so far paid Rs1 crore to the department, according to him.
According to the second official, Tata Tele and RTIL owe Rs43 crore and about Rs16 crore, respectively, to the department.
Tata Tele is India’s sixth largest mobile phone services firm by subscribers.
RTIL is a subsidiary of Reliance Communications Ltd and part of the Reliance-Anil Dhirubhai Ambani Group.
Two of the companies involved denied any knowledge of the tax dues.
“We have officially no intimation or any knowledge of any additional service tax liability,” said a spokesperson for Gammon India.
“We are not aware of any such development on the service tax front, as we have not received any show-cause notice or any intimation of any sort from the authorities in the said matter. That having been said, as a Tata group company, we always abide by the law of the land and will, of course, do so in this and any other matter as well,” said a spokesperson for Tata Teleservices.
An RTIL spokesperson declined comment.
Speaking of the Tata Tele and RTIL audits, the second official said: “These telecom firms have wrongly availed of Cenvat (Central value-added tax) credit on capital goods to build their towers which are used to transmit signals.” According to Cenvat credit norms, a manufacturer or producer of final products is allowed to take credit against duties paid on any material inputs or capital goods.
“Our main objection is that these goods do not fall in the definition of capital goods,” he added.
Mint could not independently verify the logic of the official’s claims.
This is not the first time that construction firm Gammon India has come under the regulatory scanner.
In July, the Delhi Metro Rail Corp. Ltd had issued a show-cause notice to the firm after six persons, including an engineer, were killed and at least a dozen injured when an overbridge being constructed by it collapsed on 12 July in south Delhi.
In February 2008, the central intelligence unit of Indian customs alleged import duty evasion by nine infrastructure firms, including Gammon India.
The company, the agency had then claimed, had allegedly diverted construction machinery imported for projects financed by the United Nations and other international aid organizations, and approved by the government, to private projects. Such imports are exempt from customs duty.
khushboo.n@livemint.com
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First Published: Wed, Aug 26 2009. 12 46 AM IST