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Home News Power Sector News SC asks Madhya Pradesh to defreeze NTPC’s bank accounts

SC asks Madhya Pradesh to defreeze NTPC’s bank accounts

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Supreme courtThe Supreme Court on 08-02-2016 asked the Madhya Pradesh government to defreeze NTPC's bank accounts and withdraw its notice to cancel registration of its 4,760-megawatt (MW) Vindhyachal Super Thermal Power Plant in the state, provided the PSU deposited R40 crore towards entry tax with the state high court.

The state tax department has alleged that NTPC is liable to pay entry tax of R191 crore for the assessment years 2007-2013.

A bench headed by justice Dipak Misra also asked the Madhya Pradesh High Court to decide the matter expeditiously within three months. However, it clarified that it has not expressed any opinion on the merits of the case.

While NTPC was represented by solicitor-general Ranjit Kumar, senior counsel Arvind Varma appeared for the department.

Kumar argued that the PSU is entitled to exemption in entry tax and the department cannot ask it to pay enhanced entry tax at the rate of 5%. He said that NTPC is liable to pay the entry tax at 2%.

Besides, the government's decision to attach its bank accounts and its notice for cancellation of the registration of its thermal power plant was "illegal and arbitrary".

The state government had issued various reassessment orders on May 2014 and January 2015, for the assessment years 2007-2013, for the levy of entry tax at the enhanced rate of 5%, rather than the exempted rate of 2%. This was challenged by the PSU in the high court, which initially in March 2015 restrained the state tax authorities from taking any coercive steps against NTPC, but later vacated its order.

Stating that the generation of electricity by converting latent the thermal energy of coal into electrical energy is also included in the definition of manufacture, NTPC said that the high court had erred in holding that coal is not a raw material used in the generation of electricity but is only a fuel used in the process.

"Electrical energy being goods and coal being essential for producing electrical energy in thermal power plants, it cannot be said that coal is not a raw material for generating electricity or that electrical energy is not goods which can be manufactured," the appeal stated, adding that even if the electrical energy does not show any attribute of coal, this does not prevent coal from being an essential raw material to produce electrical energy.

The PSU cited the apex court's judgement in the case, Collector of Central Excise vs Balarpur Industries, to prove its point.

The SC had earlier held that if an ingredient does not manifest itself in the end product and is burnt up and consumed, it does not cease to be a raw material or an ingredient for the end product. "Though coal is burnt up and consumed (except for ash and cinders) while producing electrical energy, it is so essential to the manufacture of electrical energy that it would constitute a raw material for the said process," it said.

Source- Financial Express


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