New rules: Moser Baer power SEZ asked to refund duties foregone

Moser Baer India Ltd (Special Economic Zone power plant unit) will have to refund to the government certain duties forgone on inputs and operation and maintenance of its power plants over the previous year because of a change in rules.

The Board of Approval for SEZs, the apex decision-making body for the zones, has rejected an appeal by the Moser Baer unit, located in the Noida SEZ, against directions given by the unit approval committee of the zone asking it to refund ₹1.56 crore in duty foregone, according to minutes of the meeting.

“The BoA found that the unit approval committee did not err in its interpretation of the guidelines for power generation in SEZs issued in April 2015 and its directions to the company for refunds of duty benefits enjoyed between April 2015 and February 2016 was justified,” a Commerce Ministry official told BusinessLine .

The BoA decision now leaves the door open for the company to take the matter to the judicial level by appealing to the courts, if it so wished. A request sent to Moser Baer for commenting on the development remained unanswered.

“Now that Moser Baer has appealed to the BoA against the refund demand and got rebuffed, it can go to a higher forum like the High Court. Its case can be based on the ‘doctrine of legitimate expectations’ where it can be argued that investments made by the company were based on the exemptions available and a withdrawal of those exemptions had disrupted its business plans,” a Delhi-based lawyer specialising in SEZ cases told BusinessLine .

The guidelines for power generation in SEZs issued in 2015 reversed a previous notification issued in 2012 which allowed a unit to set up a power plant in the processing area of an SEZ and be entitled to all fiscal benefits including duty free maintenance and import of raw materials for the power plant.

According to the 2015 notification, power plants which are situated in the processing area of SEZs shall be demarcated as non-processing area and no operation and maintenance benefits will be available for them.

The Commerce Ministry subsequently came up with new guidelines in February 2016 which stated that a power plant, including a non-conventional energy unit, to be set up by developer/co-developer in an SEZ as part of an infrastructure facility will be in its non-processing area and will be entitled to fiscal benefits only for the initial setting up.

In its appeal, Moser Baer argued that the period from April 2015 to February 2016 is governed by the power guidelines of February 2009 that allow operational and maintenance benefits for the unit.

Further, even guidelines issued in March 2012 and and February 2016 allow such benefits to units.