Mumbai: Central tax agencies have claimed the Slum Rehabilitation Authority (SRA) has allowed commercial gains to a developer and evaded taxes amounting to ₹250 crore. A report by the Directorate General Central Excise Intelligence (DGCEI) has claimed the decision by SRA to allow real estate major HDIL to privately use 1,286 residential tenements in a Kurla project, meant for Project Affected Persons (PAP), has cost the State government ₹37.29 crore in notional rent over five years.
The report also alleges that SRA has “deliberately failed to discharge a service tax liability with an ulterior motive to evade payment” in contravention of sections 67, 68, 69 and 70 of the Finance Act, 1970. A show cause notice issued this month to SRA by Alok Chopra, Additional Director General, DGCEI has demanded an explanation within 30 days, failing which the case will be judged ex parte on the basis of the report’s findings.
Named Premier, the SRA project at Bharat Nagar, Kurla was developed on plots bearing CTS (city survey number) 637 to 637/87. It comprises 17,347 residential units for rehabilitating PAP, 159 balwadis, 159 society offices and other amenities. As per the project’s Letter of Intent (LoI), all of these were to be handed over to SRA after completion, and 1,286 residential and 50 commercial units to SRA and MMRDA.
The DGCEI show cause notice claims these were utilised by HDIL for a transit camp and to relocate PAP for business and commercial benefits. “The SRA has not bothered to explain revenue and tax implicating on these units, which were wilfully and deliberately not handed over by M/s HDIL from September 11 onwards.”
The investigation found that HDIL retained the units merely on the basis of a “verbal and mutual” understanding with SRA. “When we issued a summons to the Financial Controller, SRA, in connection with this, they did not turn up,” the report says. The SRA later paid ₹56 lakh as tax on the transaction with HDIL, but did not pay the same on units claimed by HDIL for its use, it points out.
The DGCEI report says SRA raised a demand notice for recovery of only ₹2.83 crore as rent over five years for 50 commercial units after repeated demands for service tax on the transaction by tax authorities. Service tax on the construction of over 1,200 residential units was not paid, and the SRA didn’t say if outstanding rent had been recovered from HDIL. Former SRA CEO Aseem Gupta said, “Before I demitted office, all bills were sent to the developer. I’m not sure if this was followed up after June 2016, when the new CEO took over.”
Calculations by investigators show that rent on the 1000-odd units would have been ₹37.39 crore for five years, and would have carried a service tax liability of ₹4.79 cr at 14.5%. This amount, the report claims, is outstanding.
In all, SRA has collected ₹1,900 crore under various heads from private and semi-government organisations. The report claims service tax of ₹251 crore was applicable on the amount collected, but SRA did not pay despite being engaged in business activity such as renting immovable property, leasing land and charging land premium. “The said activities are not in the nature of statutory activities, therefore fee charged and collected from builders on these transactions is liable for service tax,” the report says.
We mishandled it: SRA
While admitting that an agreement with HDIL to allow it to use the tenement for private purposes was entered into but not put on record, or in writing for that matter, SRA officers denied wrongdoing. They said the matter was ‘mishandled’ in the rush to accommodate Project-Affected People (PAP) from Sahar Elevated Road, which was being constructed at the time by the Mumbai Metropolitan Region Development Authority (MMRDA).
A senior SRA officer, who declined to be named, said, “HDIL did not want to pay rent, and told us that MMRDA had committed to make the tenements rent-free. It turned out that MMRDA had not made this commitment. We were able to recover a part of the outstanding amount from the developer. There was no corruption.”
Hari Prakash Pandey, vice-president (Finance), HDIL, said the firm is yet to see the show cause notice to SRA from DGCEI.
