CHANDIGARH: The Comptroller and Auditor General (CAG) has pointed out that the state power distribution company Dakshin Haryana Bijli Vitran Nigam (DHBVN) made an irregular tax reimbursement of ?1.41 crore to a New Delhi-based contractor, Shyam Indus Power Solution Pvt Ltd.

Incidentally, the director of the company, Satya Pal Sindhu, is the brother of Haryana minister Capt Abhimanyu.

The CAG in its audit of transactions of state-owned companies for 2016-17 found that DHBVN in July 2013 issued a work order to the firm at a cost of ?110 crore along with ?8.27-crore taxes.

The firm was to supply material for installing high-tension power lines for high voltage distribution system and strengthening the system in non-HUDA areas of Gurgaon city.

According to the work order, taxes in respect of transactions between DHBVN and Shyam Indus on all items of supply to be dispatched directly from the sub-vendor to the company’s site were to be paid after receipt of each shipment at site against documentary evidence.

Central sales tax is levied on interstate sales under the CST Act. The law provides that if during the movement of goods in the course of interstate sales they are sold in-transit by transfer of documents of title to the government or a registered dealer, the in-transit sale would be exempted from the CST.

The audit observed that Shyam Indus raised invoices (from October 2013 to January 2016) towards exempted sale under the provisions of the CST Act, amounting to about ?70 crore.

“No tax had been paid as per the returns filed by Shyam Indus against such supply. However, it raised a separate

bill for reimbursement of CST amount of ?1.41 crore in February 2016 without submitting any supporting documentary evidence of tax payment. The DHBVN also did not seek any documentary evidence of CST payment from the contractor paid by Shyam Indus before allowing the reimbursement of tax in May 2016,’’ the CAG said.

The state government in August 2017 said that Shyam Indus raised claim of taxes that had been paid on purchases made by it. The CAG, however, did not find the reply tenable as the taxes paid by Shyam Indus on purchases were not liable to be paid by DHBVN because the sale price included all incidental expenses and profit element.

According to the CST Act provisions, no tax was payable under transit supply, hence the tax reimbursement of ?1.41 crore to Shyma Indus was irregular, the auditor pointed out.