Legal challenges mount for Hero Electric as customs, excise and service department seek answers

Even as Hero Electric remains under Directorate of Revenue Intelligence (DRI)'s radar over alleged violation of localisation norms amounting to Rs 311 crore for availing subsidies under the FAME scheme; a recent Registrar of Companies (ROC) filing by the company reveals that it is facing numerous other duty evasion offences by Custom, Excise and Service departments. 

These filings are part of the process where every registered firm or limited liability partnership (LLP) in India is required to submit an annual ROC compliance within the deadline outlined in the Companies Act, 2013, and the Companies Rules.

A detailed email sent to a Hero Electric spokesperson did not elicit any response till the time of publishing.  

In a case which happened about two years ago, Hero Electric is alleged to have imported e-two-wheeler parts under a classification which requires the importer to pay duties at the rate of 10 percent and zero percent. However, the Central Excise & Custom-which is mandated with collection of excise and custom duties and prevention of smuggling found these imports to be falling under the category of 15 percent duties.

Based on an internal assessment, the agency levied demand of Rs 11,50,923 and Rs 11,60,951, in addition to a penalty of Rs 8,35,774. Further, in two other separate instances, the Customs department ordered Hero Electric to pay Rs 64,48,826 and Rs 38,922, the filings claim.

Hero Electric on its part, is refuting the allegations and has challenged it at the Commissionerate level. 

Likewise, in another case, Hero Electric is alleged to have imported battery chargers by paying IGST at a rate of 18 percent. However, an internal assessment by regulatory authorities claims that it must have been paid at 28 percent.

It demanded the company to pay Rs 6,94,297 along with a penalty of Rs 65,000. Under the GST Act, IGST is collected when products or services are provided through so-called inter-state transactions.

Hero Electric's explanation was however rejected at the Commissionerate level, thereby forcing the company to escalate it with Customs Excise and Service Tax Appellate Tribunal (CESTAT) this year, where it is still said to be pending, the filings reveal. 

Furthermore, in yet another case, Hero Electric, around the year 2014 imported 2,657 sets of battery packs involving custom duties of Rs 18,14,931 and 450 sets of battery packs attracting exercise duties to the tune of Rs 3,10,236. However, it did not use these battery packs/batteries in the manufacturing of its electric two-wheeler, thereby breaching the prevailing regulatory norms.

The company’s responses to the concerned allegations were rejected by the agency, forcing it to appeal with the Commissioner in January 2018. The Commissioner asked the remand to appeal to the original authority with directions to adjudicate the matter afresh, the filings add. There was no clarification on the update of the battery case in the RoC filing.  

Lastly, in yet another case, the regulatory authorities in October 2012 alleged that Hero Electric on behalf of M/s Hero Export received job charges which are liable to service tax.

The company was asked to pay service tax to the tune of Rs 3,17,267 in addition to a penalty of Rs 10,000. The matter is currently pending before the Commissioner (Appeals), the company said in its filings.