The Central Excise Department has issued a showcause notice to Bangalore-based telecom equipment firm, Tejas Networks, on charges of evading excise duty. According to official papers which are available with Business Standard, the alleged evasion may cost Tejas about Rs 14 crore, which includes the value of the tax evaded by the company (close to Rs 6 crore); an equal amount towards penalty and close to Rs 2 crore towards interest.
The department has alleged that Tejas' manufacturing unit in Pondicherry had been shipping out telecom optical transmission equipment without including the value of the software embedded into these devices into the transaction value of the equipment, thereby evading excise duty of close to Rs 6 crore between the period Dec 2002 to 2006. The company was collecting the value of the software from its customers through separate commercial invoice.
A Tejas Networks spokesperson, in reply to an email query by Business Standard,confirmed that the Pondicherry unit of the company had received a notice from Excise Department. "For our Pondicherry manufacturing unit, we have received notice from the Excise Department as a matter of course, and have responded to it as any prudent company would do. We have not evaded any taxes and we are in the process of appeal to CESTAT against this demand and expect the matter to draw to a closure in our favor. We understand notices had also been issued to other hardware manufacturing units in Pondicherry, including MNCs." the company said in its reply.
Earlier, during a raid conducted on the company's manufacturing facility in Thavalakuppam in Pondicherry, the Central Excise Department noted that Tejas was developing the Tejas Network Element Software (TEJNES) in its facility in Bangalore, and was latter transmitting this to their unit in Pondicherry through a remote server. The software was then loaded into the flash disk and mounted into the equipment followed by detailed tests at the manufacturing centre.
In order to ascertain the nature of the TEJNES software, the excise department had called upon some of Tejas Networks' customers including BSNL, RailTel, ECI and ITI, during which it found that the equipment were being released by the company from its Pondicherry unit, along with the software which was the `brain' of the system.
The home-grown telecom product company co-promoted by Dr Gururaj (Desh) Deshpande, reported a turnover of Rs 235 crore in the fiscal 2006-07, almost 75 per cent increase over the previous fiscal and is understood to be planning a public offer.
The company has so far raised over $70 million in five rounds of funding from venture capital investors including Mayfield Ventures, Battery Ventures and Intel Capital. The recent investment in the company was from global investment bank Goldman Sachs, who invested about $24 million (Rs 95 crore) in the company in October 2007.
