Tax authorities have issued a showcause notice to state-owned Power Grid Corporation for non payment of over Rs 413 crore service tax on power transmission services, but the company contested the claim saying it is bound by the norms set by power regulator CERC.

"We are regulated by the Central Electricity Regulatory Commission (CERC) and the said amount of tax will be passed on to the consumers as an integral part of tariffs," PGCIL's senior officials said, adding that the PSU was heading for a legal opinion on tax authorities' action.

The authorities have also charged PGCIL for suppressing the facts to evade service tax.

According to the service tax department of the Central Board of Excise and Customs, PGCIL has not paid service tax for the period May 2006 to September 2008.

PGCIL, being a PSU company, cannot absorb the service tax as this is part of the tariff paid by end consumer, it said.

The notice said, "Service tax amounting to Rs 402.46 crore, education cess amounting to Rs 8.05 crore, Secondary and Higher Education cess amounting to Rs 2.65 crore (collectively amounting to Rs 413.16 crore) during the period from May 1, 2006, to September 30, 2008, appears to be recoverable from Powergrid along with interest for late payments."