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JetLite gets Rs100 crore tax notice
June, 17th 2008

The Directorate General of Central Excise Intelligence has asked JetLites directors to appear before it on 23 June

JetLite?(India)?Ltd, the low-fare subsidiary of Jet Airways (India) Ltd, has been asked to appear before the government for non-payment of at least Rs100 crore in service tax.

Last year, Jet Airways acquired Air Sahara from the Sahara group and rebranded it JetLite.

The Directorate General of Central Excise Intelligence has asked JetLites directors to appear before it on 23 June, according to a person familiar with the development, who did not want to be identified.

Jet Airways board of directors is slated to meet on 24 June to consider the companys audited financial results for the fourth quarter and the fiscal year ended 31 March.

A summons was issued to JetLite director Victoriano P. Dungca and others on the non-payment of service tax, confirmed a senior official of the directorate.

We resorted to a summons as the JetLite management failed to give a cogent reply to our queries. The claim is over Rs100 crore and we have sent similar notices to other directors of JetLite, the official added, asking not to be identified as he is not authorized to speak with the media.

However, he refused to divulge details on the nature of default as the case is under investigation.

Mint couldnt independently ascertain the transaction or transactions that could have led to this tax claim.

The income-tax department had earlier demanded around Rs200 crore in taxes from Jet Airways.

This claim is related to its acquisition of Sahara Airlines Ltd, which owned Air Sahara.

Last year, Mumbai-based Jet Airways bought Sahara Airlines for Rs1,450 crore.

I do not know anything about the service tax issue. I have not received any notice on this matter, Dungca had said on Saturday before catching a flight to Shanghai at the Mumbai international airport.

Dungca, currently a financial adviser based in California, was in India to attend a function marking the start of Jet Airways daily services from Mumbai to San Francisco via Shanghai.

Saroj K. Datta, executive director of the airline, said the Sahara group was liable to pay the service tax.

Sahara group executives were not available for comment.

There is no common set of practice in demanding service tax. However, it is not common for the government to send summons to directors, said Akil Hirani, managing partner of international law firm Majmudar and Co.

The liability of service tax will be determined on the basis of the share purchase agreement between two parties. Jet Airways may challenge this order before the directorate. Certainly, there will be inbuilt provisions in the agreement to indemnify such claims, Hirani added.

There is nothing unusual in sending notices to companies for recovering dues or liabilities, said Rakesh Sharma, director general of Central excise intelligence.

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