CERC Reserves Judgment on Solar Developer’s Safeguard Duty Compensation Plea

The Central Electricity Regulatory Commission (CERC), in a recent order, directed Phelan Energy India RJ, a solar developer, to file its response for the delay of 161 days in seeking review of the Commission’s earlier order. The Commission, in its previous order, had denied compensation because safeguard duty was imposed within a week from the date of the order.

The Commission also directed the Solar Energy Corporation of India (SECI) to file its submission within one week after the developer submits its response.

However, the Commission reserved the order on the admissibility of the review petition.

Earlier, Phelan Energy had filed a petition, seeking review of the Commission’s order dated October 4, 2019, wherein CERC had restricted the compensation due to the imposition of safeguard duty owing of the delay in payment of the amount to the engineering, procurement, and construction (EPC) contractor until after the scheduled commissioning date.


Background

Phelan Energy, in its submission, said that it did not get the opportunity to dispute the Commission’s view that compensation of safeguard duty was available only for invoices raised within the scheduled commissioning date.

The developer said that the restriction of claims of safeguard duty until the commercial operation date was held in line with claims under goods and services tax (GST) laws. It may not be correct as the entire concept of ‘time of supply of goods’ as applicable regarding GST laws was not relevant to safeguard duty. The obligation of payment of safeguard duty and determining its rate should be based on the date on which a bill of entry regarding such goods is presented argued the developer.

The developer further added that as per the arrangement with the EPC contractor, the modules were imported by the contractor, and they paid the safeguard duty for the same. All the modules were imported, and liability to pay safeguard duty accrued before the commercial operation date.

The developer argued that the invoicing by the contractor was delayed solely due to operational reasons, and the actual payment of safeguard duty took place after the commercial operation date. As a result, SECI had disallowed the total claims of around ₹54.4 million (~$732,577), citing them to be beyond the commercial operation date even though the bill of entry was December 7 and 8, 2018, which was before the commercial operation date of December 22, 2018.

Regarding the delay in filing the review petition, Phelan Energy said that the delay had occurred because it was occupied in reconciling its account and collecting the details for submission of the incremental impact of the ‘Change in Law’ expenditure, significant management changes, and the outbreak of Covid-19 and the subsequent lockdown.

SECI, in its reply, said that the Commission had considered the commercial operation date as the cut-off date for consideration of the claims of safeguard duty. Accordingly, evidence had to be produced regarding the solar modules installed before the commercial operation date for claiming the safeguard duty. Despite the contractor having imported the solar modules before the commercial operation date, there was a considerable delay in invoicing.

The nodal agency further added that there were no valid reasons for not paying the safeguard duty by the commercial operation date. Also, the correlation between the modules imported and those that were installed up to the commercial operation date had not been established.

Commission’s analysis

Considering the facts put forward by both the parties, the Commission directed the petitioner to file its submissions on condonation of delay in filing the review petition within a week. Additionally, CERC asked SECI to file its submissions within a week after that.

Earlier, CERC directed SECI to compensate SBG Cleantech Projecto Five for the increased cost incurred due to imposition of safeguard duty under the ‘Change in Law’ clause.

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