Gandhinagar, 17 January 2012

Gujarat government spokerperson and minister of state for industry Shri Saurabhbhai Patel today welcomed the Supreme Court verdict on a case related to the Essar company.

Shri Patel said, “Gujarat government welcoms this judgement because Gujarat is going to get benifit of over Rs 6,000 crore thanks to it, which will ultimately make Gujarat’s journey of development faster.”

The minister added that Gujarat government had took Essar matter to High court, and in April 2008 when the decision arrived in favor of Essar, it was Gujarat Chief Minister Shri Narendra Modi who decided to go to the Supreme Court against high court verdict in June 2008. Gujarat government filed SLP within 100 days in July 2008.

“In view of the seriousness of the case, the Gujarat government had hired Solicitor general of the government of India and had also roped in additional solicitor general to fight this case. Not only this, but throughout the case proceeding, the state government had not asked for one single adjournment,” Shri Patel further added.

Shri Patel said it was effective and sharp presentation of state government’s Industry, Finance and Enviornment and Forest departments that was responsible for today’s verdict which is in favor of the state government.

Patel pointd out that Gujarat government had denied any benifit to Essar by refusing extention of the scheme on 28 May 2002.

It should be mentioned that the Supreme Court today set aside the judgment of the Gujarat High Court by which Essar Oil was entitled to avail of Sales Tax Deferment Scheme i.e. to pay Sales Tax to the Gujarat State Government in deferred installments. The Company had availed of approx. Rs. 6,300 crore of Sales Tax benefit as of December, 2011 which was to be paid in deferred installments.

The SC said Essar would have to pay the Gujarat government Rs 9,100 in sales taxes. The money pertains to sales tax on the Vadinar refinery located in Gujarat. The company has a tax exemption for 13 years, but the Supreme Court said that it had failed to start production in the period when the tax exemption was applicable, and therefore deserved no exemption.

Essar cited a massive cyclone that hit Gujarat in 1998 as reason for not starting production in time. The SC did not agree to the argument. The company has already factored in a deferred sales tax of Rs 4800 crore, it will now have to cough up an additional Rs 4300 pay off its sales taxes. The company had made over Rs 2779 crore in operating profits, a big chunk of which will now go toward paying off the tax.

Essar: Judgment deals with sales tax deferment scheme of government of Gujarat and not a exemption

Meanwhile Essar company has clarified that today’s judgement deals with the applicability of a sales tax deferment scheme offered by the state of Gujarat.

Essar statement said, “as per the state government, Essar was not entitled to the deferment scheme because it could not commence commercial production within the prescribed period.”

According to Essar, “commercial production was delayed because of the actions of the state government and certain orders passed by the honourable High Court which was later set aside by the Supreme Court, and therefore it was entitled to an extended date of commercial production.”

Essar statement further said, “the Supreme Court has upheld the stand of the state government as a result of which Essar is not entitled to the deferment scheme. It needs to be clarified that the scheme was not for sales tax exemption in toto but was only for a deferment of payment of Sales tax. In view of the judgement the payment of tax which was to be made in deferred installments, may face some changes in the timeline.”

The company concluded the statement saying that, one would have to examine the order in detail before commenting any further.

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