Essar Oil’s review petition dismissed in SC

New Delhi, 4 April, 2012

Essar Oil’s review petition on Rs 9100 crore Sales tax deferment case is dismissed by the Supreme Court bench of Justice A.K. Patnaik and Jagdish Singh Khehar today.

The SC bench observed that there was no legal ground to challenge the verdict

Essar had sought a review of the Jan. 17 ruling ordering it to pay sales tax for not finishing the construction of its refinery at Vadinar in the western state before Aug. 15, 2003. Completing the crude oil processing plant before that would have made the refiner eligible to defer the sales tax payment by 17 years.

It should be mentioned that the Supreme Court had in January this year put 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 in its January order had 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 had cited a massive cyclone that hit Gujarat in 1998 as reason for not starting production in time.

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.

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