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Essar Oil loses deferred tax payment incentive, faces Rs 6,300 crore burden

18 Jan 2012 Evaluate

Essar Oil would have to quickly deposit sales tax of Rs 6,300 crore to the Gujarat government, as the Supreme Court has rejected the company's contention that it was entitled to make deferred payment of tax on sales from its Vadinar refinery in the state.The Gujarat government had argued that Essar's refinery would have been eligible to defer sales tax payment by 17 years, as an incentive to develop backward areas, only if the plant had been commissioned by August 15, 2003. It was commissioned only in late 2006. The company had argued that it had no control on factors that delayed the project - a severe cyclone that ravaged the coastal region and a stay order secured by a non-governmental organisation. The company approached the high court, which upheld its plea but the state government successfully challenged the verdict in the Supreme Court. Essar maintained that the verdict would only change the schedule of tax payment, not the total tax liability. The scheme was not for sales tax exemption in total but was only for a deferment of payment of sales tax. Since 2002, Essar has urged the state government that since the refinery was delayed by factors beyond its control, the Gujarat government should extend the deadline to become eligible for tax deferment for 17 years.

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Company Name CMP
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HPCL 387.00
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