Essar Oil may file review petition in SC

Essar Oil is likely to file a review petition against the Supreme Court ruling yesterday which held that the Ruias-promoted firm was liable to pay deferred sales tax to the Gujarat government.

"Essar Oil is examining all legal options and it expects to file a review petition in the Supreme Court," the company said in a statement.

According to the company, Essar has availed Rs 6,308 crore as on December 31, 2011 under a special scheme of the Gujarat government which had granted deferment of sales tax for 17 years for construction of 9 million tonne refinery at Vadinar.

Essar Oil shares tanked by over 22% to one-year low of Rs 44.80 during intra-day on the BSE. The stocks, however, recovered some losses and closed the day at Rs 51.40 apiece, still down 11.53%. Shares of sister concern Essar Energy were also hit yesterday on the London Stock Exchange where it ended 26% down at 127 pence, the all-time low.

The case relates to a special Gujarat government scheme, under which the refiner was eligible for a sales tax deferment for 17 years, running into an incentive of up to Rs 9,100 crore, provided the company starts production within a specified period, i.e. April 2003.

Although Essar Oil failed to meet the deadline as it started production only in 2006, the company was granted exemption under the scheme -- the Capital Investment Incentive to Premier/Prestigious Unit Scheme, 1995-2000.

Later, the arrangement was revoked by the state government and the matter went to the Gujarat High Court which ruled in favor of Essar.

The Gujarat government challenged the high court verdict in the Supreme Court which held that Essar was liable to pay the deferred sales tax as it failed to meet the deadline.

The Essar statement said the sales tax deferment liability has been fixed and as on December 31, 2011 it is Rs 6,300 crore. The company has assigned Rs 1,800 crore to third party, which can be recalled as per terms to meet payment obligations, it added. "Following the apex court order, any repayment schedule is expected to be discussed and finalised with the state government or court," it added.

"This amount is repayable in accordance with the terms of the agreement," it said, adding that following the apex court order, any repayment schedule is expected to be discussed and finalised with the state government or court.

It also clarified that the case was not not for sales tax exemption but was only for deferment of payment of sales tax.

The company is also in talks with the lenders for exiting the corporate debt restructuring (CDR) scheme, the statement said, adding that "the process of exiting the CDR is expected to be completed shortly.

"There is no event of default under the financing arrangements," the statement said.