Essar Oil may seek review of SC tax order

Following the Supreme Court’s rejection of Essar Oil’s 125 per cent sales tax deferment benefit claim on its investment in the Vadinar (Gujarat) refinery project, the company said it expected to file a review petition. “It needs to be clarified that the scheme was not for sales tax exemption but was only for a deferment of payment of sales tax,” the company said on Wednesday, while indicating a recourse to review. It had earlier got a favourable high court order.

Essar Oil shares slumped 11.53 per cent, or Rs 6.70, to Rs 51.40 on the Bombay Stock Exchange (BSE) on Tuesday, against a Sensex which fell 0.09 per cent . Essar Ports fell 8.18 per cent to Rs 58.35, while Essar Shipping declined 1.96 per cent to Rs 27.45.

While the quantity of sales tax deferment benefit was around Rs 9,100 crore as estimated by the company, till December 31, 2011, Essar availed Rs 6,308 crore. Of this, it had already assigned Rs 1,800 crore to third parties for payment.

“We would pay back the entire amount through internal reserves. There is no plan to borrow to pay off on this commitment. In any case, this was to be paid off by 2013-14,” said L K Gupta, managing director, in a conference call.

“The sales tax deferment benefit was a loan repayable on the earlier of 2021/22 or on exhaustion of the full eligible amount (which the company expects to be FY 2013-14) in six equal annual instalments,” Essar Oil said.

It added the sales tax deferment liability assigned as of December 31 amounted to Rs 1,800 crore, “repayable in accordance with the terms of the agreement”.

“We do not have any clue on what the schedule will be of whole repayment of this amount. We will talk to the (Gujarat) government and have mutually agreeable terms on this issue,” said V Ashok, the Essar Group’s chief financial officer, during the conference call.

Meanwhile, the company is also seeking to exit its Corporate Debt Restru-cturing (CDR) scheme, for which it is already in discussion with lenders.

“The process of exiting CDR is expected to be completed shortly. As regard the Master Restructuring Agreement, (we are) required to obtain approval of deferment of the sales tax by March 31, 2012, and repay the same. We are discussing the developments with the lenders and there is no Event of Default under the financing agreements,” it stated.