SC rejects Essar Oil's review petition

On Jan 17, the court had ordered the company to pay sales tax for not finishing the construction of its Vadinar refinery before the specified time

The Supreme Court on Wednesday dismissed Essar Oil’s petition seeking the review of an earlier order that asked it to pay Rs 6,300 crore in sales tax to the Gujarat government.

Essar had sought a review of the court’s January 17 ruling to pay sales tax for not finishing the construction of its refinery at Vadinar before August 15, 2003. It argued the construction work was delayed because of a cyclone and a stay order secured by a civil society body. The dispute centred around Essar’s eligibility for sales tax deferment; had the company completed the refinery by the specified time, it would have been eligible to defer the sale tax payment by 17 years.

Since the Vadinar refinery commenced operations later than the specified time, the Gujarat government held the company ineligible for the benefit. Subsequent to the ruling, the Gujarat government asked Essar to repay Rs 6,300 crore in sales tax plus the interest accrued.

The company on Wednesday said it had made provisions in the December quarter for making the payment. It had made a provision of Rs 4,015 crore and set aside Rs 1,800 crore for this. Talks with the Gujarat government on this issue were also on at present, the company said in a statement, adding it was also in discussions with banks for meeting the repayment obligations. The sales tax payment weighed heavily on the company's December quarter results, leaving it with a net loss of Rs 3,990 crore. Its profit for the same period in the previous year was Rs 273 crore.

The private refiner also faced a reversal in February, when a tribunal ruled against it in a case relating to a Rs 302-crore insurance claim for damages sustained by its refinery during a cyclone in 1998. The verdict, however, did not have any impact on its financials, since the claim amount was not accounted for in its books.

On Wednesday, Essar Oil scrip was down five per cent at Rs 56.75 on the Bombay Stock Exchange .