Tamil Nadu govt & Renault Nissan likely to settle tax dispute outside court

The counsels for both sides informed the Madras High Court that they are involved in settlement talks and are likely to settle it outside court

The tax dispute between the government of Tamil Nadu and the Renault Nissan Alliance India before the Madras High Court is in settlement talks stage and chances are that it will be settled outside the court, according to representatives of both the sides.

Advocate General Vijay Narayan, appearing for the Tamil Nadu government has informed the Madras High Court that the settlement talks are going on and there are chances for the dispute to be settled, seeking an adjournment of the hearing when the matter came up on Tuesday.

Senior counsel and former advocate general P S Raman, who appeared for the company told the Court that the chances to settle the matter are high. The court adjourned the matter for three weeks.

The dispute is related to the non-payment of tax incentive by the state government to the company, promised according to an MoU signed between the two parties under which the company has invested in a manufacturing facility in near Chennai. Under the agreement, signed in the year 2008, Renault and Nissan consortium had to establish an integrated automobile manufacturing facility with a capacity of 4,00,000 units per annum together with an investment of Rs 45 billion in the eligible fixed assets within seven years from February 22, 2008. 

The state government had offered incentives including a refund of Value Added Tax (VAT) and Central Sales Tax (CST) for 21 years from the date of commercial production with certain conditions and additions. The production started in February and May in 2010 and incentives were applied in the year 2011. The gross output VAT for sales within the State was 14.5 per cent and the CST was two per cent on interstate sales.

The Industries Department has in its affidavit earlier alleged that the company changed its model to gain more benefits from the said agreement, by creating a marketing arm and selling the entire products from the facility to the marketing company withing the State, thus attracting more tax, which according to the agreement, has to be reimbursed to the company. 

The dispute went to the Madras High Court and Nissan even approached International Arbitration Tribunal.

The company earlier invoked the CEPA clauses against India seeking to recover around Rs 50 billion of incentives promised by the Tamil Nadu government along with interest and damages.