The Gujarat high court on Friday restrained the state government from taking any coercive steps, at least for a month, to recover sales tax deferral liability from the Essar Oil. The state government issued a demand notice putting company's tax dues at Rs 8255.47 crore, which included interest and penalty.

Acting on a plea by the company seeking waiver of interest and penalty to the tune of Rs 2,000 crore, a bench of acting chief justice Bhaskar Bhattacharya and justice J B Pardiwala has issued notice to the state government, ministry of finance and commissioner of commercial tax and sought reply by mid-June.

The company has also sought court's directions to the government to permit payment of tax, which comes to nearly Rs 6,406 crore in instalments from 2013. This was because the state government has in the past rejected the company's proposal in this regard.

The company has sought exemption from interest and penalty on the sales tax deferral liability on the grounds that the 'Capital Incentive to Premier and Prestigious Unit Scheme 1995-2000' scheme of the state government, which it had availed, did not have provisions for interest and penalty at all.

The petition stated that out of the total sales tax of Rs 6,406 crore, it has already paid Rs 237 crore, and sought installments for payment of the remaining amount of Rs 6,169.

It also informed the court that the company is increasing its crude oil refining capacity from present 18 million metric tonne per annum (MMTPA) to 20 MMTPA.

On January 17, the Supreme Court had upheld state government's appeal against Essar's tax benefit claims.

The SC had observed that Essar could not take benefit of tax exemption scheme, since it failed to commission the project at Vadinar till 2003.