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Sales tax dues: Gujarat Govt attaches Essar Oil bank accounts
July, 10th 2012

As the Gujarat Government on Monday reportedly ordered attaching Essar Oil Ltd's accounts, the company expressed surprise over the unexpected step.

In a statement issued here, Essar Oil said it was surprised and disappointed by the State Government's unexpected step of attaching the company's bank accounts, despite clearly stating its intent to pay up the sales tax dues.

As a statement of its bonafide intent, Essar Oil has already agreed to pay Rs 1,000 crore within 30 days to the Gujarat Government towards the sales tax liability.

The company has requested that a committee be formed to jointly discuss the modalities of the payment of the balance principal amount of Rs 5,169 crore and consider a remission of the past interest of Rs 1,932 crore, it asserted.

The request for remission of interest amount is based on the fact that the company sought the sales tax scheme benefit only after the Gujarat High Court verdict in its favour in April 2008, and further no interest amount was mentioned in the Supreme Court order, according to a press release.

Essar Oil is clearly the aggrieved party in this matter despite making investments of over Rs 25,000 crore in the (Vadinar) refinery and a total of Rs 1 lakh crore of investments in Gujarat. Every refinery in the country has received major fiscal incentives from respective State Governments; but in Essar Oil's case Gujarat has denied these benefits despite being aware of the on-ground situation. However, in other cases where investment amounts have been much smaller, the State continues to grant similar benefits. Essar Oil has repeatedly made clear its intent to pay once the Supreme Court verdict was announced.

The company pointed out that it has been writing to the State Government to work out an amicable payment schedule after Essar Oil lost the case in the Supreme Court on the sales tax matter. It had also submitted a detailed payment schedule to the Additional Chief Secretary (Finance) on April 5, but it was rejected without any valid reason contrary to accepted norms.

The company also submitted the payment schedule to the Gujarat High Court on June 25 when it issued orders asking the State Government to recover the monies.

The reason Essar Oil has requested an installment-based payment scheme is because the company embarked on a major capital expansion scheme since the sales tax scheme mandated 50 per cent of the collected amount to be re-invested.

Hence, it is not possible to make the payment in a single installment as demanded by the State Government.

Despite attempts to clarify and share the schedule repeatedly, the State Government officials today visited our bankers and refinery in connection with the recovery of sales tax dues, the release said.

The case pertains to the sales tax deferment benefits accorded by the State Government to investors. The benefit given to Essar Oil was challenged in the High Court which directed recovery of dues. The Supreme Court had also upheld this order a few months ago.

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