HC gives Essar relief from penalty on sales tax dues

A bench of Gujarat high court on Friday directed the state government not to take any coercive action against Essar Oil Limited until the next hearing scheduled in June.

Giving respite to the oil giant in connection with issue of payment of Rs6,169 crore as sales tax, the bench comprising acting chief justice Bhaskar Bhattacharya and justice JB Pardiwala, issued the order after Essar Oil filed a petition for remission in payment of sales tax after it had lost the case in the Supreme Court in January.

The court also issued notices to the state government, finance department and commercial tax commissioner.

The company sought HC relief from exemption of interest and penalty imposed on sales tax dues. It also sought payment of tax dues in installments from next April. Former solicitor general Gopal Subramanium appeared on behalf of the company.

The issue relates to the violation of the terms of 125% tax benefit under the 'Capital Investment Incentive to premium institution Scheme-1995-2000'. According to the scheme, the claimant company can get benefit of 125% tax on the invested amount over a period of 17 years.

According to the scheme's terms, the company had to start its unit by August 15, 2003, but it started in 2006 which was not permissible according to the terms decided in the scheme. The government, therefore, asked the company to repay the benefits that it had reaped during the respective period against their investment.

The company then approached the apex court which upheld the government decision. When SC rejected its review petition, it moved an application before the state government seeking instalment-based payment, but it was not permitted. Ultimately, the company approached the Gujarat high court on Friday.
Essar contended before the high court that there is no provision of interest or penalty in the scheme and that the state government should give remission. The company has already paid Rs237 crore. However, the rest of the amount is due to the government.