SC orders Essar Oil to pay Rs6,309-cr sales tax dues

In a major setback to Essar Oil, the Supreme Court has directed the Ruias-controlled company to pay up Rs6,309 crore in sales tax to the Gujarat government, after it lost a case seeking tax benefit.

Essar's argument was that it did not reap any benefit from a government tax deferment scheme since it had not started production from its refinery at Vadinar, Gujarat – the country's second-biggest single-location refinery - during the qualifying period.

The case dates back to 2008 when the Congress party accused the Narendra Modi government of giving a tax benefit of 125 per cent to Essar Oil under a new capital incentive policy of the state, which was operational in the 1995-2000 period.

At that time, the Modi-led Bharatiya Janata Party government had replied that the company was setting up an integrated green field refinery at a cost of Rs5,544 crore with facilities to process crude of about 9 million metric tones per annum (MTPA), which would benefit the state.

However, the Congress did not accept this explanation, which alleged that the state exchequer was losing around Rs10,000 crore a year under the tax exemption.

Following this, the case reached the Gujarat high court and Essar won the case there in April 2008. But the state government's industries department appealed against the decision in the Supreme Court.