Essar Oil on Friday told the Gujarat High Court it was operating under a working capital crunch, adding it did not have enough funds to pay its sales tax deferral liability to the state government.
The state government has estimated the company’s tax dues at Rs 8,255.47 crore, including the interest and penalty.
After hearing the matter for over an hour on Friday, judges V M Sahai and N V Anjaria recused themselves from hearing the case, without citing any reason. The court extended the relief granted to the company by a bench on May 11 till June 25. The matter has now been placed before the acting chief justice, who would assign the case to another bench.
In May, the HC had granted relief to Essar Oil, asking the state not to take coercive steps to recover the sales tax deferral liability from the company while the matter was pending in court.
At the hearing on Friday, the Essar Oil counsel said the company was operating under a working capital crunch and did not have funds to pay its sales tax deferral liability to the state. He added a major reason for its present condition was despite being a Rs 41,000-crore company, it wasn’t given any incentive from the state or the central government. Therefore, it had proposed paying the due amount in eight annual installments, which was rejected. However, no reason was cited for the rejection, the counsel said.
The advocate general representing the state government claimed the company had to pay Rs 1,050 crore as the first instalment, according to a Supreme Court order. However, the company had not done so. He said the state government was ready to talk with company officials, but only after it paid the first installment.
In May, Essar Oil had approached the HC here, seeking a directive to the state government on the repayment and the interest it owed. The firm had sought a waiver on the interest and the penalty— Rs 2,000 crore—on its sales tax deferral liability. It said of the total sales tax of Rs 6,406 crore, it had already paid Rs 237 crore. For the remaining Rs 6,169 crore, it had proposed annual installments from April 2013.
On January 17, the SC had upheld the state’s appeal against Essar Oil’s tax benefit claims. Subsequently, state tax authorities had issued a demand notice to the company for the repayment of sales tax deferment benefits.
Gujarat govt under political pressure: Essar Oil counsel
During the hearing in a HC on Friday, the counsel for Essar Oil alleged the state government was acting under political pressure, as the opposition Congress party had accused it of ‘soft paddling’ the issue. The state government counsel, however, denied the allegation. Last week, leader of the Opposition in the Gujarat assembly, Shaktisinh Gohil, had written to Chief Minister Narendra Modi, demanding quick recovery of the pending tax from Essar Oil. Gohil had stated as the apex court had already given its verdict in favour of the state government, it should ensure the due amount was recovered quickly and no relief was provided on the interest.
