Oil refiners Indian Oil Corp (IOC) and Hindustan Petroleum Corp Ltd (HPCL) Thursday said they will contest tax authorities demand for over Rs 4,000 crore in excise duty on ethanol used for doping petrol, saying the sugarcane extract for mixing in fuel is exempt from tax.
The Director-General of GST in Pune has slapped IOC, the country's biggest oil firm, with a tax demand of Rs 4,002 crore for alleged non-payment of excise duty on ethanol mixed in petrol. HPCL has been asked to pay over Rs 346 crore.
In a regulatory filing, IOC said it is a responsible corporate and law abiding entity, which is one of the largest contributors to the national exchequer in the form of duties and taxes. During 2018-19, it paid Rs 1.93 lakh crore to the exchequer in the form of duties and taxes.
"IOC denies the allegation in the show cause cum demand notice of Director General-GST in view of the prevalent provisions of the law, which states that a person who has collected any amount representing duty of excise on sale of goods needs to pay such amount to the (tax) department.
"Since EBMS (or ethanol-blended motor spirit) is an exempt product for the purpose of levy of excise duty as per prevailing law, IOC has not recovered any amount representing excise duty on sale of EBMS," It said.
Public sector firms - IOC, Bharat Petroleum and HPCL blend 5 per cent to 10 per cent ethanol with the motor spirit (petrol) for sale of EBMS as per the government directive. The government has mandated blending of ethanol in petrol to cut dependence on imported oil for meeting fuel needs of the country.
India is over 83 per cent dependent on imports to meet its oil needs.
"IOC had received a show-cause cum demand notice from Director General-GST, Pune, as to why, Rs 4,002 crore should not be demanded and recovered alleging collection and non-payment of excise duty on ethanol portion of the sale of EBMS on the ground that the sale price of EBMS and petrol are same," it said.
Stating that it has received a similar notice from tax authorities, HPCL in a stock exchange filing said, "the demand is legally not tenable and the show cause notice will be suitably replied," the company said.
"HPCL has always discharged all its statutory obligations diligently. Show cause notices from revenue department for an additional demand of duties/ taxes received if any, are meticulously reviewed and appropriate remedies are taken as per the law of the land protecting the interests of the company," it said.
HPCL said it is following a legally tenable established practice which is in line with oil industry and it does not envisage any additional duty liability.
"The show cause notice will be duly replied and defended," it added.
IOC said it is contesting the show cause cum demand notice issued by Director General-GST.
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