 "SC asks Essar Oil to pay Rs 9,100 cr to Gujarat govt")
Mumbai: The Supreme Court today ruled against Essar Oil in a sales tax case and asked the oil company to cough up Rs 9,100 crore to the Gujarat government. The sales tax had been deferred for 13 years.
The court said the company had not begun production in its Vadinar refinery located in Gujarat when it was qualified for tax exemptions, and so it would have to pay the government its due.
Essar Oil had won the case in the High Court but the SC gave a different verdict.
[caption id=“attachment_185376” align=“alignleft” width=“380” caption=“The company had provided for Rs 4,800 crore as a part of deferred sales tax and has to provide for additional Rs 4,300 crore.”]
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Essar Oil had argued that the company failed to start production on time due to a cyclone that hit Gujarat in 1998, something they had no control on. The SC evidently did not buy the point.
The company had provided for Rs 4,800 crore as a part of deferred sales tax and has to provide for additional Rs 4,300 crore from its pocket. Its operating profit (profit before interest, tax, depreciation and ammortisation) was Rs 2,779 crore. The stock naturally reacted sharply to the bad news and was down 7.85 percent.
The SC judgement may now be considered as an event of default under the MRA (Master Restructuring Agreement) entered under corporate debt restucturing - which means, the lenders of Essar Oil can now consider the loan as a case of default and convert their loans into equity if need be.