Essar Oil Ordered by India's Supreme Court to Pay $939M in Tax Dues

The Supreme Court of India has ordered integrated oil and gas company Essar Oil to pay $939 million in tax dues to the Gujarat government in eight quarterly installments starting January 2, 2013, the company said Thursday in a statement. 

Essar Oil will also have to pay 10 percent interest on the bill, which is effective January 17, 2012, a company spokesperson told Rigzone Friday. 

The verdict passed by the court Thursday ended a long-standing battle over the tax bill, which originated with a deferred sales tax scheme tied in with the Vadinar refinery. 

"With this, the whole matter of [the] Gujarat Sales Tax payment by Essar Oil has come to conclusion," the company said.

The case centered on whether the Vadinar refinery qualified for a deferred sales tax scheme that would have allowed Essar Oil to put off paying taxes until 2021. According to Essar Oil's email statement, the refinery had to start commercial production by Aug. 15, 2003, in order to be eligible for the scheme. 

"But due to reasons beyond our control, we could only start commercial production on Nov. 26, 2006," the spokesperson said. "Believing that we were eligible for the scheme, we began retaining the sales tax amount, which the state government challenged in the High Court and lost. The decision however went against us in the Supreme Court," the spokesperson added.

The Vadinar refinery, which has a production capacity of 20 million metric tonnes per year, can produce liquefied petroleum gas, diesel oil, jet fuel and kerosene. It can handle a diverse range of crudes, from sweet to sour and light to heavy. 

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