The Supreme Court on Tuesday asked Essar Oil to pay Rs 1,000 crore to the Gujarat Government by July 30 to avoid any coercive action.

The directive came on the company’s plea that it may be allowed to pay the amount towards the first instalment of its total sales tax / Value Added Tax liability.

This means if Essar pays the amount by July 30, the state Government’s move to seize the company’s bank accounts to recover the sales tax liability of around Rs 6,300 crore as well as penalty and interest of around Rs 2,000 crore, would be stayed.

Though the company also sought waiver of the interest, the Court said other issues (such as interest and a tax repayment schedule) will be considered only when the matter is taken up again on July 31.

Essar said that it is in advanced discussions with Indian lenders for putting in place a $1 billion (Rs 5,500 crore approximately) loan facility. This will be a contingency measure for use if the tax liability becomes payable immediately or if Essar Oil is not able to negotiate a satisfactory repayment schedule, it said.

“We expect this facility to be finalised shortly,” it added.

The apex court had in January set aside Gujarat High Court order that had permitted Essar to avail the Sales Tax Deferment Scheme (to pay Sales Tax in deferred instalments). Essar had filed a petition to review this apex court order, which was also dismissed in April.

Essar Oil had claimed benefits for its Vadinar Refinery project. The company was eligible for Rs 9,100 crore (125 per cent of eligible capital investment) as sales tax incentive under the Scheme.

According to the Scheme, Essar was liable to complete the refinery project by August 15, 2003, to be eligible to claim this benefit. However, the Company could complete the project only in 2006 and started commercial production in 2008.

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