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Essar Oil is not entitled to the benefit of restoration of sales tax deferment benefit for its oil refinery, the Supreme Court has ruled. In a judgement released recently, the Court said that when a tax incentive scheme that is in operation is stopped with prospective effect and notice served on those who have already taken steps to start industrial units to start commercial production within the prescribed time, then a failure to do so does not entitle the industrial unit to press for further extension even on the ground that the matter was embroiled in red tape and environmental controversy.
Upholding the challenge of the Gujarat Government to the order of the High Court that had shown indulgence to Essar Oil, the Supreme Court, vide its order dated January 17, 2012 pointed out that the assessee who wanted to avail of the sales tax deferment scheme should have approached appellate Courts in Gujarat for being allowed to start its work relating to refinery when it was stopped from doing so, thanks to the stay order obtained by certain environmental activists under the Wild Life Act.
Instead, it repeatedly petitioned the Government for relaxation of the wildlife protection norms on the facts of the case. Having not done so, it did not lay in the mouth of Essar to contend that it was prevented from starting its commercial production due to delay occasioned by stay granted by court because a stay granted by a lower court can be lifted by the high court. The Supreme Court pointed out that in the circumstances of the case, there was ambiguity as to who was more responsible for the delay — Essar in not knocking at the doors of the high court for lifting of the stay or the Government agencies in not relaxing the environmental straitjacket.
When it comes to incentives and exemptions, it is for the assessee claiming them to prove beyond doubt that they had taken all steps to start commercial production and the blame for the delay lay elsewhere. The Court took care to reiterate the legal principle that acts of Courts including grant of stay cannot be viewed as causing prejudice to the assessee, and it is for the person aggrieved by the stay to press for the lifting of the stay.
(The author is a New Delhi-based chartered accountant.)
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