IOCL Gets Tax Stay

The Orissa High Court today directed the State Government not to initiate any steps to collect pending Value Added Tax (VAT) to the tune of Rs 1,485 crore from Indian Oil Corporation Limited (IOCL).

A Division Bench of Orissa High Court comprising Justice Indrajit Mohanty and Justice Biswajit Mohanty which kept State Government’s demand note in abeyance has also directed the working group comprising officials of IOCL, Ministry of Petroleum and Natural Gas and State Government to settle the issue within two months.

 As per reports, a Memorandum of Understanding (MoU) was signed between State Government and IOCL on February 16, 2004 for setting up of an oil refinery at Paradip.
As per the condition stated in the MoU, the State Government would have no demand for VAT on sale of products of Paradip Oil Refinery within the State for 11 years.
However, the accumulated amount of VAT would be treated as loan which IOCL would have to start repaying from the 12th year onwards. The above condition would have been executed right from the starting of production of Paradip Oil Refinery.

Paradip Oil Refinery which had started its productions from September 22, 2015 had collected VAT amounting Rs 1,485 crore by selling its products in Odisha till December,2016. 
But, the State Government issued a demand note worth Rs 1,485 crore to IOCL on February 27 and directed to repay the same after serving a notice.
However, challenging the Odisha Government’s demand note, IOCL had moved the High Court recently.
Earlier, Finance Minister Pradip Amat had said in the State Legislative Assembly that IOCL’s refinery at Paradip, which started commercial production from  November 22, 2015, is yet to pay Rs 1,485 crore for the period  till December 2016 .
He had stated that the State Government was losing revenue of about Rs 2,000 crore every year owing to the VAT deferment which could add up to Rs 69,000 crore till the deferment ends.
Accordingly a show Cause notice was issued to IOCL by the State Government and the Petroleum Major replied to the notice and later when the Government slapped the demand note, IOCL appealed before the High Court for relief.

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