New Delhi: Essar Oil Ltd.'s shares tanked Wednesday as the Supreme Court of India rejected the refiner's petition against a January ruling which said it can't defer sales tax payments to the Gujarat state government.
The court's decision means that Essar, which had asked to be allowed to defer the payments until 2021, will have to make good the full Rs 63 billion (USD 1.26 billion) sales tax deferment benefit it utilized.
Essar Oil, a unit of London-listed Essar Energy PLC, was granted the deferment as part of a Gujarat capital investment incentive program after it decided to build a giant refinery in the state's Vadinar area.
But the government revoked Essar's right to exemption, saying it had failed to complete construction of the refinery within a prescribed time frame.
Essar contested the case, saying the delay was due to reasons beyond its control.
But the Supreme Court on Jan. 17 ruled that Essar Oil would no longer be eligible for the tax program.
The refiner said Wednesday the latest order won't have any "new impact on the business."
The decision sent the Mumbai-based refiner's shares reeling: The stock, which slid 6 percent at one point, closed down 5 percent at Rs 56.75 in a Bombay Stock Exchange market which finished the day 0.6 percent lower.
Essar Oil said Wednesday it made an adjustment of Rs 40.15 billion for the case in its October-December quarter earnings, which were reported a month after the Jan. 17 ruling.
The company is in discussions with the Gujarat government for finalizing the terms of repayment of sales tax liabilities and with banks for meeting the repayment obligations, it said.
Last month, Essar expanded its Vadinar refinery by 29 percent to 18 million tons at an investment of USD 1.8 billion.
First Published: Wednesday, April 4, 2012, 18:24