It has also sought extension for payment of its outstanding tax liability on the ground that it is finding difficulty in carrying on its business as a going concern.A bench headed by Justice A K Patnaik asked Gujarat counsel Hemantika Wahi to respond to the plea.
The apex court in January last year had held Essar ineligible for sales tax deferment under an erstwhile Gujarat Capital Investment Premier Prestigious Scheme of 1995 for its plant. Since the refinery started production later than the specified time, the government had held the company ineligible for the benefit.
The apex court had last year asked Essar Oil to pay Rs 5,189 crore towards its tax liability with 10% interest in eight quarterly instalments, starting January 2013, to the Gujarat government.
While disposing of the company's plea in September last year, the bench had said that the principal amount would have to be paid in eight quarterly instalments on reducing balance in two years starting January 2 this year. Essar had earlier sought five years for payment of the balance amount.
Stating the payments have had a disastrous effect on it and have threatened its survival, Essar on Friday told the court that it had so far paid Rs 2,941 crore out of the sales tax amount of Rs 6,169 crore and a further Rs 756 crore towards interest.
Due to an unexpected and sudden development of a huge and unforeseen liability, its debt-equity ratio, which was within acceptable and stipulated parameters in March 2011, has increased to the unacceptable level of 18.15 in June this year, according to Essar.
Senior counsel Mukul Rohtagi, appearing for Essar Oil, argued that every refinery in the country has been given diverse incentives, including tax and alike, on a long-term and continuing basis by the their respective state governments and the Central government. These governments have even extended the benefit of incentives by granting extension of time necessary for completing the uncompleted projects for delay beyond control of the project proponents, it added.
Even the Rajasthan government and HPCL had entered into an MoU in March this year for setting up an oil refinery in the state. The state government has already agreed and declared that the refinery will not be financially viable without incentives and has agreed to provide the JV financial assistance, such as n an interest-free loan of Rs 3,736 crore for 15 years from the year in which commercial production commences.
The total liabilities to the tangible net worth has deteriorated and this has impaired the ability to raise resources necessary for its business on normal and reasonable commercial terms, the application stated. ...The petroleum sector is highly regulated and the profits are not based on cost plus return formula. Currently, there is a slowdown in the world economy and there is also volatility in rupee and crude prices. The applicant has almost fully exhausted its sanctioned working capital limits and it is finding it exceedingly difficult to raise additional working capital finance necessary to carry on its day-to-day business operations, it stated.