A bench headed by Justice HL Dattu in an interim order asked a batch of 16 companies, which have manufacturing units in the state, to deposit 50% of the state entry tax demand (R350 crore) payable on imported plant machinery and raw materials.
It also stayed the recovery of penalty imposed by the state government on companies for delayed or non-payment of tax dues and asked the companies to pay 50% of the tax demands, if raised, in future.
However, it clarified that the amount so deposited would be refunded to the companies in case they succeeded in the matter.
Vedanta Aluminium, a subsidiary of the London Stock Exchange listed-Vedanta Resources Plc, is allegedly liable to pay entry tax dues to the tune of around R153 crore.
Besides VAL and Tata Steel, various other companies Adani Enterprises, Bharti Telemedia, Hindalco Industries, Tata Sponge Iron, MSP Metallics, Dishnet Wireless, GMR Kamalanga and Steel Authority of India have challenged the Orissa High Courts order that upheld the states decision to tax the import of capital goods under the provisions of the Orissa Entry Tax 1999. The companies argued that in case of raw materials and consumables such as coal and alumina, where the sale takes place during the course of import or outside the territory of India and customs duty is paid, imposition of entry tax under the Act is arbitrary and ultravires of the Constitution.
Challenging imposition of entry tax on imported goods in Orissa for its alumina refinery and smelter plant, the Anil Agarwal firm said that goods imported from outside India cannot be made eligible to entry tax, which a dealer is liable to pay in the event of entry of goods into a local area for use, consumption or sale.
VAL, which is setting up an alumina refinery at Lanjigarh (Kalahandi district) and an aluminium smelter plant in Jharsuhuda with captive power plants in the state, had been procuring capital goods comprising plant, machinery and equipment from domestic manufacturers. Besides, it also imports such goods from the US, Canada, Germany, China, Australia, Italy and France. VAL said that it had been paying tax on goods, procured domestically, brought into the state.