By Bizodisha Bureau, Bhubaneswar, March 16, 2017 : In a setback to the state government, the Orissa High Court on Thursday stayed the state government’s demand notice of recovery of Value Added Tax [VAT] worth Rs 1458.98 crore from Indian Oil Corporation Limited.

Adjudicating over the petition filed by IOCL, a division bench of Justice Indrajit Mahanti and Justice Biswajit Mohanty, also ordered the high-level working group formed under the chairmanship of Union Petroleum and Natural Gas Ministry to look into the concerns raised by the government of Odisha and IOCL within two months.

Paradip Refinery

The state government in February had asked the IOCL to deposit tax of Rs 1485.98 crore for the sale of finished products from its Paradip Refinery project, which was commissioned in November, 2015.

The Odisha government incidentally unilaterally struck down a vital clause from a MoU signed between itself and the IOCL in 2004 and withdrew the mutually agreed tax incentive to IOCL. Later it issued the tax recovery notice on the IOCL.

The clause related to grant of interest free credit to Odisha equivalent to the tax payable to the state on the finished products of the Refinery during its first 11 years of commercial production.

In justification of withdrawal of incentives, the Odisha government had stated that the state would incur huge losses as the IOCL delayed implementation of the project. This apart, the IOCL on its own enhanced the capacity of the refinery plant without consulting the state government, finance minister Pradip Kumar Amat had said while announcing withdrawal of incentive to the oil major.

The deferment of tax for 11 years was essential for setting up of the refinery and a consideration for the project to be located in the state.

The IOCL petition said that the Corporation had already invested nearly Rs 35,000 crore in the refinery project alone and over Rs 50,000 crore in other projects in the state, making it the single largest investor in Odisha.