Can’t collect VAT from IOCL for now, HC tells state govt

Cuttack: The Orissa High Court Thursday prevented the state government from taking any step to collect Value Added Tax (VAT) of `1,485 crore from the Indian Oil Corporation Limited (IOCL) in connection with the oil major’s Paradip refinery operation.
A division bench of the High Court (HC) comprising justices Indrajit Mohanty and Bishwajit Mohanty directed a working group formed by the Union Ministry of Petroleum and Natural Gas to settle the VAT-related dispute between the state and the IOCL within two months.
Hearing a case filed by the oil major, the HC allowed the working group comprising officials of the petroleum ministry, state government and IOCL to take a decision on the VAT issue.
A Memorandum of Understanding (MoU) was signed between the state government and the IOCL February 16, 2004 for setting up of an oil refinery at Paradip in Jagatsinghpur district. As per the agreement, the state government would not collect VAT on the refinery’s petroleum products that are sold in Orissa market for the first 11 years of its operation.
According to the MoU, the oil major would consider VAT exemption by the state government as debt and start repaying the amount to the latter from the 12th year onward.
The IOCL has been exempted `1,485 crore in VAT from September 22, 2015, when the Paradip plant started its operations, to December 31, 2016. The state government February 27 asked the Corporation to pay the money following which the oil major had filed a case in the HC.
The state government had justified its move on the plea that the Centre did not take any step to modify the terms of the MoU despite repeated requests for the same.
The state had also informed the court that the IOCL refinery at Paradip was not made operational during the scheduled period. On top of it, IOCL authorities had raised the capacity of the unit to 15 million tonnes per annum from its original capacity of 9 million tonnes per annum by violating the MoU terms, the state had argued.

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