Indian Oil, HPCL To Contest Over Rs 4,000 Crore Tax Demand On Sale Of Ethanol-Blended Petrol
The sugarcane extract for mixing in fuel is exempt from tax, say Indian Oil and Bharat Petroleum.
Indian Oil Corp. Ltd. and Hindustan Petroleum Corporation Ltd. on Thursday said they will contest tax demand of over Rs 4,000 crore in excise duty on ethanol-blended petrol, saying the sugarcane extract for mixing in fuel is exempt from tax.
The director general of Goods and Services Tax in Pune has slapped Indian Oil with a tax demand of Rs 4,002 crore for alleged non-payment of excise duty on ethanol-petrol mix. HPCL has been asked to pay over Rs 346 crore.
In a regulatory filing, Indian Oil said it is a responsible corporate and law abiding entity, which is one of the largest contributors to the national exchequer in the form of duties and taxes. During 2018-19, it paid Rs 1.93 lakh crore to the exchequer in the form of duties and taxes.
"IOC denies the allegation in the show cause cum demand notice of Director General-GST in view of the prevalent provisions of the law, which states that a person who has collected any amount representing duty of excise on sale of goods needs to pay such amount to the (tax) department.
"Since EBMS (or ethanol-blended motor spirit) is an exempt product for the purpose of levy of excise duty as per prevailing law, IOC has not recovered any amount representing excise duty on sale of EBMS," It said.
Oil marketing companies—Indian Oil, Bharat Petroleum Corporation Ltd. and HPCL—blend 5 percent to 10 percent ethanol with petrol for sale of EBMS as per the government directive. The government has mandated blending of ethanol in petrol to cut dependence on imported oil for meeting fuel needs of the country.
India is over 83 percent dependent on imports to meet its oil needs.
"IOC had received a showcause cum demand notice from Director General-GST, Pune, as to why, Rs 4,002 crore should not be demanded and recovered alleging collection and non-payment of excise duty on ethanol portion of the sale of EBMS on the ground that the sale price of EBMS and petrol are same," it said.
Stating that it has received a similar notice from tax authorities, HPCL in a stock exchange filing said, "the demand is legally not tenable and the show cause notice will be suitably replied," the company said.
"HPCL has always discharged all its statutory obligations diligently. Showcause notices from revenue department for an additional demand of duties/taxes received if any, are meticulously reviewed and appropriate remedies are taken as per the law of the land protecting the interests of the company," it said.
HPCL said it is following a legally tenable established practice which is in line with oil industry and it does not envisage any additional duty liability.
"The show cause notice will be duly replied and defended," it added.
Indian Oil said it is contesting the show cause cum demand notice issued by Director General-GST.