ACC, HP govt tax battle heats up over Gagal II unit


After HP High Court dismissed its appeal against recovery of Rs 64 crore by state’s sales tax authorities, ACC moved SC with a SLP

The tax battle between ACC, India’s one of the leading cement companies, and tax authorities of Himachal Pradesh (HP) government is set to intensify over company’s second manufacturing unit at Gagal in Mandi district.

After the HP High Court dismissed the company’s appeal against recovery of Rs 64 crore by state’s sales tax authorities, ACC moved the Supreme Court (SC) with a Special Leave Petition (SLP).

Meanwhile, the cement maker has already filed a review petition before the state’s High Court.

A company’s spokesperson told Business Standard, “An SLP was filed with the Honourable Supreme Court and was heard on 1 April 2013. The Honourable Supreme Court directed withdrawal of the SLP since our review petition filed with the Honourable Himachal Pradesh High Court was still pending hearing and directed that we approach the Supreme Court again only after the Review Petition is heard and disposed off.”

The matter is in connection with ACC’s second manufacturing unit of 1 million tonne atGagal, for which the company said that it had availed sales tax incentives under the HP State Industrial Policy, 1991.

“Gagal Unit II, a new unit, is eligible for incentives, as per the Industrial Policy. However the Excise and taxation department, Himachal Pradesh, imposed certain restrictive conditions on eligibility,” added the spokesperson.

In its latest annual report, the company said, “The company had, as on Decebmer 31, 2011, claimed and accrued sales tax incentives aggregating to Rs 56 crore even though the sales tax authorities had introduced certain restrictive conditions after commissioning of the unit stipulating that incentive is available only for incremental amount over the base revenue and production (of Gagal I unit) prior to the commissioning of Gagal II.”

According to the report, ACC contends that Gagal II is a new unit, as decided by the HP High Court and confirmed by the Supreme Court while determining the eligibility for transport subsidy, and hence such restrictions are not applicable to the (new) unit.

“The department had recovered Rs 64 crore (tax of Rs 56 crore plus interest of Rs 7 crore) and the same is accounted as an amount recoverable,” adds the report.

Despite High Court’s dismissal of company’s appeal, ACC feels that the court had decided against the company based on erroneous understanding of certain facts and legal positions and has also failed to consider certain key facts in its order.

Himachal Pradesh is among the top states having high resources of limestone. With state’s tax incentives to attract investment, several companies set up their facilities in the state. ACC’s sister-concern company Ambuja too has presence in the state.

ACC is holding its annual general meeting (AGM) this friday. On the BSE, shares of the cement giant rose 1.4% on Tuesday to Rs 1,176.40, up Rs 16.3.

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