Essar Oil Monday said that it had made arrangements for loans of about Rs 50 billion to pay its Rs. 61.69-billion sales tax dues to the government of the western Indian state of Gujarat.

Earlier, the company had sought permission to pay the dues on a mutually agreed time schedule with the government, which the latter was not ready to consider. The company is also fighting a legal battle on the issue of rescheduling the tax liability and is also pursuing the matter with the government.

Essar Oil said that the credit arrangements made with the Indian banks would allow them to repay the tax liability immediately if the company failed to negotiate a satisfactory repayment schedule or get any kind of reprieve in the tax liability due.

The new loan facility will enable EOL to meet its sales tax liability. Our lenders have continued to be very supportive of the business, which remains well placed given the demand for high value fuels both in India and internationally, Lalit Gupta, managing director and CEO of Essar Oil, said in a statement.

In January, the Supreme Court of India said that the Essar Oil was not entitled to a sales tax incentive offered by the Gujarat government to defer payment of sales taxes for 17 years. The company lost the right to defer the payment of sales tax as it missed the August 15, 2003, deadline to start production at its Vadinar refinery.

Essar Oil approached the Supreme Court early this month after the Gujarat government attached the company's three bank accounts in the state as a coercive step to recover the dues. The court directed the company to pay Rs 10 billion to the state government towards sales tax dues by July 30 and said that the coercive steps taken by the state would be stayed on payment of this amount.

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