ONGC asked to pay ₹60 lakh as penalties for alleged discrepancy in excise duty payment of Rajahmundry asset

ONGC asked to pay ₹60 lakh as penalties for alleged discrepancy in excise duty payment of Rajahmundry asset

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According to ONGC, it had already paid ₹42 lakh for the quantity it had produced itself and sought exemption of the approx. ₹18 lakh, for the quantity produced by the contractor, as per relevant provisions back then. File.
| Photo Credit: Reuters

State-owned explorer Oil and Natural Gas Company (ONGC) informed Tuesday that the Vijayawada GST division has imposed a penalty of approx. ₹60 lakh in lieu of their alleged underpayment of special additional excise duty (SAED). This tax demand accrues to their Rajahmundry asset in Andhra Pradesh and for clearances effected in July 2022. It informed the exchanges that the company would be reviewing the order and shall file an appeal within the prescribed time limits. Additionally, it stated considering the size and scale of their operation, the impact “is not considered significant”.

Issues relating to non-reconciliation

The oil explorer underlined the primary issue relates to non-reconciliation of the tax demand for the crude oil it had produced and that of a separate production enhancement contractor (PEC) during the period. For perspective, the latter relates to agreements wherein the contractor is required to raise output and enhance recovery from depleting or mature oil fields.

According to ONGC, it had already paid ₹42 lakh for the quantity it had produced itself and sought exemption of the approx. ₹18 lakh, for the quantity produced by the contractor, as per relevant provisions back then. However, the state-owned explorer stated, the tax authorities “disregarded the payment” made towards their own production underlining that the explorer paid it to a different zonal division of the excise department. Thus, a case of non-reconciliation.

Additionally, the company informed that the exemption benefit too has been denied, treating ONGC as the manufacturer for the quantity of the PEC as well.

Describing the demand as “unsustainable”, it said, “There is neither any short payment of duty nor any suppression or intent to evade duty; hence, the demand on account of interest and penalty is not sustainable.”

ONGC’s Rajahmundry Asset is spread across four districts of Andhra Pradesh, namely, Krishna, Dr. B.R. Ambedkar Konaseema, East Godavari & West Godavari.



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