Castrol India Ltd. has emerged victorious in a long-standing tax dispute with the Maharashtra Sales Tax Department (MSTD). The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) ruled in favor of Castrol India on July 11, 2025, bringing an end to the ₹4,131 crore dispute under the Maharashtra Value Added Tax (MVAT) framework.

The dispute, which dates back to the financial years between 2007-08 and 2017-18, arose from MSTD's assertion that the movement of goods from Castrol India's plants and warehouses in Maharashtra to its Clearing and Forwarding Agents (CFAs) in other states constituted inter-state sales. The MSTD argued that these transactions were executed pursuant to pre-existing customer orders, attracting additional tax liability under the MVAT Act.

Castrol India consistently contested these claims, maintaining that the goods were not dispatched under any prior customer orders and that its tax payment methodology was legally sound and compliant with existing regulations. The company had secured favorable rulings from the MVAT Tribunal for all ten years under review. Despite this, the MSTD escalated the matter, appealing to CESTAT for nine of those ten years, excluding 2016-17.

In its decision issued on July 11, 2025, CESTAT dismissed the appeals and upheld the earlier rulings in Castrol's favor. The company confirmed that there would be no financial impact from the verdict, as it had not set aside any provisions for the disputed amount. Castrol stated that it had assessed the chances of economic outflow as remote and had accordingly not accounted for the ₹4,131 crore claim in its books.

The resolution of this long-standing dispute carries significant positive implications for Castrol India and its shareholders. The company had not made any provision in its books of accounts for the disputed amount of ₹4,131 crore. This decision was based on robust legal advice and the presence of favorable precedents in similar cases, which led the company to assess the likelihood of an economic outflow as remote. The CESTAT's ruling validates this prudent financial approach, eliminating a substantial contingent liability that had been an overhang on the company's financials. The absence of any financial implications, such as compensation or penalty, means that the company's balance sheet remains unaffected by this large demand.

The favorable outcome of this major tax litigation is expected to be met with positive sentiment in the market. The removal of a ₹4,131 crore contingent liability, which represented a significant potential financial burden, is likely to be viewed as a de-risking event for Castrol India. Following the update, Castrol India shares opened at ₹224.50 and rose to an intraday high of ₹228.80. At the time of writing, the stock was trading up 3% from the previous close.