2014 (9) TMI 897 - HC - VAT and Sales Tax

Arrear of tax dues - Request of time to make the payment - Held that - In the event of Maruthi Suzuki India Ltd., takes drastic steps to cancel the dealership, not only the petitioner will be affected but the interest of revenue will also be affected, since it would delay recovering all taxes further. It is relevant to mention here that the petitioner has now agreed to pay the entire arrears due and not disputing the liability. In such circumstances, indulgence can be granted to the petitioner, subject to certain conditions. - Decided conditionally in favour of assessee.

Summary

Issues:
- Communication of arrears of tax under Tamil Nadu Value Added Tax and Entry Tax to a dealer of Maruti Suzuki India Limited.
- Request for reasonable time to clear arrears by the dealer.
- Allegation of chronic default by the dealer and retention of collected tax.
- Potential cancellation of dealership by Maruti Suzuki India Limited.
- Resolution of the matter by the High Court.

Analysis:

The judgment involves a case where a dealer of Maruti Suzuki India Limited was aggrieved by a communication from the respondent regarding arrears of tax under Tamil Nadu Value Added Tax and Entry Tax amounting to over Rs. 8 Crores. The petitioner, previously a family business, had the business allotted to a new Managing Director and sought time to clear the arrears. The respondent's communication led Maruti Suzuki India Limited to consider canceling the dealership, prompting the petitioner to approach the High Court challenging the proceedings but not disputing the dues.

The Additional Government Pleader argued that the petitioner was a chronic defaulter with over Rs. 8 Crores due, accusing them of not taking effective steps to clear the dues despite collecting and retaining the tax. The respondent highlighted that internal disputes among legal heirs were not a valid reason to avoid tax liability for a private limited company. The High Court, after hearing both parties and reviewing the records, acknowledged the potential impact on both the petitioner and revenue if the dealership was canceled. The petitioner expressed willingness to pay the arrears without disputing the liability, leading the court to grant indulgence with specific conditions.

Consequently, the High Court directed the respondent to suspend the proceedings, requiring the petitioner to pay Rs. 2 Crores within three weeks and the remaining arrears in seven monthly installments. Failure to comply would allow the respondent to pursue further action. The writ petition was disposed of with the specified directions, and no costs were awarded, closing the connected Miscellaneous Petitions.