Case Law Details
Cannanore County Club & Resorts Pvt Ltd Vs Deputy Commissioner (Arrear Recovery) (Kerala High Court)
Introduction: The Kerala High Court recently addressed a case involving Cannanore County Club & Resorts Pvt Ltd and the Sales Tax Department. The department had directed the withholding of liquor sales to the petitioner due to a substantial tax arrear amounting to Rs. 1,86,48,258 under the Kerala Goods and Services Tax (KGST) Act. The court’s decision in this matter highlights the department’s right to take coercive measures to recover tax arrears, even if it means withholding the sale of liquor.
Background of the Case: The case revolves around a writ petition filed by Cannanore County Club & Resorts Pvt Ltd, challenging a letter (Ext. P1(A)) issued by the Deputy Commissioner (Arrear Recovery), who directed the withholding of Indian Made Foreign Liquor sales to the petitioner. The reason behind this directive was the petitioner’s substantial tax arrears of Rs. 1,86,48,258 under the KGST Act.
Tax Arrears and Previous Writ Petition: The petitioner holds a license for selling Indian Made Foreign Liquor. However, the petitioner had not paid a significant amount of sales tax, which had accumulated to more than Rs. 1,86,48,258. In a previous writ petition (W.P.(C) No. 41287/2022), the court had granted the petitioner six installments to clear the arrears. Despite this concession, the petitioner failed to pay the arrears even within the extended timeline.
Court’s Ruling: The court noted that the petitioner’s arrears amounted to a substantial sum, and revenue recovery proceedings had already been initiated. In light of the petitioner’s failure to meet the payment obligations, the court deemed the writ petition as not maintainable. The administrative authority had the power to use coercive measures to ensure the payment of tax arrears. Withholding the supply of Foreign Liquor for further sales was one such coercive measure aimed at prompting the petitioner to settle the tax arrears.
Conclusion: The Kerala High Court’s decision in this case upholds the Sales Tax Department’s right to withhold liquor sales as a coercive measure for tax recovery when a taxpayer is in significant arrears. The court’s ruling reiterates the department’s authority to take such steps to recover unpaid taxes and promotes compliance with tax obligations. This case serves as a reminder of the consequences that businesses may face when failing to meet their tax liabilities, even if it involves restrictions on their operations, such as the sale of specific goods.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
1.The present writ petition has been filed impugning Ext. P1(A) letter dated 26.08.2023 issued by the 1st respondent to 3rd respondent, whereby the 1st respondent has directed the 3rd respondent to withhold the sale of Indian Made Foreign Liquor to the petitioner, since the dealer, that is the petitioner has arrears of tax under the KGST Act for an amount of Rs. 1,86,48,258/- (Rupees One crore eighty six lakh forty eight thousand two hundred and fifty eight only). As the Revenue Recovery proceedings have been initiated against the dealer, the dealer should not be sold the Indian made Foreign Liquor for effecting the sale from his business premises.
2. The petitioner is a licensee of Indian Made Foreign Liquor. Admittedly, the petitioner has not paid huge amount of sales tax and now the arrears of rupees is more than Rs.1,86,48,258/-. Earlier the petitioner had approached this Court by filing W.P.(C) No. 41287/2022. In the said writ petition this Court had granted six installments to the petitioner to pay the arrears of sales tax dues. However, despite the liberty given by this Court, the petitioner has not cleared the arrears even in the installments granted.
3. The petitioner has arrears of Rs.1,86,48,258/-. The petitioner cannot make any grievance for non-supply of Indian Made Foreign Liquor for which he has been granted licence, when he himself in huge arrears of tax and recovery proceedings are pending against him. Petitioner is defaulter in making payment of tax and therefore, I do not find that this writ petition is maintainable before this Court. The administrative authority has powers to coerce the petitioner for making the payment of arrears of tax due. Non- supply of Foreign Liquor for further sales is one of the coercive measure for making the payment of the arrears of tax by the petitioner.
4. Therefore, this writ petition is dismissed as above.
