Supreme Court Interim Order on Tax Liability Deposit & Bank Guarantee

The Supreme Court issued an interim order directing the petitioner to deposit 50% of accrued tax liability under the U.P. Tax on Entry of Goods into Local Areas Act, 2007, with a bank guarantee for the remaining amount. A dispute arose over the withdrawal of Rs.13,50,09,000 from the petitioner's account before or after the order. The department later acknowledged that a bank guarantee of Rs.52 crores would comply with the order. The court allowed the petitioner to adjust the withdrawn amount in current and future tax demands upon furnishing the bank guarantee, with further proceedings scheduled for review and consideration.

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Issues: Compliance with interim order of Supreme Court regarding tax liability under U.P. Tax on Entry of Goods into Local Areas Act, 2007; Adjustment of amount withdrawn from bank account; Furnishing of bank guarantee; Consideration of adjustment of withdrawn amount in future tax demands.

In this writ petition, the petitioner raised concerns regarding the compliance with the interim order dated 18th January, 2012, issued by the Hon'ble Supreme Court in SLP (C) No.244 of 2012. The Supreme Court had stayed 50% of the accrued tax liability/arrears under the U.P. Tax on Entry of Goods into Local Areas Act, 2007, directing the deposit of 50% of the tax liability/arrears with bank guarantees for the remaining amount. The court also mandated the continuation of tax payments at prescribed rates for the future period. On 16th September 2012, an order was passed for the computation of the department to assess if the demand exceeded the required deposit for compliance. The HDFC Bank was directed to maintain a balance of Rs.13,50,09,000 in the petitioner's account until 23rd September 2013, with an attachment order covering this amount. A dispute arose regarding the withdrawal of this sum before or after the communication of the interim order.

After detailed computations were provided by the department on 25th September 2013, it was acknowledged that a bank guarantee of Rs.52 crores would meet the interim order's conditions. The petitioner sought the adjustment of the withdrawn Rs.13,50,09,000 in the current and future Entry Tax demands upon furnishing the bank guarantee. An interim modification was made on 16th September 2013, stating that if the petitioner furnished the bank guarantee of Rs.52 crores within 15 days, no further demands would be pressed. The respondents were given four weeks to file a counter affidavit, with a week for a rejoinder affidavit, and the matter was listed for admission/hearing on 12th November 2012. The adjustment of the withdrawn amount was deferred for consideration at the next hearing, allowing the petitioner to provide detailed computations for review by the Joint Commissioner (Commercial Tax) Corporate Circle (I), Commercial Tax Kanpur. The Joint Commissioner would address the details and objections related to the demand and realization of the withdrawn amount in the forthcoming counter affidavit.

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