In Crl.O.P.No.34570 of 2019-MAD HC- Madras HC quashes complaint case registered against guarantor under Puducherry GST & VAT Acts, says in order to be implicated in such matter, accused must be assessee in eyes of VAT Act
Justice R.N.Manjula [10-01-2023]


Read Order:Santhosh Vs. The Commercial Tax Officer And Ors 


Tulip Kanth


Chennai, March 25, 2023:The Madras High Court has quashed a case registered under the Puducherry GST & VAT Acts against the petitioner-guarantor who had given an undertaking to pay taxes, if the first accused failed to pay the same.


In this matter before the Single-Judge Bench of Justice R.N.Manjula, the first respondent had preferred a private complaint for the alleged offences committed by two accused under Sections 59(1)(a), 59(2)(a), 559(2)(b) and 59(2)(d) of the Puducherry Value Added Tax Act-2007 read with Sec.34 of IPC and Sec.174 of the Puducherry Goods and Service Tax Act-2017 and for the offence of Breach of Rules under Rule 57,1945 and 49 of the Puducherry Value Added Tax Rules, 2007 as well as for the offences under Section 418 and 422 of IPC read with Section 34 IPC.


It was alleged that the first accused, a proprietor of a concern in the name and style of M/s.Al-Safa Chicken Agencies, had been involved in selling chicken and its returns filed for the year 2013-14 was not complete. It was also alleged that the returns did not tally with the actual sales reported by the first accused. 


For the period of January 2013-February-2014 the first accused did not file any returns and pay the tax amount. The first accused had submitted objections and proposal for paying tax for two periods and for the remaining assessment period the first accused did not file any objections.


Thereafter, tax had been imposed on the first accused. The second accused / petitioner herein had executed an undertaking on a stamped paper by revealing his intention that he would pay the tax assessed on the first accused to the commercial tax department from time to time by standing as a guarantor to the extent of tax arrears in respect of the business done by the first accused. He had also stated that he would clear the tax due on behalf of the first accused on receipt of return intimation from the tax department.


Pursuant to such undertaking, the demand was made to him to pay the arrears of the tax of the first accused. Even then the second accused did not pay the tax arrears. 


The Bench took note of the fact that the sole reason for which these proceedings had been initiated against the second accused/ petitioner herein was because of the undertaking given by the petitioner on behalf of the first accused for paying tax arrears. 


“Though it might be true that the second accused also liable to pay the tax arrears in view of his undertaking or guarantee given in favour of the 1 st accused to the commercial tax department. However that can be done by taking civil action for recovery. Unless the second petitioner is the assessee in the eyes of the Act he cannot be implicated as an accused for the default committed on the part of the first accused, who alone is the assessee”, the Bench held.


The Bench affirmed that there was no basis for this criminal case as the complaint had been given against this petitioner by presuming culpability on his part for failing to pay the tax. 


“The undertaking or the guarantee executed by the second accused in favour of the 1 st accused to the department can be at the best called as an agreement and for which the petitioner can be attached with contractual liability but not criminal liability”, the Bench clarified while quashing the proceedings against the second accused alone.


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