Marshalls East Africa wins reprieve in KRA step to freeze bank accounts

Marshalls East Africa has won a reprieve after the High Court suspended a decision to freeze the auto dealer’s bank accounts over unpaid tax.

Justice Weldon Korir suspended the Kenya Revenue Authority (KRA) notices issued to Ecobank and KCB to freeze Marshalls East Africa’s accounts over a Sh17.9 million tax dispute.

The loss-making Marshalls claimed that the restrictions on its bank accounts were unconstitutional because it was not given an opportunity to be heard.

The company denies owing the taxman any money and says the arrears claimed were cleared in 2011.

It accuses KRA of failing to respond to the firm’s letter dated June 26 in response to taxman’s demand letter of June 24 asking the dealer to settle the Sh17.9 million.

Marshalls blamed Ecobank for remitting Sh2.9 million to KRA from its company’s account without notification, arguing that the move was in breach of banking rules.

The auto dealer reckons that the freeze, which happened on June 28, grounded its operations and made it difficult to pay salaries for more than 300 employees.

Marshalls made losses in the year ended March 2012 on reduced car sales that have seen the auto dealer lose market share.

It recorded a net loss of Sh165 million compared to a net profit of Sh181.5 million a year earlier and a loss of Sh344 million in 2010.

READ: Used car imports push Marshalls deeper into losses

The profit of Sh181.5 million was helped by the waiver of a Sh401 million loans borrowed from KCB by businessman Ketan Somaia who lost the battle for control of the firm in 2010.

Its annual sales have dropped to Sh234 million in the period from the previous year’s Sh263 million and Sh1.3 billion in 2007.