1952 (2) TMI 20 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the petitioner is entitled to be registered as a dealer within the meaning of Section 2(c) of the Bihar Sales Tax Act, 1944.
2. Whether the Sales Tax Officer has any jurisdiction under Section 20(4) of the Bihar Sales Tax Act, 1944, to cancel the petitioner's registration certificate after having obtained the previous sanction of the Deputy Commissioner and not of the Commissioner.

Issue-wise Detailed Analysis:

Issue 1: Entitlement to Registration as a Dealer

The petitioner applied for registration under the Bihar Sales Tax Act, 1944, claiming a gross turnover of Rs. 15 lacs for the year 1943-44, with Rs. 50,000 representing sales within Bihar. The Sales Tax Officer issued a registration certificate and required quarterly returns. For the quarter ending 31st December 1944, the petitioner reported a gross turnover of Rs. 72,873-6-0 with no taxable turnover. The Sales Tax Officer found that most sales were outside Bihar, leading to a notice under Section 20(4) for cancellation of the registration certificate. The Sales Tax Officer canceled the certificate on 9th October 1945, and subsequent appeals to the Deputy Commissioner and the Board of Revenue were rejected.

The legal question was whether the petitioner qualified as a "dealer" under Section 2(c) of the Act, which defines a dealer as any person carrying on the business of selling or supplying goods in Bihar. The court found that the petitioner's business primarily involved selling shellac outside Bihar, with minimal local sales. The definition of "dealer" excludes isolated or occasional transactions. The Sales Tax Officer determined that the petitioner's certificate was null and void under Section 18(a) of the Act. The Deputy Commissioner concurred, noting that dealers selling goods outside the province are debarred from registration, similar to those dealing in exempted goods.

The court concluded that the petitioner did not meet the criteria for registration as a dealer, as the bulk of his business was outside Bihar, and local sales were negligible and possibly fabricated to create evidence of sales in Bihar.

Issue 2: Jurisdiction to Cancel Registration Certificate

The second issue was whether the Sales Tax Officer had jurisdiction to cancel the petitioner's registration certificate under Section 20(4) after obtaining the Deputy Commissioner's sanction instead of the Commissioner's. The Commissioner of Sales Tax had delegated his powers to the Deputy Commissioner under Notification No. 3681 R dated 21st September 1944. Thus, the Deputy Commissioner had the necessary power to sanction the cancellation.

The court noted that the Sales Tax Officer's jurisdiction to cancel the certificate was valid, given the proper delegation of powers. However, the court emphasized that the Sales Tax Officer's decision to cancel the certificate was based on a misinterpretation of the Act's provisions.

Judgment Summary:

The court ruled that the petitioner was not entitled to be registered as a dealer under Section 2(c) of the Bihar Sales Tax Act, 1944, because his business primarily involved sales outside Bihar, and the local sales were insufficient to qualify him as a dealer. The Sales Tax Officer had jurisdiction to cancel the registration certificate after obtaining the Deputy Commissioner's sanction. However, the cancellation was based on a misinterpretation of the Act, as the petitioner met the conditions for registration under Section 7(1), which requires being a dealer and having a gross turnover exceeding Rs. 5,000. The court concluded that the Sales Tax Officer had no jurisdiction to cancel the certificate based on the erroneous interpretation of the Act. The petitioner was entitled to costs and to withdraw the deposit made.

Reference Answered Accordingly.

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