1962 (12) TMI 47 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Validity of the nil assessment order (Exhibit P-3).
2. Justification for the cancellation of the certificate of registration (Exhibit P-6).

Issue-wise Detailed Analysis:

1. Validity of the Nil Assessment Order (Exhibit P-3):

In this writ petition, the petitioner challenges the order of nil assessment passed by the Sales Tax Officer, which held the petitioner not liable for payment of sales tax for the year 1960-61. The learned counsel for the petitioner contends that this view is incorrect. The petitioner relied on a transaction (Exhibit P-2) to establish liability for sales tax. However, the assessing authority concluded that Exhibit P-2 could not be considered a transaction of sale as understood under the General Sales Tax Act. The court did not delve into the construction of Exhibit P-2, suggesting that the petitioner should challenge this before the appropriate appellate authorities.

2. Justification for the Cancellation of the Certificate of Registration (Exhibit P-6):

The petitioner obtained a certificate of registration under section 7(2) of the Central Sales Tax Act (Exhibit P-1). The Sales Tax Officer issued a notice (Exhibit P-4) proposing to cancel the registration certificate because the petitioner was declared not liable to pay sales tax for the years 1959-60 and 1960-61. The petitioner responded (Exhibit P-5) asserting that he had made a sale and credited an amount towards it. Despite this, the Sales Tax Officer canceled the registration certificate (Exhibit P-6), stating that the petitioner was not liable to pay sales tax under the state law for the specified years.

The court analyzed section 7(2) and section 7(4)(b) of the Central Sales Tax Act. Section 7(2) allows a dealer to obtain a registration certificate even if exempt from tax or eligible for a refund. Section 7(4)(b) permits cancellation if the dealer ceases to carry on business, ceases to exist, or ceases to be liable to pay tax under the state law. The court emphasized that the term "ceased to be liable to pay tax" implies a more permanent state, not merely the non-payment of tax for certain years. The Sales Tax Officer's approach, based solely on non-payment for two years, was deemed erroneous. The court concluded that the officer did not consider whether the petitioner had permanently ceased to be liable for sales tax.

The court dismissed the argument that the cancellation could be justified "for any other sufficient reason," as the officer had not relied on this ground. Consequently, the order canceling the registration certificate (Exhibit P-6) was set aside. The court expressed no opinion on the assessment order (Exhibit P-3) regarding the interpretation of Exhibit P-2, leaving it to the petitioner to challenge before the appellate authorities.

Conclusion:

The writ petition was allowed to the extent of setting aside the cancellation of the registration certificate (Exhibit P-6). The parties were directed to bear their respective costs. The court did not address the merits of the nil assessment order (Exhibit P-3), suggesting it be challenged through appropriate channels.