1969 (5) TMI 53 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of the assessment order dated 1st August, 1962 under section 21 of the U.P. Sales Tax Act.
2. Legality of the cancellation of the exemption certificate without affording an opportunity to the petitioner.
3. Interpretation of Rule 19 regarding the grant of exemption certificate.
4. Analysis of Rule 25 concerning the cancellation of certificates.
5. Availability of alternative remedy through appeal against the order passed under section 21 of the Act.

Detailed Analysis:
1. The High Court examined the validity of the assessment order dated 1st August, 1962, made under section 21 of the U.P. Sales Tax Act. The petitioner challenged the assessment order through a writ petition under article 226 of the Constitution of India, seeking its quashing. The court observed that the assessment under section 21 was deemed invalid due to the illegal cancellation of the exemption certificate without providing the petitioner with an opportunity to be heard.

2. The court scrutinized the legality of the cancellation of the exemption certificate granted to the petitioner without affording any opportunity for a hearing. It was noted that the certificate was canceled by the Assistant Commissioner, Sales Tax, U.P., without following due process. The court emphasized that the cancellation, conducted without allowing the petitioner to present a case, was illegal and had a significant impact on the subsequent assessment proceedings under section 21 of the Act.

3. An in-depth analysis of Rule 19 was conducted to determine the procedure for the grant of an exemption certificate. The court highlighted that the rule mandates the Sales Tax Officer to issue an exemption certificate if satisfied with the correctness of the information provided by the dealer and the proper deposit of the fee. The use of the term "shall issue" in the rule indicated that the Sales Tax Officer had no discretion in granting the certificate, emphasizing the dealer's entitlement to the certificate upon fulfilling the specified conditions.

4. The court delved into the interpretation of Rule 25, which governs the cancellation of certificates. It was noted that the rule allows for the cancellation of an exemption certificate by the Assistant Commissioner if satisfied that the dealer has contravened any provisions. The court emphasized the objective nature of the test for cancellation, requiring a factual basis for the decision rather than subjective satisfaction. The court highlighted the necessity for an objective approach in such matters and implied that the affected party should be given an opportunity to be heard.

5. The court considered the availability of an alternative remedy through an appeal against the order passed under section 21 of the Act. The petitioner's argument regarding the lack of appeal against the cancellation of the exemption certificate under Rule 25 was acknowledged. The court rejected the contention that the petitioner should seek remedy through appeal, emphasizing that the order under section 21 suffered from a legal error, leading to its quashing by the court. The court concluded that the writ petition was maintainable, and the order passed under section 21 was erroneous, warranting its annulment.