1971 (9) TMI 181 - HC - VAT and Sales Tax

Summary

Issues:
1. Retrospective enforcement of registration cancellation affecting exemption claim.

Analysis:
The case involved a query regarding the enforcement of the cancellation of a registration certificate with retrospective effect. The dealer, engaged in selling electric goods, had claimed exemption for sales made to a registered dealer, M/s. Jai Hind Stores, amounting to Rs. 62,859-11-3 during the period from 1st April, 1956, to 30th June, 1956. The registration of M/s. Jai Hind Stores was canceled in November 1956, with retrospective effect from 1st April 1956. The Sales Tax Officer denied the exemption, citing the cancellation of the purchasing dealer's registration. The matter was appealed but upheld, leading to the reference to the High Court.

The court analyzed the relevant provisions of the Bengal Finance (Sales Tax) Act, 1941, extended to the Union Territory of Delhi. Section 5(2) of the Act allowed deductions for sales to registered dealers for specified goods. The cancellation of registration under sub-section (7) of section 7 empowered the Commissioner to cancel a registration certificate for reasons recorded in writing after providing the dealer an opportunity to be heard. The cancellation had to be notified in the official Gazette under section 9 of the Act.

Additionally, the court examined rule 12(1)(d) of the Rules framed under the Act, which detailed the procedure for cancellation of a registration certificate. The rule emphasized the importance of promptly publicizing such cancellations to inform other dealers dealing with the canceled registrant. The court interpreted the rule to suggest that the cancellation date specified in the order should be prospective, not retrospective.

The court emphasized that the cancellation of a registration certificate should not have retrospective effect, as it would unfairly affect transactions made before the cancellation. In this case, the dealer's claim for exemption was for sales made prior to the registration cancellation of M/s. Jai Hind Stores. The court held that the dealer could not be deprived of the deduction under section 5(2) for sales made when the registration was valid, as the dealer could not have anticipated the retrospective cancellation.

The court concluded by answering the reference question against the department, highlighting that the dealer should be entitled to the exemption claimed for sales made before the retrospective cancellation of M/s. Jai Hind Stores' registration. The judgment did not address the impact of the delay in notifying the cancellation in the official Gazette. No costs were awarded in the case, and the reference was answered in the negative.