1981 (2) TMI 209 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Disallowance of deductions based on the retrospective cancellation of the registration certificate.
2. Legality of not going behind the order of cancellation.
3. Classification of surgical trays under the appropriate entry of the Bombay Sales Tax Act, 1959.

Detailed Analysis:

Issue 1: Disallowance of Deductions Based on Retrospective Cancellation
The Tribunal disallowed deductions for sales made on 22nd November 1965, 17th December 1965, and 18th December 1965, to Messrs. H. Amritlal and Company, citing the retrospective cancellation of their registration certificate effective from 10th November 1965. The Tribunal's decision was based on the premise that Messrs. H. Amritlal and Company could not be considered a registered dealer after the cancellation. However, the Court held that "the cancellation of a registration certificate with retrospective effect from an anterior date cannot and does not prejudice the rights of third parties" who dealt with the company before the actual cancellation date. Therefore, the applicants were entitled to deductions for sales made before the cancellation date. The Court also noted that the Assistant Commissioner's reasons for deeming the sales non-genuine were not substantiated, particularly the claim that Messrs. H. Amritlal and Company were fictitious persons.

Issue 2: Legality of Not Going Behind the Order of Cancellation
The applicants contended that they should be allowed to challenge the correctness of the order of cancellation if it adversely affected them. The Court held that "an order of cancellation of a registration certificate with retrospective effect does not prejudice third parties," thus the Tribunal was correct in not permitting the applicants to challenge the order of cancellation. However, the Court emphasized that if any document or fact from the registration record is used against an assessee, the assessee must be allowed to inspect the relevant file to ensure adherence to the principles of natural justice.

Issue 3: Classification of Surgical Trays
The applicants argued that surgical trays should be taxed under entry 22 or entry 43 of Schedule E to the Bombay Sales Tax Act, 1959, rather than entry 20. The Court found that the surgical trays manufactured by the applicants were correctly taxed under entry 20, which covers "Stainless steel articles and utensils (but excluding articles used as parts of industrial machinery or plant)." The Court dismissed the contention that surgical trays could be considered surgical instruments or steel furniture, noting that surgical trays do not fit the common or trade usage of these terms.

Conclusion:
1. Question 1: The Tribunal was not justified in disallowing the deductions based on the retrospective cancellation of the registration certificate.
2. Question 2: The Tribunal was correct in not allowing the challenge to the order of cancellation, with the modification that the affected dealer must be allowed to inspect relevant documents.
3. Question 3: The Tribunal correctly classified surgical trays under entry 20 of Schedule E to the Bombay Sales Tax Act, 1959.

There will be no order as to the costs of this reference, and the applicants are entitled to a refund of the fee of Rs. 100 deposited by them.