1989 (8) TMI 329 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legitimacy of the cancellation of the registration certificates under the Kerala General Sales Tax Act and Central Sales Tax Act.
2. Validity of the provisional assessments for the months of December 1987, January 1988, February 1988, and March 1988.
3. Relevance and impact of admissions made by the assessee regarding false declarations.
4. Interpretation and application of the "good and sufficient reasons" clause under section 14(7) of the Kerala General Sales Tax Act and section 7 of the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Legitimacy of the cancellation of the registration certificates under the Kerala General Sales Tax Act and Central Sales Tax Act:
The assessing authority initiated proceedings to cancel the registration certificates granted to the assessee under section 14 of the Kerala General Sales Tax Act and section 7 of the Central Sales Tax Act. The authority found that the declaration forms provided by the assessee were false and unauthorized. The partners of the assessee-firm admitted that the declarations were false and filed with the intent to delay tax payment. The assessing authority concluded that allowing the registration to continue would result in a significant loss of revenue to the state and canceled the registration. The appellate authority affirmed this decision, citing a prima facie case of wilful tax evasion by the assessee.

2. Validity of the provisional assessments for the months of December 1987, January 1988, February 1988, and March 1988:
The assessee filed "nil" returns for the months in question, but the Revenue obtained information indicating substantial purchases of pepper. The assessing authority rejected the declarations filed by the assessee from non-existent firms and brought the turnover to tax. The provisional assessments were upheld by the Deputy Commissioner of Sales Tax. The Sales Tax Appellate Tribunal quashed the assessment for December 1987 but upheld the assessments for January, February, and March 1988. The Tribunal found that the facts leading to the provisional assessments and the cancellation of registration were interlinked.

3. Relevance and impact of admissions made by the assessee regarding false declarations:
The partners of the assessee-firm admitted to filing false declarations to delay tax payment. This admission was recorded in the assessment files and formed a crucial part of the assessing authority's decision to cancel the registration. The Appellate Tribunal, however, ignored this admission in its decision. The High Court noted that the admission was not disputed or retracted by the assessee at any stage and held that in the absence of any denial or explanation, the admission was almost conclusive regarding the facts contained therein. The High Court criticized the Appellate Tribunal for ignoring this vital admission.

4. Interpretation and application of the "good and sufficient reasons" clause under section 14(7) of the Kerala General Sales Tax Act and section 7 of the Central Sales Tax Act:
The High Court emphasized that the words "good and sufficient reasons" should receive a reasonable interpretation that effectuates the levy, assessment, and recovery of tax. The Court referred to the decision in Natarajan Chettiar's case, which held that non-filing of returns or non-remittance of tax can form "good and sufficient reasons" for cancellation of registration. The High Court concluded that filing false declarations with intent to delay tax payment constitutes "good and sufficient reasons" for cancellation of registration. The Appellate Tribunal's failure to understand this scope led to a legal error.

Conclusion:
The High Court set aside the common order of the Appellate Tribunal dated 26th September 1988, in T.A. Nos. 436 and 437 of 1988, and remitted the matter to the Sales Tax Appellate Tribunal for fresh consideration in accordance with the law and the observations made in the judgment. The tax revision cases were allowed.