1994 (1) TMI 255 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of sub-rule (4) of rule 14-C of the M.P. General Sales Tax Rules, 1959.
2. Authority of the State Government to cancel recognition certificates.
3. Applicability of Section 21 of the M.P. General Clauses Act, 1957.
4. Procedural fairness in issuing the show cause notice.

Issue-wise Detailed Analysis:

1. Validity of sub-rule (4) of rule 14-C of the M.P. General Sales Tax Rules, 1959:
The petitioner contended that sub-rule (4) of rule 14-C, which allows the cancellation of recognition certificates, is ultra vires and beyond the rule-making power of the State Government. The court examined the procedural scheme prescribed for the grant, validity, and cancellation of recognition certificates. The petitioner argued that while the Legislature provided for the issuance of recognition certificates in section 16-C of the Act, it did not include any statutory provision for their cancellation. The court, however, held that the power to rescind the certificate must necessarily be implied, given the scheme and object of the provisions and the context in which the power is conferred. Thus, sub-rule (4) of rule 14-C is not ultra vires the provisions of the Act and is within the rule-making authority of the State Government.

2. Authority of the State Government to cancel recognition certificates:
The petitioner argued that the State Government lacked the authority to frame a rule enabling the cancellation of recognition certificates once granted. The court noted that the recognition certificate is to be issued to enable the dealer to avail of the concessional rate of tax prescribed in section 6(2)(b). The Act does not expressly provide for rescinding the certificate, but it cannot be the legislative intention that a dealer should enjoy the benefits of the certificate indefinitely, irrespective of changes in circumstances or conduct. The court concluded that the power to rescind the certificate is necessarily implied and therefore, the State Government has the authority to cancel recognition certificates.

3. Applicability of Section 21 of the M.P. General Clauses Act, 1957:
Section 21 of the M.P. General Clauses Act provides that the power to issue notifications, orders, rules, or by-laws includes the power to add, amend, vary, or rescind them. The court examined whether the issuance of a recognition certificate or the order issuing it could be considered a notification or order under Section 21. The court referred to various decisions, including Kamla Prasad Khetan v. Union of India, State of Bihar v. D.N. Ganguly, and State of Kerala v. M.G. Madhavan Pillai, to determine the applicability of Section 21. The court concluded that Section 21 embodies a rule of construction that should be applied only if the construction cannot be determined with reference to the context or subject matter of a particular statute. In this case, the provisions of Section 21 are clearly attracted, and the power to rescind the certificate is not exhausted upon its grant.

4. Procedural fairness in issuing the show cause notice:
The petitioner challenged the notice requiring it to show cause why the recognition certificate should not be canceled, based on a decision reported in Kherstone Crusher v. General Manager, District Industries Centre, Jabalpur, and the actual work being done in the petitioner's establishment. The court noted that addressing this issue would involve entering into disputed questions of fact, which it was not inclined to do at this stage. The court directed that if the petitioner submits a reply to the show cause notice within two months, the second respondent should, after giving the petitioner an opportunity of being heard, take a decision under rule 14-C, sub-rule (4) of the Rules.

Conclusion:
The writ petition was dismissed, with the court directing the petitioner to submit a reply to the show cause notice within two months and the second respondent to take a decision after giving the petitioner an opportunity of being heard.

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