1998 (1) TMI 503 - HC - VAT and Sales Tax

Summary

Issues:
Cancellation of registration under U.P. Trade Tax Act and Central Sales Tax Act due to failure to furnish additional security of Rs. 2,00,000 demanded by the Trade Tax Officer.

Analysis:
The petitioner, a firm engaged in business activities including iron, steel, building materials, and stone grits, had its registration under the U.P. Trade Tax Act and Central Sales Tax Act cancelled for not providing additional security of Rs. 2,00,000 as demanded by the Trade Tax Officer. The notice demanding additional security did not specify reasons, and the petitioner objected to furnishing it. Despite a court order staying the cancellation proceedings, the registration was still revoked on grounds of non-appearance and non-furnishing of additional security.

The legal provision under section 8-C of the U.P. Trade Tax Act allows the assessing authority to demand security for various purposes, including tax realization and form custody. However, sub-section (3) mandates that no security can be required without giving the dealer an opportunity to be heard, and the amount should not exceed the estimated tax payable for the relevant assessment year.

The court found that the assessing authority did not follow due process as required by law. The notice demanding additional security did not provide reasons, and the objections raised by the petitioner were not addressed through proper orders. The court emphasized that cancellation of registration has serious implications for a business and should only be done in compliance with statutory procedures.

Ultimately, the court quashed the impugned orders cancelling the petitioner's registration but allowed the assessing authority to proceed afresh if necessary and in accordance with the law. The judgment highlighted the importance of following proper procedures and providing opportunities for the dealer to be heard before taking such drastic actions.