2001 (9) TMI 1108 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to order under Gujarat Sales Tax Act, 1969 - retrospective cancellation of registration affecting transactions - reliance on apex Court decisions - assessment based on cancellation - benefit to purchasing dealer - genuineness of transactions - re-examination of case required.

Analysis:
In this petition under article 226 of the Constitution, the petitioner, a registered dealer under the Gujarat Sales Tax Act, 1969, challenged an order passed under section 48 of the Act, two provisional attachment orders under section 48A, and an assessment order passed by the Sales Tax Officer. The petitioner had purchased goods from dealers who were registered under the Act at the time of transactions in 1995-96. However, the Sales Tax Department retrospectively cancelled the registration of three dealers, leading to the transactions being treated as purchases from unregistered dealers. The petitioner contended that the retrospective cancellation should not affect the transactions as they were bona fide and based on the dealers' valid registration at the time.

The petitioner relied on the decision of the apex Court in State of Maharashtra v. Suresh Trading Company and a previous decision of the High Court to support the argument that a purchasing dealer is entitled to rely on the registration certificate of the selling dealer and that retrospective cancellation should not impact transactions made in good faith. The respondent authorities argued that the retrospective cancellation logically implies purchases from unregistered dealers, justifying the assessment based on such cancellation.

The Court referred to the apex Court's decision in State of Maharashtra v. Suresh Trading Company, emphasizing that a purchasing dealer can act based on the selling dealer's valid registration and that retrospective cancellation should not affect genuine transactions. The High Court further clarified in Giriraj Sales Corporation v. State of Gujarat that the purchasing dealer must benefit from this principle if transactions were bona fide and without fraudulent intent. The Court noted the State Government's stand, as reiterated by the respondent's counsel, that genuine transactions should not be affected by relevant provisions.

Consequently, the Court directed the respondents to re-examine the case in line with the principles established by the apex Court and previous decisions of the High Court. The assessment orders were quashed, and the respondents were instructed to make a fresh decision considering the genuineness of transactions and the legal principles outlined. The petition was allowed, the assessment order was set aside, and the attachment orders were quashed, with no costs imposed.