2006 (7) TMI 600 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 8A(1B) of the U.P. Trade Tax Act regarding cancellation of registration.
2. Justifiability of cancellation of registration based on non-furnishing of additional security within the specified time.
3. Applicability of the three-month period for cancellation of registration in relation to additional security.

Analysis:
The High Court dealt with a revision under section 11 of the U.P. Trade Tax Act, 1948, challenging the Tribunal's order dated November 11, 1998, concerning the assessment year 1997-98. The case involved a dealer engaged in the business of manufacturing and selling foodgrains. The assessing authority demanded additional security of Rs. 6 lakhs from the dealer due to suspected tax evasion. When the dealer failed to provide the security by the specified date, a notice was issued for cancellation of registration under section 8A(1B) of the Act. The dealer sought time but ultimately had their registration cancelled on March 6, 1998. The Tribunal later overturned this decision, citing that the cancellation order was premature as it was issued before the three-month period specified in the Act.

The learned Standing Counsel argued that section 8A(1B) allows cancellation of registration if the dealer fails to pay tax, penalty, or other dues within three months. However, the additional security demanded under section 8C does not fall under these categories. Therefore, the three-month period does not apply to the additional security requirement. The Counsel contended that since the dealer did not furnish the security by the specified date, the cancellation of registration was justified without waiting for the three-month period to elapse. The Court agreed with this interpretation, emphasizing that under section 8A(1B), registration can be cancelled for any sufficient reason, including non-furnishing of additional security within the stipulated time.

The Court found merit in the Counsel's argument and held that the Tribunal's view that registration could only be cancelled after three months was incorrect. As additional security is not considered tax, penalty, or other dues, the three-month provision does not apply in this case. Therefore, the assessing authority was within its rights to cancel the registration upon the dealer's failure to provide the required security by the specified deadline. Consequently, the Court allowed the revision, set aside the Tribunal's order, and remanded the matter back to the Tribunal for a fresh decision based on the merits of the case.