2004 (9) TMI 632 - HC - VAT and Sales Tax

Summary

Issues Involved:
Challenge to rejection of registration application under KGST and CST Acts based on credibility of sureties and security offered.

Analysis:
The petitioner challenged the rejection of their registration application under the KGST and CST Acts in exhibit P8. The officer cited reasons such as the owner of the mill, which the petitioner leased, claiming not to know the petitioner and the lack of credibility of the sureties provided. The officer also highlighted that one of the sureties was already a surety for a defaulter, raising concerns about the financial integrity of the sureties. The petitioner argued that the rejection of a surety should not be a ground for declining registration and offered two additional sureties. The court emphasized that registration should generally be granted under the Acts to promote accountability and discourage unregistered business activities, as the department would still need to recover taxes from unregistered dealers. However, the assessing officer was justified in demanding proper security to ensure tax recovery in case of default. The security offered should be easily convertible into cash, such as a bank guarantee or landed property. Even if a large security amount cannot be provided, the officer can monitor the dealer's activities closely to ensure compliance and cancel registration in case of violations.

The court directed the officer to consider exhibit P8 as a proposal for rejection but instructed the petitioner to produce a proper lease deed for the business place and godown, along with offering security in the form of a bank guarantee or landed property with necessary documentation. The officer was tasked with verifying the lease deed, summoning the building owner, conducting local inquiries, and inspections to ensure the legitimacy of the lease before granting registration. The writ petition was disposed of, with the officer instructed to reconsider the matter if the petitioner complies with the requirements. If credible sureties with sufficient assets were not provided, the officer could accept a bank guarantee and continue monitoring the business closely to prevent tax liabilities from accumulating. A final decision on the registration application was to be made within one month of the petitioner submitting the lease deed and security as specified.