2008 (8) TMI 875 - HC - VAT and Sales Tax

Additional security demanded and cancellation of registration both provincial and Central - Held that - Security, as per terms of section 8C can be demanded for proper realization of tax or penalty. It may be true that the dealer has deposited the admitted tax along with the return for the month of July 1999. This is one aspect of the matter. Looking to the facts and circumstances of the case and taking into consideration the fact that the applicant is not a resident of Farrukhabad, the interest of justice would be sub-served if the applicant is required to furnish the additional securities of two registered dealers of ₹ 3 lakhs instead of ₹ 5 lakhs. In other respects the order demanding the additional security remains intact. Six weeks time is granted to furnish the additional security from the date of order.

Summary

Issues:
1. Demand for additional security under section 8C of the U.P. Trade Tax Act, 1948.
2. Cancellation of registration under the Act and Central Sales Tax Act for failure to furnish additional security.

Analysis:
1. Demand for Additional Security:
The revisions arose from an order demanding additional security under section 8C of the Act. The assessing officer demanded additional security of Rs. 5 lakhs from the dealer, citing the high turnover as the reason to safeguard the Revenue's interest. The dealer challenged the demand, questioning its justification. The dealer argued that the demand was arbitrary and not linked to the disclosed turnover. The court analyzed the provisions of section 8C, which allow for demanding additional security for proper realization of tax or penalty. The court emphasized that the objective is to protect the Revenue's interest in case of default by the dealer. The court noted that the assessing officer considered relevant factors, such as the dealer's turnover and lack of property at the business location, in demanding additional security. The court rejected the dealer's argument that section 8C was not applicable since no tax or penalty was due at the time of the demand.

2. Cancellation of Registration:
The subsequent orders cancelling the dealer's registration under the Act and Central Sales Tax Act due to failure to furnish additional security were also challenged. The court held that if the dealer complies with the order to furnish additional security within the specified time, the cancellation of registration would stand cancelled automatically. The court, considering the circumstances, reduced the required additional security amount from Rs. 5 lakhs to Rs. 3 lakhs. The court granted six weeks for the dealer to furnish the revised additional security. The judgment allowed one revision in part and disposed of the others based on the observations made in the judgment.

In conclusion, the court upheld the demand for additional security under section 8C, emphasizing the need to protect the Revenue's interest. The court provided relief to the dealer by reducing the additional security amount and granting time for compliance, ensuring the cancellation of registration would be revoked upon fulfilling the revised security requirement.