2010 (5) TMI 772 - HC - VAT and Sales Tax

Whether the non-payment of arrears of tax and penalty would disentitle the petitioner from getting the C form licence? Held that - Though normally show-cause notice cannot be challenged by filing a writ petition under article 226 of the Constitution of India, in view of the fact that there is an unjust denial to issue C form licence to the petitioner and that too, when the respondent has no jurisdiction to do so, thus inclined to hold that though the impugned communication is a show-cause notice, this court can entertain the present writ petition. In view of the above facts and circumstances, there shall be an order of interim direction directing the respondent to issue C form licence to the petitioner pending disposal of the writ petition.

Summary

Issues:
Challenging denial of statutory C form issuance by respondent based on arrears of tax and penalty; Interpretation of statutory provisions under Puducherry Value Added Tax Act, 2007 and Central Sales Tax Act, 1956; Jurisdiction of the court to entertain writ petition against denial of C form license issuance.

Analysis:
The petitioner, a dealer of petroleum products, challenged the respondent's denial of issuing the statutory C form based on alleged arrears of tax and penalty. The petitioner contended that even if tax liabilities exist, it should not hinder the issuance of the C form license. The respondent argued that the proceedings were a show cause and the petitioner must respond before seeking judicial intervention, citing relevant legal precedents. The court noted a disputed question regarding tax payment by the petitioner and the necessity to await a counter from the respondent.

Regarding the entitlement to the C form license, the court examined the provisions of the Puducherry Value Added Tax Act, 2007, and the Central Sales Tax Act, 1956. The court highlighted that while the former allows withholding forms in recovery proceedings, the latter does not provide for refusing a C form license due to tax or penalty non-payment. The court emphasized that denying the license would unjustly obstruct the petitioner's business, suggesting alternative measures like attaching sale proceeds. The court differentiated between the power to recover taxes and the authority to withhold C form licenses.

The court addressed the respondent's reliance on legal judgments emphasizing limited judicial review for show cause notices. However, the court distinguished the present case, asserting that the denial of the C form license lacked jurisdiction. Despite general restrictions on challenging show cause notices, the court found merit in entertaining the writ petition due to the respondent's unjust refusal without proper authority. Consequently, an interim direction was issued, mandating the respondent to issue the C form license to the petitioner until the final disposal of the writ petition. The court scheduled further proceedings for counter submissions, ensuring a comprehensive review of the case.