2010 (4) TMI 1014 - HC - Benami Property

Cancellation of the registration of the petitioners as dealer for resale of petrol and diesel in RC Held that - In cases where there has been violation of principles of natural justice writ would lie. The facts of the present case does not relate to assessment order but it is on cancellation of registration which affects the right of the petitioners to carry on business lawfully as guaranteed under article 19(1)(g) of the Constitution of India. The judgment relied upon by the learned counsel for the respondent is of no help to the respondent-Department at all. In such view of the matter, following the abovesaid order stated supra, no hesitation to hold that the impugned orders are in violation of principles of natural justice and accordingly, the impugned orders stand set aside and the writ petitions are allowed

Issues Involved:
1. Cancellation of registration certificates.
2. Alleged arrears of tax and penalties.
3. Violation of principles of natural justice.
4. Discrepancies between show-cause notices and impugned orders.
5. Alternative remedy and maintainability of writ petitions.
6. Compliance with statutory provisions and procedural fairness.

Detailed Analysis:

1. Cancellation of Registration Certificates:
The petitioners challenged the cancellation of their registration certificates for resale of petrol and diesel under various tax acts, including the Pondicherry General Sales Tax Act, 1967, and the Puducherry Value Added Tax Act, 2007. The respondent canceled the registrations based on alleged tax evasion and failure to pay penalties for several assessment years.

2. Alleged Arrears of Tax and Penalties:
The respondent issued notices stating that the petitioners were in arrears of tax for multiple assessment years. The petitioners contended that the returns filed by them were correct and that the sale of lubricants should be treated as second sales, not first sales. They argued that the tax should be paid only on volumes sold, not on supply.

3. Violation of Principles of Natural Justice:
The petitioners argued that the cancellation orders were passed without considering their objections and without providing sufficient time to respond. They claimed that the respondent did not furnish copies of documents relied upon and that the orders were arbitrary and without jurisdiction. The court noted that there were discrepancies between the reasons given in the show-cause notices and the impugned orders, indicating a violation of the principles of natural justice.

4. Discrepancies Between Show-Cause Notices and Impugned Orders:
The court observed that the show-cause notices cited non-payment of tax and penalties as the reason for proposed cancellation, while the impugned orders included additional reasons such as failure to file quarterly extracts regarding declaration form C. The court held that the petitioners were not given an opportunity to rebut these additional reasons, which constituted a violation of natural justice.

5. Alternative Remedy and Maintainability of Writ Petitions:
The respondent argued that the petitioners had an alternative remedy by way of revision petitions, which they had initially filed but later withdrawn. The court held that in cases of violation of natural justice, the availability of an alternative remedy is not a bar to filing a writ petition. The court emphasized that the right to carry on business is a fundamental right under Article 19(1)(g) of the Constitution of India, and any action affecting this right must comply with principles of natural justice.

6. Compliance with Statutory Provisions and Procedural Fairness:
The court noted that the respondent did not follow the statutory provisions and procedural fairness in canceling the registrations. The respondent failed to provide the petitioners with the necessary documents and did not consider their objections adequately. The court cited previous judgments where similar orders were quashed for violating natural justice principles.

Conclusion:
The court set aside the impugned orders of cancellation, holding that they were in violation of the principles of natural justice. The court allowed the writ petitions and directed that it is open for the respondent to proceed in accordance with the law, ensuring compliance with procedural fairness and statutory provisions. No costs were awarded, and connected miscellaneous petitions were closed.

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