2009 (11) TMI 875 - HC - VAT and Sales Tax

Natural justice - cancellation of registration of dealers - Held that - Considering the fact that the status as a registered dealer confers certain rights and privilege on the dealer under the Act, in fairness to the rights of the petitioner, the respondent should have intimated about not only the rejection of the request seeking time but also the grounds on which the proposal is made, so that the petitioner has the opportunity to rebut the same - there is no hesitation in accepting the plea of the petitioner that the order is passed without observing the principles of natural justice and the same has to be set aside - petition allowed - decided in favor of assessee.

Summary

Issues:
Cancellation of registration under Value Added Tax Act and Central Sales Tax Act, violation of principles of natural justice, multiple reasons for cancellation, failure to inform grounds for cancellation, dispute over arrears of tax.

Cancellation of Registration under Value Added Tax Act and Central Sales Tax Act:
The petitioner sought a writ of certiorari to quash the order cancelling their registration under the Value Added Tax Act and the Central Sales Tax Act. The respondent justified the cancellation due to the petitioner being in arrears of tax, posing a potential loss to the government. The petitioner was given an opportunity to respond, but despite requesting additional time to prepare a reply, the registration was canceled abruptly without addressing the request for an extension. The court found that the order lacked adherence to principles of natural justice as the petitioner was not informed of the grounds for cancellation, denying them the chance to rebut the reasons provided.

Violation of Principles of Natural Justice:
The court emphasized that the cancellation of registration should have been accompanied by a clear indication of the grounds for the action, allowing the petitioner a fair opportunity to contest the decision. It was noted that the order cited multiple reasons for cancellation, including the failure to file a required declaration form, without proper communication to the petitioner. The court held that the order was passed without observing the principles of natural justice, necessitating its setting aside.

Dispute over Arrears of Tax:
A discrepancy arose regarding the arrears of tax, with the respondent alleging non-payment while the petitioner claimed to have paid more than the demanded amount based on an audit statement. The court refrained from delving into the factual dispute but directed the parties to resolve the issue of arrears and verify the actual payments made. Despite setting aside the impugned order, the court clarified that the respondent could proceed lawfully in addressing any outstanding tax matters.

In conclusion, the court allowed the writ petition, setting aside the order canceling the petitioner's registration under the Value Added Tax Act and the Central Sales Tax Act. No costs were awarded, and the connected miscellaneous petition was closed.