2011 (5) TMI 870 - HC - VAT and Sales Tax

What constitute the object and purpose of registration of a dealer under the sales tax laws? What is the scope of enquiry envisaged under sub-section (3) of section 19 of the Tripura Value Added Tax Act, 2004, and sub-rule (1) of rule 5 of the Central Sales Tax (Registration and Turnover) Rules, 1957, in the matter of granting of registration to a dealer ? Whether the satisfaction , which sub-section (3) of section 19 of the Tripura Value Added Tax Act, 2004, and section 7(3) of the Central Sales Tax Act, 1956, read with rule 5(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957, contemplates, is a satisfaction without any limits or fetters? Whether refusal of registration , in the present case, both under the Tripura Value Added Tax Act, 2004, and the Central Sales Tax Act, 1956, is based on irrelevant considerations having no nexus with the object behind incorporating the provisions for registration under the said Acts, and, if so, whether the refusal to register the petitioner as a dealer , under the relevant fiscal statutes, suffers from malice in law, if not malice in fact? Whether the petitioner is, in the facts and attending circumstances, entitled to compensation on account of the conduct of the respondents in not allowing registration to the petitioner as dealer , under the relevant fiscal statutes, so as to enable the petitioner to carry on its business? Held that - In the present case, the petitioner is not liable to pay tax under the CST Act, 1956, as he has not made any sale in the course of inter-State trade and commerce from the State of Tripura nor he can make any sale of coal in the State of Tripura and become thereby liable to pay tax under the local Sales Tax Act unless and until he is allowed to import coal into the State of Tripura. As the action of the respondents/authorities concerned in refusing registration of the petitioner as a registered dealer is wholly untenable in law and discloses malice in law, the petitioner has considerable force, when it claims compensation for the losses, which it has suffered. Thus, though the petitioner has been able to make out a good case for directing payment of suitable compensation for the losses, which the petitioner has suffered, this court, at this stage, refrains from passing any order directing payment of compensation to the petitioner by the respondents, particularly, respondent No. 3. The present one is, however, a fit case, where the writ petition needs to be allowed with reasonable cost. This writ petition is allowed with cost of ₹ 10,000 to be paid within one month from today and the impugned communication, dated December 30, 2010, is hereby set aside and quashed. Respondent No. 3 is hereby directed to grant to the petitioner-company necessary registration certificate in accordance with law without any further delay and within a period of, at best, two weeks from today.

Summary

Issues Involved:
1. Object and purpose of "registration" of a "dealer" under the sales tax laws.
2. Scope of "enquiry" under section 19(3) of the Tripura Value Added Tax Act, 2004, and rule 5(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957.
3. Limits of "satisfaction" under section 19(3) of the Tripura Value Added Tax Act, 2004, and section 7(3) of the Central Sales Tax Act, 1956.
4. Relevance of considerations for refusal of "registration" and whether such refusal suffers from malice in law.
5. Entitlement of the petitioner to compensation due to conduct of respondents in not allowing "registration".

Detailed Analysis:

Object and Purpose of "Registration" of a "Dealer":
The court emphasized that the primary object behind the "registration" of a "dealer" under the sales tax statutes is to facilitate the collection of tax and prevent evasion. This is supported by the Supreme Court's observations in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax and Periyar and Pareekanni Rubbers Ltd. The purpose of "registration" is to keep track of taxable transactions and ensure effective levy and collection of tax.

Scope of "Enquiry" under Section 19(3) of the TVAT Act, 2004, and Rule 5(1) of the CST Rules, 1957:
The court noted that the "enquiry" under section 19(3) of the TVAT Act, 2004, and rule 5(1) of the CST Rules, 1957, is limited to verifying if the application for "registration" is in order. This involves checking whether the particulars required under the relevant Acts and Rules have been furnished by the applicant. The enquiry is not judicial but administrative, focusing on the correctness and completeness of the application.

Limits of "Satisfaction" under Section 19(3) of the TVAT Act, 2004, and Section 7(3) of the CST Act, 1956:
The satisfaction required by the authorities must have a nexus with the objects sought to be achieved by the enactment. The satisfaction must be based on relevant materials required under the relevant Acts and Rules. The court cited Indian Nut Products v. Union of India and Smt. S. R. Venkataraman v. Union of India to emphasize that the satisfaction must be based on relevant grounds, and any irrelevant considerations would render the satisfaction invalid.

Relevance of Considerations for Refusal of "Registration":
The court found that the grounds for refusing "registration" to the petitioner were irrelevant and had no nexus with the objects of "registration". The refusal was based on non-submission of a pollution certificate, non-submission of a registered lease deed for the stockyard, non-submission of a certificate of incorporation recording a change of address, and subsequent withdrawal of the introducer's signature. The court held that these grounds were not relevant for the purpose of granting "registration" and amounted to an abuse of power.

Entitlement to Compensation:
The court acknowledged that the petitioner had suffered losses due to the respondents' refusal to grant "registration". The refusal was found to be arbitrary, illegal, and for reasons other than bona fide. The court refrained from awarding compensation but allowed the writ petition with costs of Rs. 10,000 to be paid to the petitioner. The court directed the respondent to grant the necessary "registration" certificate within two weeks.

Conclusion:
The court allowed the writ petition, set aside the impugned communication, and directed the respondent to grant the "registration" certificate to the petitioner within two weeks. The court also awarded costs of Rs. 10,000 to the petitioner.