2011 (5) TMI 887 - HC - VAT and Sales Tax

Cancellation of registration passed under section 17(11) of the U. P. Value Added Tax Act on the ground that the revisionist is not actually doing any business which is evident from the spot inspection report Held that - The question of law raised above is answered in favour of the revisionist and it is held that the grounds on which cancellation order has been passed are extraneous and are not covered by section 17(11)(c) of the Act not even within the meaning of sufficient cause as contained in section 17(11)(c)(ix) of the Act.

Summary

Issues:
Cancellation of registration under section 17(11) of the U. P. Value Added Tax Act.

Analysis:
The petitioner, a dealer in polythene bags and spices, challenged the cancellation of its registration under section 17(11) of the U. P. Value Added Tax Act. The registration was revoked based on allegations that the petitioner was not conducting any business, had made bogus purchases, and that the Taxpayer Identification Number (TIN) could be misused to cause revenue loss. The High Court analyzed the grounds for cancellation as per section 17(11) of the Act. The court noted that the specified grounds for cancellation did not include the reasons cited by the authorities. The court emphasized that non-transaction of business alone does not justify cancellation, as it does not directly impact revenue. Additionally, the allegation of bogus purchases was not substantiated, and the connection between the petitioner and the tax evasion activities of another firm was not established.

The primary ground remaining for cancellation was the potential misuse of the TIN for tax evasion. However, the court found no concrete evidence to support this claim. It highlighted that no specific instance of misuse was provided, neither by the petitioner nor the transporter associated with the petitioner. The court concluded that none of the reasons cited for cancellation fell under the clause "for any sufficient cause" in section 17(11) of the Act. The court interpreted that the phrase "for any other sufficient cause" was broad but maintained that the reasons for cancellation did not meet its criteria, as they did not demonstrate any impact on revenue.

Consequently, the court ruled in favor of the petitioner, holding that the grounds for cancellation were extraneous and did not align with the provisions of section 17(11) of the Act. The orders of cancellation issued by the authorities were set aside, and the revision was allowed without any costs.