2011 (2) TMI 1340 - HC - VAT and Sales Tax

Cancellation of VAT registration granted earlier to the petitioner - Held that - The statutory prescription of section 19(2) of the Act is that the dealer should first be put on notice, be given an opportunity of being heard, and only thereafter is the prescribed authority entitled to cancel registration, that too only if he is satisfied that there are good and sufficient reasons to do so. Admittedly, the show-cause notice dated May 19, 2010 was not even served on the petitioner before the certificate of registration was cancelled. As the petitioner was neither put on notice nor given an opportunity of being heard, the impugned order of cancellation of registration dated July 26, 2010 falls foul of the statutory requirement of section 19(2) of the Act and is therefore, quashed. We have taken a lenient view considering the fact that the first respondent is more than 57 years of age, and she is on the verge of retirement from service. For her attempts to show the petitioner in poor light, only with a view to escape blame for her illegal acts, we consider it appropriate to impose exemplary costs quantified as ₹ 5,000 which the first respondent shall pay from her pocket to the petitioner within a period of four weeks from today. Writ petition is allowed with exemplary costs

Issues involved:
1. Cancellation of VAT registration by the first respondent.
2. Allegations of illegal and arbitrary actions by the first respondent.
3. Dispute over possession of business premises.
4. Failure to issue way bills despite registration.
5. Violation of statutory requirements under the Andhra Pradesh Value Added Tax Act, 2005.
6. Allegations of perjury and misleading conduct by the first respondent.
7. Contradictory statements and falsehood by the first respondent.
8. Failure to follow due process and provide opportunity to be heard before cancellation of registration.
9. Imposition of exemplary costs on the first respondent.

Detailed Analysis:
1. The petitioner challenged the cancellation of their VAT registration by the first respondent, alleging it to be arbitrary, illegal, and without jurisdiction. The petitioner, a partnership firm engaged in the manufacture and sale of PVC pipes, acquired a sick unit through a public auction conducted by the Andhra Pradesh State Financial Corporation. They claimed peaceful possession of the factory premises and machinery after executing a sale deed. The petitioner applied for VAT registration, which was granted but later canceled by the first respondent without issuing way bills, leading to the dispute.

2. The petitioner contended that they were unaware of the registration cancellation until later communication, highlighting discrepancies in the notices and lack of reasons provided for the cancellation. The first respondent, in response, stated that the cancellation was due to a dispute over the business premises' title. The court found that the cancellation lacked proper notice and opportunity for the petitioner to be heard, violating statutory requirements under the Act.

3. The judgment also addressed the dispute over possession of the factory premises, involving legal proceedings and interim orders related to the auction and possession of plant and machinery. The court considered these events in the context of the VAT registration cancellation issue to determine the legality of the first respondent's actions.

4. Allegations of perjury and misleading conduct were raised against the first respondent regarding contradictory statements and the method of sending notices. The court noted discrepancies in the dates and modes of service of notices, questioning the credibility of the first respondent's submissions and highlighting the importance of truthfulness in legal proceedings.

5. The court emphasized the necessity of following due process before canceling a registration under the Act, citing section 19(2) requirements for notice, opportunity to be heard, and valid reasons for cancellation. As the petitioner was not given a fair opportunity to contest the cancellation, the court quashed the order and deemed it illegal.

6. In light of the first respondent's actions and falsehoods, the court imposed exemplary costs on her as a penalty for attempting to mislead the court and justify the illegal cancellation of registration. Despite considering the first respondent's age and imminent retirement, the court held her accountable for the wrongful conduct and ordered payment of exemplary costs to the petitioner within a specified timeframe.

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