2014 (4) TMI 689 - HC - VAT and Sales Tax

Business transaction after filing of application for cancellation VAT registration but in the absence of any order from the VAT authorities assuming that registration was not cancelled - What would be the effect of withdrawal of application seeking cancellation of registration before the order of conciliation passed on an application u/s 27(1) of Gujarat VAT Act is communicated - Effect of withdrawal of application seeking cancellation of registration Undated order - No evidence - Held that - It is noticed that in the interregnum period, no order of cancellation was passed on his application dated 30/10/2007 - Neither from the material on the record nor from the affidavit in reply, the respondent could satisfy of passing of such order before the application for withdrawal of the earlier application for cancellation of registration reached to the authority - Admittedly, there has been no communication of such undated order of cancellation and the said order is communicated on 27th February 2009 where the cancellation had been made effective from 30th September 2007, a month prior to the date of the application which is the date of discontinuation of business of appellant. Whether undated order was passed prior to 17/2/2009 - No evidence - Held that - It is also apparent from the pleadings and from the submissions that the official website of the respondent continued to reflect the status of the appellant as a registered dealer - Assuming that such reflection on the website may not have a bearing on the case of the appellant for such registration as the appellant as a dealer himself had applied for cancellation of the registration due to discontinuance of business and such information on the website of the Department is for the safeguarding the interest of the third parties - In absence of any material on record to indicate that pursuant to the first application u/s.27(1) any cancellation order in fact had been made by the concerned authority, this Court is of the firm opinion that before such order of cancellation had been passed when due communication of subsequent withdrawal of his earlier application has been effected, such subsequent cancellation by way of an order impugned dated 17th February 2009 deserves indulgence from this Court and the Tribunal certainly erred in holding that even in absence of communication of undated order, such order was valid - Whether in fact undated order was passed prior to 17/2/2009 itself is a serious question mark and therefore, Tribunal also erred in upholding validity of order of cancellation passed under subsection (1) of Section 27 of VAT Act when withdrawal was much prior to 17/2/2009. Absence of explicit provision for opportunity of hearing and communication Held that - It is noticed that in the event of the dealer himself applying for cancellation of registration u/s 27(2), there is no explicit provision for availing an opportunity of hearing to the dealer as he himself is the applicant volunteering for such cancellation, nor is there any express provision for communicating such order - The reflection of the status of the present dealer as a registered dealer on 26th January 2008 was on account of the official website not being updated - Such updation if not regularly done, confusion and disputes are found to consequently follow - To avert these factual disputes the communication of the order of cancellation of certificate of registration must be done, even if such cancellation is made pursuant to the application made by the dealer himself - Section 27(1) makes it incumbent upon the Commissioner to publish in the manner prescribed, status of the dealer when certificate of registration has been cancelled under the provisions of this Act - Resultantly, all the questions raised in this Appeal are answered in favour of the appellant - The Order of the Tribunal dated 1st May 2013 is set aside so also consequential order dated 17th February 2009 cancelling the registration of the petitioner Decided in favour of assessee.

Issues Involved:
1. Validity of the tribunal's decision regarding the communication of the cancellation order.
2. Validity of the cancellation order under Section 27(1) of the Gujarat Value Added Tax Act, 2003.
3. Requirement and consequences of communicating the cancellation order under Section 27(3) of the Act.

Detailed Analysis:

Issue 1: Validity of the tribunal's decision regarding the communication of the cancellation order
The appellant, a proprietary concern registered under the Gujarat Value Added Tax Act, 2003, challenged the tribunal's decision that upheld an earlier order of cancellation of registration without its communication to the appellant. The appellant argued that no communication was received regarding the cancellation order before 17th February 2009. The tribunal had erred in law and facts by holding the earlier order valid despite the absence of communication. The court noted that the appellant continued to hold the registration and engaged in business transactions under the belief that the registration was not canceled due to the lack of communication from the respondent.

Issue 2: Validity of the cancellation order under Section 27(1) of the Gujarat Value Added Tax Act, 2003
The appellant applied for cancellation of registration on 30th October 2007 but later sought to withdraw this application on 2nd July 2008 due to new business opportunities. The respondent argued that the initial application for cancellation should be deemed accepted and that the subsequent application had no bearing. The court found that there was no evidence of an order of cancellation being passed before the appellant's withdrawal application. The undated cancellation order communicated on 17th February 2009 was not valid as it was not passed before the withdrawal application was submitted.

Issue 3: Requirement and consequences of communicating the cancellation order under Section 27(3) of the Act
The court examined the statutory provisions under Section 27 of the VAT Act, which require the registration authority to cancel the registration upon satisfying the conditions specified in subsection (1). The court emphasized the need for communication of the cancellation order, even when the dealer himself applies for cancellation. The absence of communication and the continued reflection of the appellant's status as a registered dealer on the official website led to confusion. The court held that the tribunal erred in upholding the validity of the undated cancellation order and that proper communication of the cancellation order is essential to avoid disputes.

Conclusion:
The court answered all the questions in favor of the appellant, setting aside the tribunal's order dated 1st May 2013 and the consequential cancellation order dated 17th February 2009. The court clarified that the reactivation of the registration should be effective from the date of the withdrawal application. The appeal was disposed of with no order as to costs.

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