2014 (11) TMI 837 - HC - VAT and Sales Tax

Cancellation of Registration - Exercising power of revision under Section 75 read with Section 100 of the Gujarat VAT Act - violation of principle of natural justice - illegal acts and omissions by a trader - Held that - Principles of natural justice are not empty formalities. They are required to put a person likely to be visited with adverse order to notice why a proposed action not be taken for prima facie grounds indicated in the notice. When the very notice suggested exercise of powers under Section 75 which was for taking the order of subordinate officer under revision for appropriate reasons to be recorded, it would be in gross violation of principle of natural justice then to permit the authority to pass final order under entirely different provision which clothed the authority with vastly different powers. The error committed by the Deputy Commissioner does not end here. He, in fact, passed his final order under purported exercise of power under Section 75. Even while passing of the order he was not aware that the registration should or could be cancelled under Section 27(5) of the VAT Act and not be revised under Section 75 thereof. the order cannot be viewed as mere reference to a wrong statutory provision tracing the power of cancellation. It was rather a situation where the authority passed an order assuming jurisdiction under a wrong provision exercising powers of entirely different nature which powers were not available to him for revising the order of registration. Such order cannot be saved or cured by an affidavit suggesting that he intended to pass the order under Section 27(5) and there was a mere wrong reference to Section 75 read with Section 100 of the VAT Act. - all petitions allowed - Decided in favor of assessee.

Summary

Issues Involved:
1. Power of the Deputy Commissioner under Section 75 read with Section 100 of the VAT Act.
2. Limitation period for revising the registration order.
3. Validity of cancelling GST Act registration under VAT Act.
4. Misreference of statutory provisions in the cancellation order.
5. Alleged involvement in bogus billing activities.
6. Breach of natural justice in the cancellation process.

Issue-wise Detailed Analysis:

1. Power of the Deputy Commissioner under Section 75 read with Section 100 of the VAT Act:
The Deputy Commissioner initially issued a show-cause notice under Section 75 read with Section 100 of the VAT Act to cancel the petitioner's registration. However, it was later contended that the correct provision should have been Section 27(5) of the VAT Act. The court noted that Section 75 pertains to revision powers, which are different from the powers under Section 27(5) that allow for cancellation of registration for specific acts and omissions by the dealer.

2. Limitation period for revising the registration order:
The petitioner argued that the revision order was beyond the prescribed limitation period, as the registration was initially granted on 13.11.1995, and the Deputy Commissioner's order was passed well beyond five years from the date of registration. The court found this argument moot since the Deputy Commissioner's power under Section 27(5) allows for cancellation at any time, provided the grounds are established and due process is followed.

3. Validity of cancelling GST Act registration under VAT Act:
The court clarified that registrations granted under the GST Act, which were in force before the VAT Act came into effect, are deemed to be registrations under the VAT Act due to Section 23 of the VAT Act. Thus, the Commissioner has the power to cancel such registrations under Section 27(5) of the VAT Act.

4. Misreference of statutory provisions in the cancellation order:
The Deputy Commissioner's order referred to Section 75 read with Section 100 of the VAT Act, which was incorrect. The court emphasized that this was not a mere misreference but a fundamental error. The Deputy Commissioner exercised powers under a provision that was not applicable, leading to the conclusion that the order could not be saved by referring to the correct provision post-facto.

5. Alleged involvement in bogus billing activities:
The petitioner was accused of engaging in dubious transactions and bogus billing, which led to the cancellation of its registration. The court noted that while the Deputy Commissioner had the authority to cancel registration under Section 27(5) for such activities, the entire process was flawed due to the incorrect statutory reference.

6. Breach of natural justice in the cancellation process:
The petitioner argued that the order was passed without disclosing adverse material, violating the principles of natural justice. The court agreed that the petitioner was not given a proper opportunity to defend itself against the correct statutory provisions, further invalidating the Deputy Commissioner's order.

Conclusion:
The court quashed the Deputy Commissioner's order and the Tribunal's partial confirmation, citing the exercise of jurisdiction under incorrect statutory provisions and the resulting violation of natural justice. The court allowed for the possibility of fresh proceedings under the correct legal framework if warranted by the circumstances.