2015 (2) TMI 928 - HC - VAT and Sales Tax

Cancellation of registration certificate - whether the Tribunal is correct in holding that the Appellant has not done any genuine business of buying and/or selling goods but issued only bogus bills without considering and examining the facts of the transactions of sale and purchase of goods brought to the notice of the Tribunal - Held that - If there was no genuine business transaction and carried on in the name of this entity, then, how the registration certificate was issued and on whose application and in relation to what business transaction is not adverted to, at all. - If the notice in Form No.309 is relied upon and the order recites that it was issued, then, the further finding that it was duly served by affixing a copy thereof on 3rd October, 2012 appears to be contradictory. It was issued and stated to have been reversed, then, why it came to be affixed has not been clarified at all. If the affixation has been done because none was found in the premises on whom personal service could have been effected, then, a clear endorsement in that behalf was required. If the act envisages a request being made by the dealer for cancellation of the Registration certificate and order in that behalf is capable of being reviewed, then, that is to precede by serving the concerned dealer a notice in the prescribed form. If Rule 87 of the MVAT Rules, 2005 are referred to, then, that demands service of orders and notices by delivery by hand of a copy of the order or notice to the addressee or to a person declared by him in Form 105 or to his agent duly authorized in this behalf by him, or to a person for the time being employed by him in connection with the business in respect of which he is registered as a dealer, or to any adult member of his family residing with the dealer. Therefore, one of the modes has to be adopted and in terms of Rule 87(1)(a)(b)(c)(d) and (e) all these are either hand delivery or by post or by email or by sending a copy of the order or notice by a courier agency appointed by the Commissioner. If upon an attempt having been made to serve any order or notice by the above stated modes, does not result in the person being duly served and the sales tax authorities are of the opinion that the order or notice cannot be served by any of the above, then, he can resort to other more prescribed and which, inter alia, is affixing of such notice on the premises or office of the dealer. Tribunal ought to have been satisfied that the notice could not be served by the modes set out under rule 87(1) and, therefore, affixing was necessitated. Secondly, if the reliance is placed by the Tribunal on a statement being recorded during the course of investigation and that of the Appellant, then, the Appellant should have been put to notice of any such statement given by him. The Appellant ought to have been given an opportunity to inspect the record and which was before the Deputy Commissioner of Sales Tax when he passed the order dated 29th November, 2012. Thus, if there was evidence and material to indicate that the Appellant in collusion with the hawala operators perpetrated a fraud on the department by obtaining a bogus registration, then, all such documents and materials should have been disclosed to the appellant much in advance so that he could have dealt with them. There was a necessity of giving a proper and complete opportunity to the Appellant to contest the factual materials we quash and set aside the order of the Tribunal and restore the VAT Appeal on the file of the Tribunal for rehearing and decision afresh on merits and in accordance with law - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Challenge to order passed by Maharashtra Sales Tax Tribunal in VAT Appeal Nos.336 and 337 of 2013; Cancellation of registration certificate from inception; Allegations of issuing bogus bills; Substantial question of law regarding genuineness of business transactions; Interpretation of subsections (2) of section 27 of the Maharashtra Value Added Tax Act, 2002 and subsection (2) of section 9 of the Central Sales Tax Act, 1956.

Detailed Analysis:

1. The appeal challenged the order passed by the Maharashtra Sales Tax Tribunal in VAT Appeal Nos.336 and 337 of 2013, which dismissed the VAT appeals against the cancellation of the appellant's registration certificate from the inception, effective from 14th August, 2006. The primary issue raised was whether the appellant conducted genuine business transactions or merely issued bogus bills, which was the subject of substantial legal question.

2. The appellant, a proprietor dealing in electronic goods, was registered under the Maharashtra Value Added Tax Act, 2002 and the Central Sales Tax Act, 1956. The appellant claimed to have carried out legitimate buying and selling activities, filed returns, and paid taxes as required by law. However, the registration certificate was canceled, leading to a series of legal proceedings challenging the cancellation.

3. The appellant contended that the cancellation of the registration certificate was done without proper notice or knowledge, and subsequent modifications were made without their awareness. Allegations of colluding with hawala operators to facilitate fraudulent transactions were raised, leading to the cancellation of the certificate from the inception. The appellant argued that due process was not followed in reviewing and canceling the registration.

4. The High Court found merit in the appellant's contentions regarding the lack of proper notice and procedural irregularities in the cancellation process. The court highlighted the importance of providing the appellant with a fair opportunity to contest the factual materials and incriminating statements attributed to them. The court emphasized the need for transparency and due process in dealing with such serious allegations.

5. Consequently, the High Court quashed and set aside the order of the Tribunal, restoring the VAT appeal for rehearing and decision afresh on merits and in accordance with the law. The court clarified that it had not expressed any opinion on the merits of the case and instructed the Tribunal to expedite the disposal of the appeal. The appellant was granted access to all relevant records and documents for inspection before the rehearing.

6. The court's decision aimed to ensure that the appellant receives a fair opportunity to contest the allegations and present their case effectively. By setting aside the previous order and directing a rehearing, the court upheld the principles of natural justice and procedural fairness in the legal proceedings. The judgment underscored the importance of adhering to legal procedures and providing parties with a proper platform to address the accusations leveled against them.