2018 (9) TMI 158 - HC - VAT and Sales Tax

Cancellation of registration with retrospective effect - GVAT Act - Held that - Even if the cancellation of registration was to be upheld, the question is, should the same has been ordered with retrospective effect providing for cancellation of registration from inception. Even if such registration is cancelled, the purchasing dealers in their assessments can always argue that their transactions with the petitioner were genuine and that therefore they cannot be deprived of the input tax credit concerning such transactions. The cancellation of registration from the date of the order would continue to operate - petition allowed.

Summary

Issues:
Petition challenging retrospective cancellation of registration under the Gujarat Value Added Tax Act.

Analysis:
The judgment involves petitions filed by dealers challenging the retrospective cancellation of their registrations under the Gujarat Value Added Tax Act. The facts of the case revolve around a private limited company engaged in trading various commodities, whose registration was cancelled from inception due to suspicions of engaging in bogus billing activities. The cancellation was based on the authority's opinion that the company's transactions with other dealers were circuitous and aimed at inflating turnover for bank loans. The petitioner contended that all transactions were duly recorded, and no revenue linkage was established. The petitioner also argued against the retrospective cancellation, stating it could lead to complications for purchasing dealers. The Tribunal admitted the appeal but rejected the request for stay, prompting the petitioner to challenge this decision.

The petitioner's counsel argued that all transactions were recorded and audited, with no evidence of revenue linkage or bank loans. The cancellation with retrospective effect was deemed unjustified, especially considering the frequent nature of purchase and sale transactions in the commodities market. The petitioner raised concerns that retrospective cancellation could unfairly target purchasing dealers, impacting past transactions. On the other hand, the AGP opposed the petition, stating that the competent authority provided a speaking order after giving the petitioner an opportunity to represent. The AGP argued against granting interim protection, citing potential complications.

The High Court, after considering the arguments, focused on the issue of interim protection pending the revision petition before the Tribunal. The court highlighted the significance of not prejudicing either party during ongoing litigation. The court deliberated on the retrospective cancellation of registration, emphasizing that even if upheld, it should not have been ordered from inception. The judgment concluded by allowing all petitions and staying the cancellation of registrations to the limited extent of their retrospective effect, ensuring that the cancellation from the date of the order would continue to operate.