2019 (5) TMI 498 - HC - VAT and Sales Tax

Restoration of registration of petitioners - suspension of certificate of registrations - non-payment of Entry tax - section (5A) of section 27 of the VAT Act - Jurisdiction - power of Commissioner to suspend the registration of a dealer - HELD THAT - Sub-section (5A)(1) of section 27 of the VAT Act which grants powers to the Commissioner to suspend the registration of a dealer, it is crystal clear that such power can be exercised only for the failure on the part of the dealer to pay the tax under section 30 of the VAT Act. Further, under sub-section (27) of section 2 of the VAT Act, tax means a tax leviable and payable under the Act on sales or purchase of goods and includes lump sum tax leviable or payable under section 14, 14A, 14B, 14C or 14D. Admittedly, on the facts of the case, the order of suspension of registration of the petitioners is passed on failure of the petitioners in non-payment of Entry tax, which is evident from the documents produced along with the affidavitin- reply filed by the respondents wherein it is revealed that for the year 2014-15, 2015-16 and 2016-17, a total amount of Entry tax not paid by the petitioner was ₹ 16,53,961/- whereas the VAT Act not paid is ₹ 61,186/- - from the aforesaid facts, it is clear that the petitioners certificate of registration has been suspended from 1.6.2016 to 31.3.2017 for non-payment of Entry tax by the petitioner for which the provisions of sub-section (5A) of section 27 of the VAT Act have been invoked by the respondents, which could not have been invoked by the respondents in view of the aforesaid clear provisions of the VAT Act as jurisdiction to suspend certificate of registration of the petitioner under VAT Act can be assumed only in case when any of the clause from (a) to (e) of the section 27(5A) of VAT Act is attracted. In view of the suspension of certificate of registration of the petitioners, the petitioners are unable to generate Form C under section 8(4) of the CST Act which is required to be delivered to the sellers of the goods by the petitioners so as to avail the benefit under the CST Act of reduced rate of tax. As the certificate of registration is not restored after the suspension period is over, the petitioner is also suffering from non-issuance of Form C under the CST Act. As the impugned order of suspension of registration of the petitioner under VAT act and CST Act is without jurisdiction, the same is hereby quashed and set aside - Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Suspension of Certificate of Registration under VAT Act and CST Act.
2. Non-payment of Entry Tax.
3. Jurisdiction of the Commissioner under Section 27(5A) of the VAT Act.
4. Issuance of "C" Forms under CST Act.
5. Restoration of Certificate of Registration.

Detailed Analysis:

1. Suspension of Certificate of Registration under VAT Act and CST Act:
The petitioners challenged the suspension of their registration certificates under the VAT Act and CST Act, arguing that the suspension was without jurisdiction. The court noted that the suspension was due to non-payment of Entry Tax, which is not a valid ground under Section 27(5A) of the VAT Act. The court highlighted that the power to suspend registration can only be exercised for specific failures listed in Section 27(5A), such as failure to inform changes, furnish returns, pay tax under Section 30, file declarations, or produce books of accounts.

2. Non-payment of Entry Tax:
The petitioners admitted to facing financial difficulties, resulting in delayed payment of Entry Tax. They had paid a significant portion of the outstanding dues but were still in arrears. The court observed that the suspension of registration was based on the non-payment of Entry Tax, which is not included in the definition of "tax" under Section 2(26) of the VAT Act. Therefore, the suspension for non-payment of Entry Tax was deemed without jurisdiction.

3. Jurisdiction of the Commissioner under Section 27(5A) of the VAT Act:
The court emphasized that the Commissioner could only suspend registration for reasons explicitly mentioned in Section 27(5A) of the VAT Act. Since non-payment of Entry Tax is not one of the specified reasons, the suspension order was found to be beyond the Commissioner's jurisdiction. Additionally, the suspension was applied retrospectively, which violated the statutory provisions.

4. Issuance of "C" Forms under CST Act:
The suspension of the petitioners' registration prevented them from generating "C" Forms required under the CST Act, causing undue hardship. The court referenced a previous judgment (M/s. Manan Autolink Pvt. Ltd. v. State of Gujarat) to support the argument that the inability to generate "C" Forms due to unpaid VAT dues was illegal. The court directed the respondents to allow the petitioners to generate "C" Forms for the specified period, either online or manually.

5. Restoration of Certificate of Registration:
The court found that the respondents were unjustified in not restoring the petitioners' registration certificates after the suspension period ended. The court ordered the restoration of the certificates with effect from 1.7.2016 and directed the respondents to facilitate the issuance of "C" Forms for the relevant period.

Conclusion:
The court quashed the suspension order, deeming it without jurisdiction, and directed the restoration of the petitioners' registration certificates under the VAT Act and CST Act. The respondents were instructed to allow the generation of "C" Forms for the specified period, ensuring compliance with the CST Act. The petition was allowed with no order as to costs.