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2020 (1) TMI 710 - HC - VAT and Sales TaxPrinciples of Natural Justice - cancellation of registration - Petitioner was purchasing natural gas by paying Central Sales Tax - SCN was issued to the Petitioner for cancellation of registration under the Central Sales Tax Act, 1956 - HELD THAT - The authority cancelling the certificate has to be satisfied that cause exists for cancellation of registration and the cancellation is to be done after due notice to the dealer. Therefore, if the dealer submits explanation to the show cause notice, the authority, before proceeding to cancel the registration, will have to be satisfied that the explanation is not proper. This procedure envisages that reasons need to be given to cancel the registration. The registered dealer is entitled to know why his explanation was not found satisfactory. The SCN issued to the Petitioner on the basis that the Petitioner had not effected sale of any of the goods specified therein in the year 2016-17. Thus Section 7(4) was invoked against the Petitioner. However, the impugned order refers to Section 7(5) of the Act. Section 7(5) of the Act deals with the contingency where registered dealer himself seeks cancellation of the registration - Petitioner has not made such application. Thus the order is unreasoned and without application of mind. The contention of the Petitioner of breach of principles of natural justice will have to be accepted - Petition allowed - decided in favor of petitioner.
Issues:
Challenge to order based on violation of principles of natural justice. Analysis: The petitioner, engaged in manufacturing activities, challenged an order passed by the Deputy Commissioner of Sales Tax, Navi Mumbai, dated 18 March 2019, alleging a violation of natural justice principles. The petitioner had purchased natural gas by paying Central Sales Tax and was registered under the Maharashtra Value Added Tax Act, 2002. A show cause notice was issued for cancellation of registration under the Central Sales Tax Act, 1956. The petitioner submitted responses and contentions, including legal decisions, but received an order with vague grounds of cancellation, citing "other reason, please specify." The High Court noted that the order lacked reasons and was based on Section 7(5) of the Act, pertaining to cases where the dealer seeks cancellation, which was not the situation here. The Court highlighted the importance of providing reasons for cancellation after due notice to the dealer, allowing them to understand why their explanation was deemed unsatisfactory. The Court examined Section 7 of the Central Sales Tax Act, 1956, which deals with the registration of dealers and the grounds for cancellation. It pointed out that the cancellation of registration must be based on valid reasons, and the dealer should be given an opportunity to present their case. The authority cancelling the registration must be satisfied that a cause exists for cancellation, and the cancellation should occur after due notice to the dealer. The Court emphasized that the registered dealer has the right to know why their explanation was not accepted and why the registration was being cancelled. In this case, the Court found that the order lacked proper reasoning and failed to follow the required procedure, leading to a breach of natural justice principles. Consequently, the High Court quashed and set aside the order dated 18 March 2019, restoring the proceedings initiated by the Respondent No.4 based on the show cause notice dated 19 June 2018. The Court directed the Respondent No.4 to provide a hearing to the petitioner and pass an appropriate order in accordance with the law. The writ petition was disposed of accordingly, ensuring that the principles of natural justice were upheld in the proceedings.
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