2016 (8) TMI 296 - HC - VAT and Sales Tax

Validity of cancellation of TIN registration number - merit of the case not examined principle of natural justice - GVAT - Sub-rule (3) of rule 10 postulate a specific mandate to the authority that when the Commissioner intends to cancel or suspend the registration under sub-rule (5) or (5A) of section 27, he shall give a notice to the dealer with form No.104 Held that - the authority before canceling the registration of the appellant, has not observed this specific procedure as contained under the relevant rules - In the present case however, no notice either in form No.104, or any other manner was issued to the petitioner why the registration should not be canceled. The reasonable opportunity concept is brushed aside before taking action against the appellant and therefore, the impugned orders are required to be quashed and set aside hereby matter remanded back - Decided in favor of appellant.

Summary

Issues Involved:
1. Validity of the cancellation of the appellant's TIN number without service of notice in Form No.104 as required under Rule 10(3) of the Gujarat Value Added Tax Rules.
2. Compliance with the principles of natural justice in the cancellation process.
3. Consideration of the appellant's dealings with registered dealers whose TIN numbers were later canceled.

Detailed Analysis:

1. Validity of the Cancellation of TIN Number:
The primary issue was whether the Gujarat Value Added Tax Tribunal was justified in holding that there was no requirement for service of notice in Form No.104 before the cancellation of the appellant's registration under Section 27(5) of the Gujarat Value Added Tax Act, 2003. The appellant argued that the Deputy Commissioner of Commercial Tax canceled their TIN number without following the mandatory procedure prescribed under Rule 10(3), which requires the issuance of a notice in Form No.104. The Tribunal and the Appellate Authority dismissed the appeals without examining the merits, focusing solely on the cancellation of the TIN numbers of the dealers the appellant had dealt with.

2. Compliance with Principles of Natural Justice:
The appellant contended that the authorities failed to provide an appropriate opportunity to present their case, violating the principles of natural justice. The appellant was not notified about the possible cancellation of their registration, nor was any opportunity given to respond to the cancellation issue. The court emphasized that the principles of natural justice apply to administrative, quasi-judicial, and judicial exercises of power. The statutory authority must observe these principles before exercising its powers.

3. Consideration of Dealings with Registered Dealers:
The appellant purchased goods from two registered dealers, M/s. Laxmi Corporation and M/s. Khodiyar Traders, whose registrations were valid at the time of the transactions. The subsequent cancellation of these dealers' registrations should not affect the appellant's transactions. The court noted that the Tribunal failed to consider this aspect and the relevant case law, such as Mit Traders v. State of Gujarat, which dealt with similar issues.

Judgment:
The court found that the authorities did not follow the mandatory procedure prescribed under Rule 10(3) of the Gujarat Value Added Tax Rules, which requires the issuance of a notice in Form No.104 before canceling a registration. The court held that the failure to provide notice and an opportunity to be heard violated the principles of natural justice. The court quashed and set aside the impugned orders, answering the substantial question of law in favor of the appellant. The tax appeal was allowed to the extent that the cancellation of the appellant's registration was invalid due to non-compliance with the statutory procedure and principles of natural justice. The Civil Application (OJ) No. 551 of 2015 was also disposed of accordingly.