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2020 (4) TMI 306 - HC - VAT and Sales TaxAb initio cancellation of the registration certificate of the appellant - It is claimed that the basis of the allegations and grounds neither made out nor established in the original order - Gujarat VAT Act - CST Act - principles of natural justice - HELD THAT:- Sub-section (5) of section 27 of the GVAT Act empowers the Commissioner to cancel the certificate of registration from such date as may be specified by him. On a plain reading of the sub-section, it appears that it is permissible for the Commissioner to cancel the registration even with retrospective effect - Thus under sub-section (5) of section 27 of the GVAT Act, the Commissioner is empowered to cancel the certificate of registration from such date as may be specified by him; under clause (1) of sub-se Since sub-section (5) of section 27 of the GVAT Act does not contain the words “from a date not earlier than the date of the order”, this is a clear indication of the legislative intent, not to curtail the date of cancellation of registration to the date of the order of cancellation of registration. In other words, sub-section (5) of section 27 of the GVAT Act permits the Commissioner to cancel the certificate of registration even with retrospective effect. This court is of the considered view that in case of non-payment of tax dues, the registration may be cancelled prospectively from the date of the order or at best from the date of violation; but not ab initio from the date of grant of registration or any date prior to the violation of the statutory provision. The registration of a dealer cannot be cancelled retrospectively to even include the period where the transactions were legal and valid and there was no violation in terms of any of the clauses contained in sub-section (5) of section 27 of the GVAT Act. While cancelling the registration of a dealer, the authority should consider the nature of the violation as well as the effect that the cancellation of the registration has, not only on the dealer but on all other dealers who have dealt with him. In case of mere non-payment of assessed tax dues, there is no illegality in the transactions entered into by the parties, and hence, the concerned authority should exercise discretion accordingly, and if it finds on facts that a case for cancellation is made out, it may cancel the registration prospectively. Thus, the Tribunal was not justified in confirming ab initio cancellation of the registration certificate of the appellant. Whether the Gujarat Value Added Tax Tribunal was justified in holding that the judgment of this court in the case of State of Gujarat v. Nageshi Enterprise, [2016 (12) TMI 886 - GUJARAT HIGH COURT], wherein the dealer had specifically admitted that he was not entitled to input tax credit, would be applicable to the facts of present case? - HELD THAT:- The decision of this court in State of Gujarat v. Nageshi Enterprise has been rendered in the peculiar facts of the said case wherein the dealer had specifically admitted that he was not entitled to input tax credit, whereas in the facts of the present case, the appellant has challenged the tax, interest and penalty till the stage of second appeal, and there is no admission on its part that the transactions in question were invalid. Question No.2 is also, therefore, required to be answered in favour of the appellant and against the respondent, namely, that the Tribunal was not justified in holding that the decision of this court in the case of State of Gujarat v. Nageshi Enterprise would be applicable to the facts of the appellant. Whether the Gujarat Value Added Tax Tribunal was justified in confirming the order of the first appellate authority confirming the cancellation of registration certificate of the appellant on the basis of the allegations and grounds neither made out nor established in the original order cancelling the registration certificate? - HELD THAT:- In the facts of the present case, no notice in Form 503 has been issued to the appellant prior to the first appellate authority taking into consideration the material which did not form part of the material before the Commercial Tax Officer. Moreover, this court is of the opinion that the provisions of sub-rule (1) of rule 57 of the GVAT Rules would be applicable to assessment proceedings wherein the appellate authority is of the opinion that the demand is required to be enhanced or the penalty is not proportionate to the default. In a case of cancellation of registration pursuant to a show cause notice, the appellate authority cannot travel beyond the grounds stated in the show cause notice and expand the scope of the proceedings by placing reliance upon additional material, which was not relevant to the grounds stated in the show cause notice. The Tribunal, in the impugned order, has failed to consider the scope of the proceedings before it and has upheld the order passed by the first appellate authority on the grounds which were extraneous to the show cause notice. Moreover, as discussed hereinabove, the Tribunal has thoroughly misunderstood the facts of the case while holding that appellant had accepted that the purchases were not genuine. The Tribunal was, therefore, not justified in upholding the order passed by the first appellate authority whereby it had confirmed the order of cancellation of the registration certificate of the appellant - Answered in favour of the appellant and against the revenue. Appeal allowed - decided in favor of appellant.
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