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TMI Blog2009 (10) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... rnish additional security under section 17(1) of the KVAT Act to the tune of Rs. 89,33,177. On receipt of exhibit P10 notice, the petitioner submitted exhibit P11 reply contending that the time of 24 hours granted is unreasonable and insufficient. Further it is pointed out that the writ petition is posted for consideration on October 20, 2009. Inspite of the request to keep the proceedings in abeyance, exhibit P12 is issued by the third respondent cancelling registration of the petitioner granted under the KVAT Act and the CST Act. Through amendments brought into the writ petition, exhibit P12 proceeding is now under challenge. The petitioner in W.P. (C). No. 29600 of 2009 had approached this court challenging exhibit P9 notice issued proposing cancellation of registration. But after filing the writ petition the registration is cancelled as evidenced by exhibit P10 and by amendment brought into the writ petition the cancellation of registration is under challenge. W.P. (C). No. 29900 of 2009 is filed challenging exhibit P9 order wherein registration of the petitioner is cancelled. Since the cancellation of registration in all the three cases is based on the same set of facts and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the report of the Deputy Commissioner, Palakkad is to the effect that the petitioner had presented the cheques issued by the Axis Bank, Palakkad to the checkpost at Naduppuni making to believe the instrument as "demand drafts" and five cheques thus issued were dishonoured. Therefore there was a deliberate attempt of evasion of tax by cheating and misleading Government authorities and the petitioner have conspired with unscrupulous persons for submitting the cheques issued by "Peroorkadavu Farmers Development Society, Palakkad". In this case the petitioner has submitted detailed reply wherein it is stated that the chicken are generally transported during night hours in order to avoid hot sunlight and the vehicles may be arriving the check-post after 5 O'clock in the evening. Since it is not practical to obtain demand drafts during that time the petitioner was compelled to avail of service of certain persons at Palakkad to obtain and submit pay orders. Huge amounts of advance tax was paid with respect to all other consignments effected during the period from April 2009 to July 2009, which were properly credited to the Government account and the pay orders which are said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed notice under section 67 of the KVAT Act demanding penalty of Rs. 4 lakhs plus Rs. 2 lakhs as tax. The notice proposing to impose penalty is produced as exhibit P9. So also in the case of W.P. (C). No. 29900 of 2009 the petitioner was imposed with penalty to the tune of Rs. 4 lakhs and the petitioner had remitted the said amount by way of demand draft as evidenced by exhibit P8. One of the main grounds of challenge against the impugned orders is that, there is absolutely no ingredients brought out to establish any valid reason coming within the purview of section 16(10) of the KVAT Act. Section 16(10) reads as follows: "16. (10) Notwithstanding anything contained in sub-section (9), the registering authority shall have power, for good and sufficient reasons, to cancel, modify or amend any registration certificate issued by it." What amounts to "good and sufficient reasons" for the purpose of section 16(10) is enumerated in rule 17(18) of the KVAT Rules, which reads as follows: "17. (18) No registration shall be cancelled under sub-section (9) or sub-section (10) of section 16 without giving an opportunity to the dealer of being heard. For the purposes of (sub-section (10) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount covered by the cheque and makes prompt payment of tax or other amount due under the Act for a period of six months, the assessing authority shall restore the facility of payment by means of cheque." In the cases at hand the authority had not followed the procedure prescribed under rule 28. But at the very first moment when it is intimated that the cheques were dishonoured, the petitioners have paid or tendered the full amount covered under such dishonoured cheques. Therefore it is contended that the dishonour of cheque by itself could have been dealt with by imposition of the consequences as provided in rule 28, and it is not a "good and sufficient reason" for cancellation of registration. Another foremost contention against the impugned action is that, it is specifically mentioned that the Commissioner of Commercial Taxes had issued instructions to invoke provisions of the KVAT Act to cancel registration of the dealers. Hence it is clear that the authority who issued the impugned proceedings has not acted on the basis of any materials brought on to his satisfaction or after he became convinced that there is circumstances warranting such cancellation. It is contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner had played an active role in the commission of the fraud. It is further submitted that investigation is going on, based on a crime registered by the police. It is also contended that impugned orders are appealable under the KVAT Act, and hence the writ petition is not maintainable. Heard, M/s. K. Ramkumar, senior counsel, S. Anil Kumar and M. Ramesh Chander appearing on behalf of the petitioners and Shri K. Vinod Chandran, Special Government Pleader (Taxes) on behalf of the respondents. Arguments were advanced on behalf of the petitioners based on the above narrated grounds for interference with the orders impugned. On the other hand the learned Special Government Pleader vehemently opposed such contentions on more than one ground. At the outset, maintainability of the writ petitions are questioned on the basis of effective alternate remedy of appeal available under the statute. Learned counsel for the petitioners pointed out that there is no appeal provided against an order issued under section 16(9) of the KVAT Act, as per section 55(1) of the said Act. But it is specific that the impugned orders are not issued under sub-section (9) of section 16. The learned Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot constitute the ingredients necessary to invoke action for cancellation of registration. The learned Special Government Pleader raised a contention that the procedure in rule 28 is contemplated only with respect to dishonour of "a cheque" and when there is repeated dishonours it will amount to evasion of tax committed on more than one occasion, which is coming within the purview of section 16(9) of the KVAT Act, and which will warrant cancellation of registration. But the contention is liable to be repelled, since no action as enumerated in rule 28 was resorted to in any of these cases on the dishonour of any one of the cheques, on any earlier occasion, and also because of the fact that the action is initiated specifically on the basis of reasons contemplated under section 16(10), and not under section 16(9). The next question arising for consideration is as to whether there exists any other "good and sufficient reason" warranting cancellation of registration, apart from the mere dishonour of the cheques. It is brought out on record that the cheques in question were presented as if it were pay orders. From circular No. 25/2007 it is evident that the check-post authorities are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -application of mind and non-advertence to the objections. Therefore I am of the opinion that the impugned orders cannot be sustained while tested on the touch stone of the mandatory requirements of a quasi-judicial proceedings, and therefore those orders are liable to be quashed. But it is made clear that quashing of the impugned proceedings will not in any way prevent the competent authority in initiating fresh proceedings for cancellation of registration on issuing fresh notices, enumerating valid grounds either under section 16(9) or under section 16(10) of the KVAT Act read with rule 17(18) of the KVAT Rules, and in finalizing such proceedings after affording reasonable opportunity to the petitioners to object such proposal, and after affording opportunity of personal hearing. It is also made clear that quashing of the impugned proceedings is without prejudice to any other proceedings already initiated or which may be initiated against the petitioners for imposition of penalty, demand for additional security deposit, demand for payment of tax amounts due with interest, and such other proceedings. In the result the writ petitions are allowed quashing the impugned orders in al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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