TMI Blog2016 (6) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... raudulent means concealing the fact of cancellation of his CST registration. The issuance of a C Form in such instance would be void ab initio since it would not satisfy the requirement of Section 8(1) of the CST Act read with Section 7 (4) thereof. If the selling dealer has after making a diligent enquiry confirmed that on the date of the sale the purchasing dealer held a valid CST registration, and is also issued a valid C Form then such selling dealer cannot later be told that the C Form is invalid since the CST registration of the purchasing dealer has been retrospectively cancelled. Where, a selling dealer fails to make diligent enquiries and proceeds to sell goods to a purchasing dealer who does not, on the date of such sale, hold a valid CST registration then such selling dealer cannot later be seen to protest against the cancellation of the C-Form. As observed by the Supreme Court in Commissioner of Sales Tax, Delhi v. Shri Krishna Engg. Co. [2005 (1) TMI 389 - SUPREME COURT OF INDIA] the selling dealer in such instance will have to pay for his recklessness . Therefore, the order passed by the DT T cancelling the C Form issued to the Petitioner in the present case wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DT T in respect of the aforementioned two invoices. A copy of the said C-Form is enclosed with the petition as Annexure P-4. It shows that it was a system generated C-Form containing details of the purchasing dealer i.e. Respondent No.2 with its Registration Certificate Number and the amount up to which such registration is valid. The name and address of the purchasing dealer i.e. Respondent No. 2 has also been indicated. It also bears the TIN and name of the selling dealer i.e. the Petitioner. It contains the details of the two invoices dated 10th March, 2015 with the respective amounts. 5. The Petitioner later learnt that the above C-Form had been cancelled by the DT T. In order to verify this, the Petitioner checked the website of the DT T. The status of the C-Form issued to the Petitioner was shown as cancelled on 27th November, 2015. The Petitioner also obtained a copy of an order passed by the Assistant Value Added Tax Officer (AVATO) in Form DVAT-11 on 4th August, 2015 cancelling the registration of Respondent No.2. A copy of the said cancellation order has been enclosed as Annexure P-6 to the petition. It was noticed that the cancellation was made retrospective from 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Respondent No.2. Secondly, it is submitted that under Section 74 of the DVAT Act, the Petitioner has an alternative remedy of approaching the Objection Hearing Authority. It is pointed out that Section 74(1)(b) permits any person who is dis-satisfied with any other order or decision made under this Act to file objections before the OHA. 10. On merits, it is submitted by Mr Narayan that the transactions of sale involving the Petitioner and Respondent No. 2 were under a cloud because enquiries made by the DT T revealed that the name of the Proprietor of Keshav Corporation in its bank account from where the RTGS transfer of the invoice amounts took place to the account of the Petitioner was different from the name of the Proprietor of Keshav Corporation available with the DT T. The address of the said Keshav Corporation in the bank account was also different from the address shown in the DT T records viz., 334/1, Gali No. 3, Vishwas Nagar, Delhi-110032. In other words, the entity which paid the sums to the Petitioner against the invoices raised by the Petitioner may have been Keshav Corporation but it was not the entity to which C-Forms were issued by the DT T. Mr Narayan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing any view as far as the cancellation of the registration of Respondent No. 2 is concerned. 15. As regards the plea regarding the availability of an alternative remedy under Section 74 (1) (b) of the Act, it appears to the Court that the person directly affected the decision of the DT T to cancel the C-Form is the Petitioner i.e. the selling dealer. The purchasing dealer cannot be said to be affected by that decision since the purchasing dealer has taken advantage of Section 8 (1) (b) of the CST Act and paid the lesser tax of 2% on the interstate sale. The present petition raises an important question of law regarding the absence of a power under the CST Act or the Rules made thereunder to cancel a C-Form. This requires interpretation of the relevant provisions. In the circumstances, the Court does not consider it appropriate to relegate the Petitioner to the statutory remedy of going before the OHA as that is not efficacious in the facts of the present case. No power to cancel a C Form 16. The central issue in the present case is whether there exists a power in the Commissioner VAT, Delhi under the CST Act and the Rules thereunder to cancel a C-Form and fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement of Section 8(1) of the CST stood fully satisfied. The purchasing dealer had a valid CST registration on the date of purchase of goods by the Respondent No. 2 from the Petitioner. The C-Form issued by the DT T confirmed the registration of Respondent No.2 under the CST Act. 20.1 In the State of Maharashtra v. Suresh Trading Company (supra), the facts were that between 1st January and 31st December 1967, the Respondents purchased goods from Sulekha Enterprises Corporation (SEC) who were registered dealers under the Bombay Sales Tax Act, 1959. On the date of such sale the registration of SEC was valid. The Respondents claimed deduction in the turnover of sales on that basis. This was disallowed by the Sales Tax Officer on the ground that the registration of SEC had been cancelled on 20th August 1967 with retrospective from 1st January 1967. Therefore, on the dates on which the Respondents had purchased the goods, SEC could not be said to be a registered dealer. The STO proceeded to impose penalty on the Respondents. 20.2 The High Court of Bombay reversed the decision of the STO and the High Court's decision was affirmed by the Supreme Court which observed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificates to be genuine. The fact that registration has been granted, yet the person holding the certificate is a fictitious one seem to be contradictions in term. A certificate of registration can be granted only when the dealer, apart from being a businessman, satisfies the other requirements prescribed by law. A registration certificate cannot be granted to a non-existent person. The fact that there have been some persons who are labelled by the department as fictitious dealers goes to show that the officers under the Act either collude with dishonest people in the field or fail to exercise due diligence and allow fraud to be practised in the commercial field. Whether it is collusion or negligence, these officers bring disrepute to the State and introduce uncertainty and lack of confidence into a true field of trust. It is high time that the State Government institutes appropriate enquiries, take such steps as are necessary to eliminate fictitious dealers from the field and also take strong action against persons connected with such matters so that there be no recurrence of it in future. 23. A reference in this regard is also made to the decision of the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The practical effect of cancellation of C Forms 26. It was submitted by Mr Narayan that there would be a practical difficulty in the DT T seeking to inform every selling dealer in the country of the cancellation of registration of a purchasing dealer registered under the CST Act in Delhi and that the remedy of the selling dealers in such instance would be to proceed against the purchasing dealers. In the considered view of the Court, if the selling dealer has after making a diligent enquiry confirmed that on the date of the sale the purchasing dealer held a valid CST registration, and is also issued a valid C Form then such selling dealer cannot later be told that the C Form is invalid since the CST registration of the purchasing dealer has been retrospectively cancelled. Where, a selling dealer fails to make diligent enquiries and proceeds to sell goods to a purchasing dealer who does not, on the date of such sale, hold a valid CST registration then such selling dealer cannot later be seen to protest against the cancellation of the C-Form. As observed by the Supreme Court in Commissioner of Sales Tax, Delhi v. Shri Krishna Engg. (supra) the selling dealer in such in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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