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2016 (9) TMI 1114 - MADRAS HIGH COURT

2016 (9) TMI 1114 - MADRAS HIGH COURT - [2016] 96 VST 315 (Mad) - Validity of assessment order - cancellation of registration certificate with retrospective effect - reversal of input tax credit when registration was in force - principles of natural justice - requirements of Rule 10(2) of the Tamil Nadu Value Added Tax Rules, read with Section 19 of the Tamil Nadu Value Added Tax, 2006 - Sections 39(14) and 39(15) of the Act - Section 17 of the VAT Act, 2006 - Held that: - there cannot be any qu .....

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the selling dealer and availed input tax credit in respect of the said goods, has to pay the amount availed on the date from which the order of cancellation of the Registration Certificate takes effect. The buying dealer is also liable to pay, any addition to the amount due, interest at the rate of two percent per month on the amount of tax payable, for the period commencing from the date of claim of input tax from the dealer. Section 39(15) of the VAT Act, 2006, is silent, as to whether the com .....

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certificate was alive. - The retrospective cancellation of the Registration Certificate is set aside - appellant was not provided with an opportunity to file any counter affidavit, on the grounds of challenge made in the supporting affidavit to the writ petition filed to quash the Registration Certificate, with retrospective effect - matter remanded to writ court - petition dismissed. - Writ Appeal Nos.946, 947, 948, 949 of 2016, 2123 of 2013, 2259 to 2264 of 2013, 753 of 2016 and 1049/2016 .....

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setting aside the assessment orders passed by the competent authorities. As facts and law involved in all the writ appeals except W.A.No.753/2016, are common, they are being dispsoed of by this common judgment, and W.A.No.753/2016, is separately dealt with. 2. In view of the above, suffice to incorporate the averments and grounds of challenge from one appeal. Respondents in all the appeals, except W.A.No.753/2016, are the buying dealers, who have purchased goods from the selling dealers, whose .....

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ontrary to the principles of natural justice and the decision of the Hon'ble Apex Court in the case of State of Maharashtra vs. Suresh Trading Co. reported in 109 STC 439, decisions of this court in M/s.Jinsasan Distributors vs. Commercial Tax Officer (CT), Chintadripet Assessment Circle reported in 59 VST 256, M/s.Althaf Shoes (P) Ltd reported in 50 VST 179, M/s.Sri Vinayaga Agencies reported in 60 VST 283, Aassan Global Trade in W.P.Nos.25996 to 25998 of 2014 and also in the case of M/s.In .....

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ation Certificates of the seller dealers, have been cancelled with retrospective effect, reversal of input tax credit of the buying dealers, is contrary to the law declared by the Hon'ble Apex Court in State of Maharatshtra vs. Suresh Trading Co. reported in (1998) 109 STC 439 (SC) . Thus, for the abovesaid reasons, and other grounds inter alia, made in the supporting affidavits, respondents/buying dealers, have sought for a writ of certiorari, to quash the proceedings, impugned in the writ .....

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DISTRIBUTORS v. CTO ((2013) 59 VST 256(MAD.)), pointed out that the issue raised in these writ petitions is covered in favour of the petitioner. 3. Mr.S.Kanmani Annamalai, learned Additional Government Pleader, who takes notice for the respondent, in reply, fairly conceding to the arguments advanced by the learned counsel for the petitioner, submitted that as against the order passed, writ appeal has been filed and the same is also pending without any order of stay. 4. In the decision reported i .....

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tax credit or the order revising the assessment is based on the cancellation of the registration certificates of the selling dealers, who sold the goods to the petitioners herein. It is also not in dispute that the registration certificates of the selling dealers have been cancelled with retrospective effect. That appears to be the one and only ground for initiating the action and therefore the challenge. 9. The question now to be considered is whether the cancellation of the registration certi .....

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our view, the High Court was right. A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of registration certification when the registration was current. ... In the present case, it is not in dispute that the registration certificates of the selling dealers have been canc .....

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the Honourable Supreme Court in the decision cited above. No costs. The connected miscellaneous petitions are closed. 5. W.A.Nos.946/2016 to 949/2016 are filed against the orders made in W.P.Nos.11404 to 11407 of 2015. Similar orders have been passed in other writ petitions, against which, appeals filed, are listed today. 6. Assailing the correctness of the orders impugned before us, Mr.Kanmani Annamalai, learned Additional Government Pleader (Taxes), explained that Tamil Nadu Value Added Tax, 2 .....

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read along with Section 19(15) of the Act, 2006, which states, where a registered dealer has purchased any taxable goods from another dealer and has availed input tax credit in respect of the said goods and if the registration certificate of the selling dealer is cancelled by the appropriate registering authority, such registered dealer, who has availed by way of input tax credit, shall pay the amount availed on the date from which the order of cancellation of the registration certificate takes .....

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ion may, by order, for good sufficient reasons to cancel, modify or amend any certificate of registration granted by it. Sec. 39(15). No application for registration or for a copy or duplicate of the certificate under this section shall be refused and no order under sub-section 14 shall be made, unless the dealer concerned has been given an opportunity of being heard. 8. Inviting attention of this court to Section 17 of the VAT Act, 2006, learned Additional Government Pleader (Taxes) submitted t .....

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t, the burden of proving such claim shall lie on such dealer. Sec.17(3) Notwithstanding anything contained in this Act or in any other law for the time being in force, a dealer in any of the goods specified in the Second Schedule liable to pay the tax in respect of the first sale in the State shall be the first seller of such goods and shall be liable to pay tax at the rate specified in the Second Schedule on his turnover of sale relating to such goods, uless he proves that the sale or purchase, .....

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gistered buying dealers is only provisional, the assessing authority is empowered to revoke the same, which in the case on hand, has been done. He further submitted that consequent to the cancellation of the Registration Certificates of the selling dealers with retrospective effect, reversal of input credits availed by the dealers has been made in terms of Section 19(15) of the VAT Act, which cannot be said as erroneous. 10. He further submitted that assessment orders are passed, based on the do .....

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he Selling dealer's Registration Certificate was cancelled retrospectively. Assessee's claim for deduction on the basis of purchase made at the time when the sellers Registration Certificate was alive, was disallowed. Although there is power to cancel the certificate of registration retrospectively, the Apex Court in State of Maharatshtra vs. Suresh Trading Co. reported in (1998) 109 STC 439 (SC) held that as long as the buyers have purchased the goods, when the Registration Certificates .....

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ed by any registered dealer is only provisional and that the Assessing Officers are empowered to revoke the same, if it appears to the assessing authority to be incorrect, incomplete or otherwise not in order. If Section 19(15) of the VAT Act, 2006, to be given effect, in letter and spirit, then, no sooner the Registration Certificate of the selling dealer is cancelled by the appropriate authority, such registered dealer, who had purchased any taxable goods from the selling dealer and availed in .....

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s empowered to cancel, modify or amend any certificate of registration granted by him, retrospectively. 13. As the issue considered by this court, in the instant writ appeals, is restricted only to the correctness of reversal of input credits availed, by the buying dealers, consequent to the cancellation of the Registration Certificates of the selling dealers with retrospective effect, we are not inclined to go into the aspect, as to whether the competent authority has power to cancel, modify or .....

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stered dealers under the said Act. Bills given to the respondents contained a certificate to the effect that the registration of Sulekha Enterprises was in force, on the date of sales. Respondent/buying dealers, thereafter, resold the goods purchased by them from Suleka Enterprises, within the State of Maharashtra. Purchasing dealers also claimed to deduct, from their turn over of sales, for the relevant accounting years, the re-sale of the goods purchased from Sulekha Enterprises. The Sales Tax .....

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Sales Tax Tribunal, resulted in confirmation on disallowance, but the Tribunal ordered deletion of penalty. 15. Being aggrieved, respondent/buying dealer, moved the High Court, for an answer, as to, "whether, on the facts and in the circumstances of the said case, the Tribunal was correct in holding that the Sales Tax Authority was justified, in treating the purchase of the applicants made from Sulekha Enterprises, as purchasers from an unregistered dealer, on the ground that the Registrati .....

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herwise not taxable. High Court further held that the condition precedent for becoming entitled to make a tax free re-sale was the purchaser of the goods, which was re-sold from a registered dealer and obtaining from that registered dealer of a certificate in this behalf. Thus the condition having been fulfilled, the right of purchasing dealer to make a tax free sale accrued to him. Thereafter, the whole, by reason of something that had happened subsequent to the date of the purchaser, namely, t .....

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e certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find our whether a state of facts exists which would justify the cancellation of registration must be .....

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ation of registration with effect from a date that preceded the dates of the transactions and how, accordingly, the respondents could be made liable to pay tax." 18. Thus, the Hon'ble Apex Court, dismissed the appeal preferred by State of Maharashtra holding that, whatever be the effect of retrospective cancellation upon the selling dealer, it can have no effect upon any person, who has acted upon the strength of a registration certificate, when such certificate was alive. 19. In Deputy .....

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manner visit the assessee with adverse consequences. The assessee is entitled to the exemption pleaded, on the basis of form 25 declarations, issued by the purchasing dealers, who had admittedly valid certificates, on the day when the declarations were issued." 20. We have already considered, what the Hon'ble Apex Court in Suresh Trading Company's case , has held. Revenue has not placed any contrary judgments, nor pleaded that the judgements, stated supra, are inappropriate to the f .....

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espondent herein in Rc.No/221/2014/Ac dated 12.01.2015. 22. Order impugned before the writ court was cancellation of the Registration Certificate of M/s.Vijayshree Metals, Chennai/respondent, with retrospective effect. Placing reliance on the decision of this court in Jinsasan Distributors vs. Commercial Tax Officer (CT), Chintadripet Assessment Circle, Chennai, reported in 2013 59 VST 256 (Mad) and by observing that the said decision is squarely applicable to the facts to W.A.No.753/2016, the w .....

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