Royal Plastic vs Commercial Tax Officer, Villivakkam Assessment Circle and Another

Chitra Venkataraman, J.—The Petitioner has sought for issuance of a writ of certiorarified mandamus to quash the order of the first Respondent dated September 1, 2004 and to direct the first Respondent to continue the registration issued under the Central Sales Tax Act, 1956, on December 20, 2003 by his CST. No. 796772 in form B effective from December 26, 2003.

The Petitioner herein got his registration in 2003 both under the Tamil Nadu General Sales Tax Act, 1959 and under the Central Sales Tax Act. The assessment for the year 2003-04 was completed by the first Respondent on September 1, 2004. As the Petitioner had not complied with Rule 24(9) and Rule 24(9A) of the Tamil Nadu General Sales Tax Rules, 1959, to have the renewal of the registration, the first Respondent herein issued a notice to the Petitioner to surrender their registration certificates under both the Acts within seven days of the receipt of notice. Subsequently, the registration certificates issued under both the Tamil Nadu General Sales Tax Act and under the Central Sales Tax Acts were cancelled with effect from April 1, 2004.

The grievance of the Petitioner is that there is no separate notice issued for cancellation of the registration certificates u/s 7 of the CST Act and there is no personal hearing granted to the Petitioner. It is further stated that the provision of the CST Act does not provide for cancellation of registrations. Consequently, the order passed is without jurisdiction. The learned counsel for the Petitioner pointed out that subsequent to the cancellation, the Petitioner went in for fresh assessment proceedings. The first Respondent passed the order for the subsequent year on September 18, 2009. The Petitioner states that at that time only, they came to know that they were treated as unregistered dealers for the period from April 1, 2004 to October 14, 2004. The Petitioner contends that even though they have obtained fresh registration with effect from October 15, 2004, their registration is valid from April 1, 2004. Hence, the above writ petition.

A perusal of the affidavit shows the admitted fact that consequent on the order passed cancelling the registrations the Petitioner had surrendered the forms and certificates. Apparently, satisfied with this proceedings, the Petitioner had gone for a fresh registration from October 15, 2004. Hence, for the period April 1, 2004 to October 14, 2004, the Petitioner was treated as an unregistered dealer only. The first Respondent issued pre-assessment notice for the assessment year 2004-2005 and levied higher rate of tax. The Petitioner''s grievance is that this fact came to their knowledge only on October 6, 2009. Hence, the Petitioner has come before this court.

The learned counsel appearing for the Petitioner submitted that after 5 issuance of notice dated May 12, 2006, on receipt of the objection, there were no proceedings at all till March 28, 2008 when the Petitioner was visited with a revised notice. The Petitioner had rightly replied to the said notice. In the background of the said facts, reliance was placed by the learned counsel for the Petitioner on the decision of the High Court of Orissa in National Aluminium Co. Ltd. v. State of Orissa reported in (1994) 93 STC 529 that the cancellation of the registration under the CST Act was unsustainable.

I do not find any ground to accept the claim of the Petitioner based on the decision of the Orissa High Court. The case therein relates to a levy of penalty u/s 10A of the CST Act. The Assessee therein was granted registration on August 16, 1982. However, the Assessee therein used the statutory certificates in respect of purchases made prior to the date of registration, thereby committing an offence u/s 10(c) of the CST Act. The Petitioner did not renew the registration under the Orissa Sales Tax Act from February 1985 to July, 1985 and from September, 1985 to October, 1986 and that as the registration under the CST Act is dependent upon the certificate under the Orissa Sales Tax Act, the purchases made during the aforesaid period under the guise of a registered dealer was a false representation and hence an offence u/s 10(c) of the CST Act. Apart from this, there was also a violation of the registration certificate. Hence, proceedings were initiated u/s 10A of the CST Act to levy penalty. The Orissa High Court pointed out that as to the question as to whether the Petitioner purchased any goods at any point of time in the course of the inter-State trade or commerce prior to the date of registration, evidence showed that the Assessee did not purchase any goods prior to the date and hence penalty cannot be levied. As to the issue on the levy of penalty u/s 10A of the CST Act, the court pointed out that the certificate issued to the Assessee u/s 7(2) of the CST Act showed the clear mentioning that the certificate was valid until it was cancelled. There was no factual cancellation or a fictional cancellation under law by the application of any provision. The court further held that the Section 7(4)(b) of the CST Act provides for the cancellation of the certificate under the stated circumstances and that there is no provision which invalidates a registration certificate under the CST Act, the moment the dealer does not get a renewal of the registration under the Orissa Sales Tax Act nor is there an automatic cancellation under the CST Act for not being a dealer for a specified period under the Orissa Sales Tax Act.

As for the present case is concerned, as early as September 1, 2004, the registration of the Petitioner both under the TNGST Act and CST Act stood cancelled from April 1, 2004. The Petitioner thereafter surrendered all its unused forms and the certificates with the officer concerned. No grievance was raised by the Petitioner at any point thereafter. There is hardly any explanation on the delay in not challenging the order or any grievance expressed over the cancellation. Hence, when the order of cancellation had thus reached a finality and no grievance shown at any point of time till the order of assessment was made, there is hardly any ground to accept the plea of the Petitioner that there was no independent notice before cancellation.

As regards the provisions on cancellation of registration, Section 20 of the TNGST Act deals with the registration of dealers. Sub-section (1)(a) of Section 20 provides that every dealer whose total turnover in any year is not less than three lakhs of rupees shall, and any other dealer or person intending to commence business may, get himself registered under this Act. Sub-section (2) of Section 20 lists out the class of dealers who have to register themselves irrespective of the quantum of his turnover. One of those classes of dealers who have to go for compulsory registration relevant for the present case is given u/s 20(2)(iii) of the TNGST Act is the dealer registered u/s 7(3) of the CST Act.

Section 7 of the CST Act provides for registration under the CST Act. It classifies dealers under two categories, viz., (i) those who have to go compulsorily for registration and (ii) those dealers for whom the registration under the CST Act is optional. Sub-section (1) of Section 7 mandates that every dealer liable to pay tax under this Act must go for registration under the CST Act. Sub-section (2) of Section 7 makes registration optional under the CST Act, to those dealers registered under the local Act notwithstanding the fact he is not liable to pay tax under the CST Act. Section 7(4) deals with amendment and cancellation of registration.

For easy understanding, Section 7(4) (b) of the Act is extracted hereunder:

(4)(b) be cancelled by the authority granting it where he is satisfied, after due notice to the dealer to whom it has been granted, that he has ceased to carry on business or has ceased to exist or has failed without sufficient cause, to comply with an order under Sub-section (3A) or with the provisions of Sub-section (3C) or Sub-section (3E) or has failed to pay any tax or penalty payable under this Act, or in the case of a dealer registered under Sub-section (2) has ceased to be liable to pay tax under the sales tax law of the appropriate State or for any other sufficient reason.

The learned counsel for the Petitioner placed heavy reliance on the provisions of Section 7(4) of the CST Act that the grounds of cancellation cannot be anything other than what is specified under the Section.

As for this contention is concerned, admittedly, the Petitioner had no grievance at all as to the notice sent on September 1, 2004 proposing to cancel the registration within seven days of the receipt of the notice. The Petitioner was called upon to produce particulars if it had paid the renewal fee within the prescribed period; otherwise, the notice stated that the proposal would be confirmed with effect from April 1, 2004 and the Petitioner was also asked to get their pending assessments completed and to surrender the unused declaration forms, if any, obtained from the Respondent''s office. The notice was received by the Petitioner on October 7, 2004. The Petitioner did not challenge the notice at any point of time thereafter. For nearly five years, it accepted this cancellation. The Petitioner went in for fresh registration only after October 14, 2004 by seeking fresh registration. A perusal of the affidavit shows that there was an inspection in the place of business on November 2, 2004. A pre-assessment notice under the CST Act for the assessment year 2004-05 dated May 12, 2006 was served on the Petitioner on June 9, 2006. The Petitioner was informed that the registration was valid only from October 15, 2004 and that for the period prior to October 15, 2004, it was not eligible to collect the tax or to enjoy concessional rate of tax. A revised notice was issued on March 28, 2008 wherein it was stated that as the Petitioner was enjoying registration only from October 15, 2004, they were not eligible to avail of the concessional rate of tax in respect of the sales covered by form 17 declaration. In the wake of the assessment proceedings rejecting the plea for concessional levy, the Petitioner has approached this court. There are no reasons stated in the affidavit for the belated writ petition nor any reason disclosed for not challenging the order passed on the notice. It must be noticed that the Petitioner filed an application on October 12, 2004 for fresh registration. If really the Petitioner had any grievance on cancellation, nothing prevented the Petitioner from seeking remedy before the revisional authority. Hence, on the ground of laches alone, the writ petition is liable to be dismissed.

Quite apart from laches, even on the legal plea, the writ petition has to be dismissed. The Petitioner is an Assessee registered under the CST Act as well as under the Tamil Nadu General Sales Tax Act. The registration under the CST Act is u/s 7(1) and not by reason of Section 7(2) of the CST Act. As already noted an Assessee who is a registered dealer under the CST Act has to necessarily register himself u/s 20(2) of the TNGST Act. Under Sub-section (3) of Section 21 of the TNGST Act, certificate issued under Sub-section (2) of Section 21 of the TNGST Act shall be valid for a period of one year and is renewable within such period and on payment of fees certified in Sub-section (1). The sub-section further states that the certificate shall be deemed to have been cancelled unless it had been renewed. Proviso to Sub-section (3) states that even if a registered dealer fails to renew the certificate of registration within the period prescribed, namely, as prescribed under Rule 24, Sub-rule (9) of the TNGST rules, he shall be permitted to renew the certificate, as per Rule 29A of the TNGST rules, namely, up to 30th of April of the year for which renewal is requested on payment of penalty equal to the fee payable. Going by the said Section, in the absence of any renewal application made within the time prescribed, or for that matter, even beyond the period as prescribed under Rule 29A, the certificate of registration under the TNGST Act goes for a deemed cancellation as per Sub-section (3) of Section 21. As far as the asses-see is concerned, being a dealer having a registration u/s 7(1) of the CST Act, the mandatory registration under the TNGST Act stands cancelled by virtue of Section 21(3). As far as Sub-section (4) of Section 7 of the CST Act is concerned, the cancellation of the registration could be for any sufficient reason other than what had been already specified under sub-clause (b) of Sub-section (4). The registration under the CST Act was specifically stated as valid from December 26, 2003. Given the mandatory character of Section 7(1) of the CST Act in respect of the Assessees having CST transactions and Section 20(2)(iii) of the TNGST Act, making registration under the TNGST Act mandatory for dealers having registration under the CST Act, the question as to the cancellation of registration under the CST Act as a fallout of the cancellation of the registration under the TNGST Act has to be read as falling under Sub-section (4)(b) of Section 7 of the CST Act as for "any other sufficient reason". The decision of the Orissa High Court has to be read in the context of the fact therein and hence, is distinguishable, given the purport of registration under both these enactments, namely, to keep track of the assessable transactions and to keep track of persons who deal in such transactions, to ensure effective levy and collection of tax. In the face of Section 21(3) of the TNGST Act, which contemplates deemed cancellation of registration, the provisions of Section 7(4) (b) of the CST Act for cancellation "for any other reason" assumes significance. Hence, no exception could be taken to the order passed by the first Respondent. In the above circumstances, I do not find any ground to accept the plea of the Petitioner placing reliance on the decision of the Orissa High Court.

As already pointed out in the preceding paragraph, with the order passed as early as 2004 attaining finality and further acted upon by the Petitioner in going for a fresh registration, the writ petition is without merits and hence, is liable to be dismissed and it is accordingly dismissed. No costs. Connected M.P. No. 1 of 2009 also stands dismissed.