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2009 DIGILAW 174 (ORI)

DEEPAK TRADING COMPANY v. STATE OF ORISSA

2009-03-03

B.P.RAY, I.M.QUDDUSI

body2009
JUDGMENT B. P. Ray J. - In the present writ petition, the petitioner calls in question the action of opposite party No. 1 in issuing notice for termination of agreement with the petitioner and placing the indent and selecting the opposite party No. 3 to supply soya chunks for Bolangir district under Mid-Day Meal Programme (hereinafter called "MDM Programme") on the ground that the same is illegal and arbitrary. Bereft of unnecessary details, the short fact which gives rise to this writ petition is that the State Government had launched the MDM Programme for the school children throughout the State. This programme is being carried out under the control and supervision of Women and Child Development Department (opposite party No. 2). Under the MDM Scheme, the Government decided for supply of eggs for school children and for that purpose the guidelines were fixed wherein it, inter alia, stated that the Collector of respective districts would purchase eggs. Under the said programme, it was further decided by the Government for supply of soya chunks in case of non-availability of eggs. Instructions dated March 12, 2008 (annexure 2) provide for supply of soya chunks in addition to eggs or in addition to that where surplus fund was available. Pursuant to the Government instructions under annexure 2, opposite party No. 1 floated tender bearing No. 1612/DSWO dated June 9, 2008 (annexure 3) inviting competitive bids for supply of soya chunks for Bolangir district for the year 2008-09. The said Tender Call Notice (for short, "TCN") contained various conditions and eligibility criteria with regard to the persons/firm to participate in the bid. Copy of the said TCN, the details of bid notice for purchase of soya chunks for MDM Programme for the year 2008-09 have been attached to the writ petition as annexure 4. The petitioner submitted the bid before the authority within the stipulated time along with VAT clearance certificate, TIN No. 21101800603 and OST No. BP-II-1157 in respect of the petitioner - firm and all other documents relating to solvency, income-tax clearance, agency licence issued by RTA, PAN number along with earnest money of Rs. 50,000. Including the petitioner - firm there were as many as thirteen persons who submitted their tenders but out of thirteen, tenders of eleven persons were rejected on the ground of want of documents and other eligibility conditions. 50,000. Including the petitioner - firm there were as many as thirteen persons who submitted their tenders but out of thirteen, tenders of eleven persons were rejected on the ground of want of documents and other eligibility conditions. As such, only two tenderers, the petitioner as well as opposite party No. 3 remained in the race and their rate was finalized for evaluation. After evaluation, it was found that the rate quoted by the petitioner was Rs. 61.61 per kg. whereas the rate quoted by opposite party No. 3 was Rs. 81 per kg. of soya chunks. The petitioner being found to be the lowest bidder, his offer was accepted and accordingly, the agreement was executed on June 23, 2008 for supply of soya chunks for the year 2008-09. At this stage, opposite party No. 1 issued notice dated June 27, 2008 (annexure 7) stating therein that complaint has been received regarding the VAT clearance certificate, TIN number furnished by the petitioner which stood in the name of Late Dewaram Agarwal as proprietor. In the said notice, the petitioner was asked to submit his show-cause as to why the agreement dated June 23, 2008 (annexure 6) shall not be cancelled. Upon receipt of such notice, on the very same day, the petitioner submitted various documents/annexure 8 series before the opposite party No. 1. However, the opposite party No. 1 cancelled the petitioner's agreement vide order No. 1819 dated July 1, 2008 (annexure 10) revoking the agreement executed with the petitioner - Dipak Trading Co. represented by Sri Koushal Kumar Agarwal on the ground that he failed to fulfil all the conditions of the tender by mis-representation of facts. In the said order, opposite party No. 1 has also called opposite party No. 3 Kaliram Agarwal the next lowest bidder among the eligible bidders for negotiation. Hence, this petition. Learned counsel appearing on behalf of the petitioner submitted that the opposite party No. 1, Collector, has acted illegally to terminate the concluded contract with oblique and mala fide intention to favour opposite party No. 3 by placing indent in his favour. Hence, this petition. Learned counsel appearing on behalf of the petitioner submitted that the opposite party No. 1, Collector, has acted illegally to terminate the concluded contract with oblique and mala fide intention to favour opposite party No. 3 by placing indent in his favour. The petitioner as the successor of his deceased father late Dewaram Agrawal who carried on the proprietary business under the name and style "M/s. Deepak Trading Co." had filed an application in form VAT-108 and continued to carry on the business under the same name and style and also had filed monthly VAT returns together with admitted taxes. He obtained VAT clearance certificate in VAT form No. 612 dated February 2, 2008 in the financial year 2007-08 and dated May 26, 2008 in the financial year 2008-09 issued by the Sales Tax Officer, Kantabanji (hereinafter referred to as, "the STO"). The STO, Kantabanji also issued way bills to the petitioner in the month of March, 2008. He received a letter dated June 27, 2008 from the office of the STO, Kantabanji, wherein he has been asked to submit certain documents for making necessary amendment in the registration certificate. In compliance whereof he appeared before the STO, Kantabanji on June 29, 2008 and submitted the required documents and also filed an application for issue of an amended certificate of registration. Relying on section 31(d) of the Orissa Value Added Tax Act, 2004 and rule 30(1)(c) of the Orissa Value Added Tax Rules, 2005, he submitted that cancellation of registration certificate is possible only when the proprietor dies leaving no successor and not otherwise. According to him, cancellation of registration certificate is not warranted when the successor of the proprietor continues the business and carries on all legal formalities as required under the provisions of law. Relying on certain judicial pronouncement, the learned counsel submitted that when two views were possible, the court would adopt the interpretation which was in favour of the tax-payer and against the Revenue. According to the learned counsel there appears some anomaly and contradiction between section 31(d) of the OVAT Act and rule 30(1) of the OVAT Rules. Relying on certain judicial pronouncement, the learned counsel submitted that when two views were possible, the court would adopt the interpretation which was in favour of the tax-payer and against the Revenue. According to the learned counsel there appears some anomaly and contradiction between section 31(d) of the OVAT Act and rule 30(1) of the OVAT Rules. It is submitted that a combined reading of section 31(d) and section 32 of the OVAT Act leads to an unambiguous conclusion that neither the successor of a proprietorship business needs to apply for fresh registration nor the certificate of registration is needed to be cancelled. He submitted that the petitioner made a valid application for amendment of registration certificate in form VAT-108 and pursuant to sub-section (4) of section 32, it has been clarified that the amendment applied for has been granted and certificate of registration was accordingly amended. Concluding his argument he submitted that opposite party No. 1, Collector is not justified to terminate his concluded agreement and to execute a fresh agreement with opposite party No. 3. The learned counsel appearing on behalf of opposite party No. 1 submitted that on receipt of a complaint challenging the genuineness of VAT clearance certificate submitted by the petitioner, opposite party No. 1, called for a report from the Assistant Commissioner, Commercial Taxes, Bolangir (hereinafter referred to as, "the ACCT") seeking clarification about the genuineness of the VAT clearance certificate furnished by the petitioner's firm. In reply, the ACCT intimated that one Dewaram Agarwal who had a valid VAT clearance certificate, had died on October 26, 2007. Sri Koushal Kumar Agarwal, one of the legal heirs of the deceased Dewaram Agarwal filed application before the STO, Kantabanji Circle for change of ownership of the aforesaid business from Dewaram Agarwal to Sri Koushal Kumar Agarwal. The competent authority to change the ownership of the business is the ACCT, Bolangir and not the STO, Kantabanji. Therefore, VAT clearance certificate issued by the STO in favour of Sri Koushal Kumar Agarwal is not valid and the same would be valid only after amendment sought for by Sri Koushal Kumar Agarwal is allowed. In view of this, opposite party No. 1 has taken a decision that VAT clearance certificate furnished by the petitioner's firm was not a genuine certificate and cannot be accepted. In view of this, opposite party No. 1 has taken a decision that VAT clearance certificate furnished by the petitioner's firm was not a genuine certificate and cannot be accepted. A copy of letter No. 2626 dated June 25, 2008 of the ACCT, Bolangir is annexed to the counter-affidavit as annexure A/1. On the basis of the report of the ACCT, a notice was issued to the petitioner to show cause as to why his tender shall not be cancelled. In reply to the said show-cause notice, the petitioner submitted some old documents, which he had filed along with the tender papers. As no new material was submitted by the petitioner to prove the genuineness of VAT clearance certificate, the show-cause notice submitted by the petitioner was not accepted and the agreement executed with him was revoked. Keeping in view the immediate necessity for supply of soya chunks for the MDM to maintain the nutrition of the young school going children, the Collector thought it fit to negotiate with the opposite party No. 3 for supply of soya chunks. In that process an application was made and opposite party No. 3 agreed to supply soya chunks at the rate quoted by the petitioner. Consequently necessary agreement was executed with opposite party No. 3 for supply of chunks. The said agreement was valid for one year from the date of execution of the agreement. The learned counsel appearing on behalf of opposite party No. 3, Kaliram Agarwal submits that opposite party No. 1, Collector has terminated the agreement with the petitioner consequent upon filing of a void clearance certificate along with the tender documents. Since the petitioner's tender documents were in violation of the terms and conditions of the tender notice, opposite party No. 3 was awarded with the supply order at the same price as quoted by the petitioner. The petitioner has submitted a void VAT clearance certificate by indicating the TIN number of a non-existent business concern. M/s. Deepak Trading Co. which was a proprietorship concern of late Dewaram Agarwal having TIN No. 21101800603 and after the death of the sole proprietor the certificate of registration is cancelled automatically and the TIN number allotted to the said proprietorship concern became infructuous and also the clearance certificate issued in form VAT-612 by the STO was null and void. M/s. Deepak Trading Co. which was a proprietorship concern of late Dewaram Agarwal having TIN No. 21101800603 and after the death of the sole proprietor the certificate of registration is cancelled automatically and the TIN number allotted to the said proprietorship concern became infructuous and also the clearance certificate issued in form VAT-612 by the STO was null and void. The TIN number indicated in the VAT clearance certificate was allotted to the father of the petitioner and not to the petitioner. After the death of the proprietor Dewaram Agarwal, his legal heirs cannot call themselves to be the proprietor of the firm and no one can use the registration certificate of the late proprietor for continuation of the business and if any legal heir wants to continue the business, he may do so after getting a fresh certificate of registration from the competent authority and in no case the certificate of registration of the late proprietor can be amended. Since after the death of the proprietor, the proprietorship concern would have no legal entity under the OVAT Act, 2004 and the registration certificate of the said proprietorship concern is liable to be cancelled and the said proprietorship concern would become an unregistered dealer under the OVAT Act, the provision of sub-section (4) of section 32 would be of no assistance to the petitioner. He further submitted that sub-rule (3) of rule 30 provides that after the death of the proprietor of a business the registration certificate of the dealer shall be cancelled by the registering authority. Citing rule 20 of the OVAT Rules he further stated that no certificate of registration can be transferred to any other person. The learned counsel appearing on behalf of opposite parties 4, 5, and 6 submitted that the impugned orders under annexures 11 and 12 are revisable orders by the Commissioner of Sales Tax, Orissa, under section 79 of the OVAT Act, 2004 read with rule 18 of the OVAT Rules, 2005. Hence, challenge made by the petitioner against the impugned orders under annexures 11 and 12 in the present writ application is not maintainable. Hence, challenge made by the petitioner against the impugned orders under annexures 11 and 12 in the present writ application is not maintainable. Section 99 of the OVAT Act, 2004 postulates that no dealer shall be entitled to undertake any contract with any Government unless he obtains a certificate in the prescribed manner from the Commissioner to the effect that he has no liability to pay tax nor he has defaulted under the OVAT Act. The petitioner, therefore, made an application for tax clearance certificate in respect of TIN 21101800603 and since there was no liability against the aforesaid TIN, a tax clearance certificate in form VAT-612 has been issued without verifying the entitlement of the applicant which cannot ipso facto give any right to the petitioner that the aforesaid TIN number granted to his late father can be used by him. The registration certificate bearing TIN No. 21101800603 was granted to Dewaram Agarwal, proprietor of M/s. Deepak Trading Company. The said Dewaram Agarwal expired on October 26, 2007 and accordingly the TIN number granted to Dewaram Agarwal ceased and/or became inoperative from that date. As the certificate of registration cannot be transferred under the provisions of the OVAT Act and the Rules made thereunder, filing of an application for amendment of registration certificate in form VAT-108 by the petitioner who is not a registered dealer under the OVAT Act is of no consequence. Section 32 of the OVAT Act starts with the phrase, "if any dealer registered under the Act" and, therefore, Shri Koushal Kumar Agrawal being not a registered dealer cannot make any application for registration. The contention of the petitioner that according to sub-section (4) of section 32 of the aforesaid Act, the amendment as to change of ownership is deemed to have been amended as the registering authority failed to amend the registration certificate within one month from the date of application, has no application to this case. That is the reason why the registering authority has rejected the amendment application under annexure 12 and cancelled the VAT registration certificate under annexure 11. These orders have been passed according to law. Relying on sub-rule (3) of rule 30, learned counsel for the petitioner submitted that on the death of the proprietor the registering authority is obliged under the law to cancel the registration certificate immediately by an order in writing. These orders have been passed according to law. Relying on sub-rule (3) of rule 30, learned counsel for the petitioner submitted that on the death of the proprietor the registering authority is obliged under the law to cancel the registration certificate immediately by an order in writing. In view of the rival contentions of the respective parties the following questions fall for consideration by this court : (i) Whether the application filed by the petitioner pursuant to the tender notice dated June 9, 2008 is a valid application ? (ii) Whether after the death of the proprietor of proprietorship concern, the registration certificate issued to the proprietorship concern remains in force ? (iii) Whether under the provisions of the OVAT Act, the legal heir of a deceased proprietor has any right to ask for amendment for registration certificate granted to the deceased proprietor and the same can be amended ? (iv) Whether opposite party No. 1 is legally justified to cancel the agreement/contract entered into with the petitioner because of non-fulfilment of the tender condition and is justified to enter into a fresh contact with opposite party No. 3 ? Law is well-settled that in absence of a valid application accompanied by valid/genuine documents as required in the tender call notice, no contract can be awarded in favour of such person. In the present case one of the criteria is that a participant must be a registered dealer under the OVAT Act and the application must be accompanied by a valid tax clearance certificate. In the present case the application submitted by the petitioner was accompanied by a tax clearance certificate showing TIN No. 21101800603 issued by the STO, Kantabanji. According to the opposite parties the said registration certificate was granted by the Commercial Tax Department to late Dewaram Agarwal, the father of petitioner Sri Koushal Kumar Agarwal. The tax clearance certificate issued in name of M/s. Deepak Trading Co. which was the proprietorship concern of Dewaram Agarwal was furnished along with the application. The petitioner Sri Koushal Kumar Agarwal is not registered dealer under the OVAT Act having any TIN number and the Commercial Tax Department has not issued any tax clearance certificate to the petitioner, Koushal Kumar Agarwal. This amounts to a fraud. Law is well-settled that fraud vitiates everything. The petitioner Sri Koushal Kumar Agarwal is not registered dealer under the OVAT Act having any TIN number and the Commercial Tax Department has not issued any tax clearance certificate to the petitioner, Koushal Kumar Agarwal. This amounts to a fraud. Law is well-settled that fraud vitiates everything. Therefore, the application submitted by the petitioner in response to the tender call notice is not a valid application. So far as the second question is concerned, there is no dispute that in case of a proprietorship concern, the registration certificate is issued to the proprietor. In the present case, one late Dewaram Agarwal was the proprietor of M/s. Deepak Trading Co., who died on October 26, 2007. On the death of the said Dewaram Agarwal, there was a civil death of the registration certificate granted to late Dewaram Agarwal as the proprietor of M/s. Deepak Trading Co. and the same cannot be transferred in the name of any of the legal heirs of late Dewaram Agarwal. Sub-rule (3) of rule 30 of the OVAT Rules provides that : "In the event of death of a dealer being the proprietor of the business registered under the Act, the legal heir shall, within fourteen days from the date of death, inform in writing, the registering authority of the circle or range, as the case may be, the date of his death and produce before such authority such evidence, as may be required, and the registering authority either on receipt of such application, or otherwise, shall cancel the certificate of registration immediately by an order in writing from the date specified in that order." When the death of Dewaram Agarwal came to the knowledge of the registering authority the latter passed an order under annexure 11 cancelling the VAT registration certificate with effect from October 26, 2007. The registering authority has also cancelled the application for amendment of the registration certificate issued to late Dewaram Agarwal under annexure 12. The contention of the petitioner is that as the registering authority failed to grant registration certificate within thirty days from the date of application, the amendment as to change of ownerships applied by the petitioner is deemed to be allowed. This contention of the petitioner is not tenable. The contention of the petitioner is that as the registering authority failed to grant registration certificate within thirty days from the date of application, the amendment as to change of ownerships applied by the petitioner is deemed to be allowed. This contention of the petitioner is not tenable. The petitioner has no authority under law to make an application for amendment of a registration certificate granted to his late father, Dewaram Agarwal, which ceased to operate on the date of death of Dewaram Agarwal. Section 32 of the OVAT Act deals with the amendment of certificate of registration. Sub-section (1) of section 32 of the Act makes it clear that only a dealer registered under the Act can make an application for amendment on the situation specified therein. Sri Koushal Kumar Agarwal being not a dealer registered under the OVAT Act is not at all entitled to seek amendment of a registration certificate granted to his late father which was not in force on the date of making application for amendment by the petitioner. Rule 20 of the OVAT Rules provides that no certificate of registration issued under sub-rule (1) or (2) of rule 18 and TIN and SRIN assigned under sub-rule (1), (2) or (4) of rule 19 shall be transferred. Sub-section (d) of section 31 of the Act does not say that on the death of the proprietor to whom certificate of registration was granted, the same shall be treated as a registration certificate of the legal heirs of the deceased. Apart from the above, the registering authority itself has cancelled the certificate of registration granted to late Dewaram Agarwal under annexure 11 and rejected the amendment application of the petitioner under annexure 12. Unless these orders are reversed by the competent authority in the hierarchy, the said orders will govern the field. Thus, it can safely be concluded that on the date when the application was filed in response to the tender, call notice, the petitioner had no certificate of registration under the OVAT Act and the tax clearance certificate issued by the STO in the name of M/s. Deepak Trading Co. the proprietorship concern of late Dewaram Agarwal, has no legal force. So far as the fourth question is concerned, it is not in dispute that no valid tax clearance certificate was furnished along with the application for tender. the proprietorship concern of late Dewaram Agarwal, has no legal force. So far as the fourth question is concerned, it is not in dispute that no valid tax clearance certificate was furnished along with the application for tender. The petitioner was not a registered dealer under the OVAT Act during the relevant time. He has misrepresented himself as a registered dealer under the OVAT Act bearing TIN No. 21101800603 which in fact was allotted to the late father of the petitioner. In that situation, opposite party No. 1 is further justified to enter into a fresh contract with opposite party No. 3 for supply of soya chunks at the rate quoted by the petitioner keeping in view the immediate necessity of MDM for supply of soya chunks to the school-going children. In the result, the writ petition is dismissed. There will be no order as to cost. I. M. Quddusi J. - I agree.