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2018 DIGILAW 1044 (GUJ)

Tarulata Trading Pvt. Ltd. v. State of Gujarat

2018-08-30

AKIL KURESHI, B.N.KARIA

body2018
JUDGMENT Akil Kureshi, J. These petitions are filed by the dealers whose registrations have been cancelled with retrospective effect by the competent authority under the Gujarat Value Added Tax Act ('the VAT Act' for short). Facts being identical, we may notice from Special Civil Application No. 22129 of 2017. 2. Petitioner is a private limited company and is engaged in the business of trading of various commodities. The petitioner enjoys registration under the VAT Act and Central Sales Tax Act with effect from 27.06.2008. The department carried out a spot visit at the premises of the petitioner company, during which, certain material was collected, giving prima-facie impression to the authorities that the petitioner was engaged in bogus billing activities without sale and purchase of goods. The Deputy Commissioner of Value Added Tax issued notices for assessment and cancellation of registration. The petitioner replied under a letter dated 02.05.2017 stating that all the accounts and records have been furnished for the years 2012-13 to 2015-16. Such accounts are regularly audited. Majority of the transactions are local sales. C-forms are therefore not produced. To the authority's prima-facie opinion that the transactions were circular in nature and therefore bogus, the petitioner pointed out that he is open to assessment and payment of tax as may be found due. Till such assessment is completed, the petitioner has requested that no further action may be taken. 3. The authority passed an order dated 29.05.2017, cancelling the petitioner's registration from inception. He declared that such registration would be ab-initio cancelled. In the order, he referred to the petitioner's transactions with three other dealers viz. Shankh Impex, Adept Trading and Placid Tradelink. He compared the sales and purchase of these three entities and that of the petitioner to demonstrate that these transactions were circuitous in nature. He pointed out that number of sales and purchases were made internally between these four agencies which would establish that the sales and purchases were not genuine and the petitioner was merely engaged in bogus billing activities. He expressed an opinion that such bogus billing activities were carried out to defeat the interest of Revenue and to inflate the turnover for availing larger bank loans. 4. The petitioner challenged such order before the Value Added Tax Tribunal ('the Tribunal' for short). Pending the revision, the petitioner requested for stay of the order. He expressed an opinion that such bogus billing activities were carried out to defeat the interest of Revenue and to inflate the turnover for availing larger bank loans. 4. The petitioner challenged such order before the Value Added Tax Tribunal ('the Tribunal' for short). Pending the revision, the petitioner requested for stay of the order. The Tribunal by an order dated 04.08.2017 admitted the appeal, however, request for stay was rejected. This order of the Tribunal, the petitioner has challenged in the present petition. 5. Learned counsel for the petitioner submitted that all the transactions of the petitioner of sale and purchase of the goods were duly recorded in the accounts which were regularly audited and presented before the authorities. The VAT authorities are unable to point out any revenue linkage. The petitioner has not availed of any bank loan which would sufficiently demolish the contention of the Revenue authorities that the turnover was inflated for availing larger bank loans. He further submitted that cancellation of registration with retrospective effect could not have been ordered. No reasons are cited why such cancellation was effected with retrospective effect. He submitted that the petitioner was dealing in commodities where purchase and sale happens frequently. The Warehousing (Development and Regulation) Act, 2007, would permit a person to purchase the goods without actual movement thereof. Thus, merely because there were frequent transactions between four entities or that the petitioner could not show the actual movement of the goods, would not be the ground for holding that the petitioner was engaged in the bogus billing activities. He submitted that the retrospective cancellation of the registration of the firm would enable the authorities to target the petitioner's purchasing dealers who might have purchased the goods in the distant past. 6. On the other hand, learned AGP Shri Trivedi opposed the petition contending that the petitioner has not pointed out any of these facts before the authorities. The competent authority has passed a speaking order after giving opportunity of representation to the petitioner. The Tribunal has given reasons for not granting interim relief. He submitted that granting any interim protection to the petitioner would lead to multiple complications. 7. Facts being identical in all petitions, they are not separately recorded. We clarify that that we are taking up the issue only of interim protection to the petitioner pending revision petition before the Tribunal. The Tribunal has given reasons for not granting interim relief. He submitted that granting any interim protection to the petitioner would lead to multiple complications. 7. Facts being identical in all petitions, they are not separately recorded. We clarify that that we are taking up the issue only of interim protection to the petitioner pending revision petition before the Tribunal. We would therefore be slow in making any observation which might prejudice one side or other in pending litigation at any rate. It is provided that no such observation would handicap either side in the revision petition pending before the Tribunal. 8. With this preamble, we may recall that the petitioner's registration as a dealer continued right from the year 2008 till it was recently cancelled with retrospective effect. Even if the cancellation of registration was to be upheld, the question is, should the same has been ordered with retrospective effect providing for cancellation of registration from inception. Even if such registration is cancelled, the purchasing dealers in their assessments can always argue that their transactions with the petitioner were genuine and that therefore they cannot be deprived of the input tax credit concerning such transactions. On the other hand, even if such registration is not cancelled with retrospective effect and the department has material to believe that certain transactions of the past carried out by the petitioner were non-genuine, it would always open for the department to pursue such issue with the purchasing dealers. Be that as it may, pending the Revision Petition before the Tribunal, in facts of the case we would like to stay the retrospective operation of the cancellation of registration. 9. In the result, all petitions are allowed. The orders cancelling the registrations of the respective petitioners are stayed to the limited extent of their retrospective effect. In other words, the cancellation of registration from the date of the order would continue to operate. 10. All petitions are disposed of accordingly.