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2019 DIGILAW 1308 (RAJ)

Combined Traders, 2672 v. State Of Rajasthan

2019-05-01

GOVERDHAN BARDHAR, MOHAMMAD RAFIQ

body2019
JUDGMENT : This writ petition has been filed by petitioner, namely, Combined Traders, praying for declaring Rule 17(20) of the Central Sales Tax (Rajasthan) Rules, 1957 (for short, ‘the Rajasthan Rules’), as introduced through notification dated 14.07.2014, ultra vires of Section 8(4), 13(1)(d), 13(3) & 13(4)(e) of the Central Sales Tax Act, 1956. Further prayer is made to declare the cancellation of ‘C’ forms permitted to be downloaded on the website of the Department to respondents no.4 and 5, vide order dated 07.12.2017, as illegal, without the authority of law and violative of Article 19(1)(g) of the Constitution of India. Prayer is also made for quashing and setting aside the communications dated 20.11.2017 and 30.11.2017 sent by the respondent no.3 to the VATO Ward-17, New Delhi, as being preposterous and not sustainable as the said communications preceded the date of cancellation of ‘C’ form, which was 07.12.2017. The petitioner has further prayed for declaration that the registration certificates of the respondents no.4 and 5, which were cancelled on 07.12.2017 with retrospective effect from 01.05.2017, were valid during the period when transactions were made by the petitioner and that even according to Section 16(4) of the Rajasthan Value Added Tax Act, 2003 such cancellation can only be effective from the date of the order or the hoisting of such cancellation on the portal of the department and would not come into effect retrospectively. It is also prayed to declare the communication dated 27.12.2017 sent by the respondent no.2 to the Commissioner VAT/GST, Delhi as without the authority of law and thus quash and set aside the same. Lastly, prayer is made for a direction to the respondent no.1 to validate the ‘C’ forms issued to the respondents no.4 and 5 on 06.07.2017 immediately thus enabling the petitioner to claim the benefit of Section 8(1) as he had already submitted the said ‘C’ forms verified on TINXSYS on 14.09.2017. 2. Briefly stated, the facts of the case are that the petitioner, as a registered dealer in Delhi, had made sales in the first quarter of 2017-18 under Section 8(1) of the Central Sales Tax Act, 1956 (‘for short, ‘the Act’) to respondent no.4 M/s. H.G. International, TIN No.08372171209 and respondent no.5 M/s. Saraswati Enterprises, TIN No.08942179286. As per petitioner, the said sales were duly recorded in the books of accounts against which payments had also been received through the banking channels. As per petitioner, the said sales were duly recorded in the books of accounts against which payments had also been received through the banking channels. The ledger accounts of the respondents have been enclosed to the writ petition. To claim reduced rate of tax under Section 8(1), the petitioner had furnished ‘C’ forms, as per the requirement of Section 8(4) of the Act. As per second proviso to Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 (for short, ‘the Rules of 1957’) a single ‘C’ form is required to be submitted for a quarter, which was issued by each of the respondents towards the transactions made in the first quarter of 2017-18. As per petitioner, the ‘C’ forms were obtained by the respondents no.4 and 5 online on 06.07.2017 after qualifying the conditions under Rule 17(8), (9), (10), (11), (12) and (13) of the Central Sales Tax (Rajasthan) Rules, 1957 (for short, ‘the Rajasthan Rules’). The petitioner had claimed refund in the return filed on 11.07.2017 for the first quarter of 2017-18 under the Delhi Value Added Tax Act, 2004 (for short, ‘the DVAT Act’). When the said refund was not given within a period of two months from the date of filing of return, petitioner approached the Delhi High Court by filing Writ Petition (Civil) No.8283/2017, which vide order dated 18.09.2017, directed the authorities in Delhi to refund the amount along with due interest within four weeks and two weeks thereafter respectively. On 25.10.2017, the respondent no.3 informed the VATO, Ward-17, Delhi about the cancellation of ‘C’ forms of the respondents no.4 and 5 on the ground that they have not been found functioning at their business premises. By another letter dated 30.11.2017, Delhi VAT authority was informed about cancellation of the said ‘C’ forms as well as the registration certificates of the respondents no.4 and 5. The registration certificates of respondents no.4 and 5 were cancelled on 07.12.2017, under Section 16(4) of the Rajasthan Value Added Tax Act, 2003 (for short, ‘RVAT Act’). Hence this writ petition. 3. Mr. Rajesh Jain, learned counsel for petitioner, argued that while sub-section (1) of Section 13 of the Act confers power on the Central Government to make Rules, sub-section (4) of Section 13 gives that power to the State Government. Hence this writ petition. 3. Mr. Rajesh Jain, learned counsel for petitioner, argued that while sub-section (1) of Section 13 of the Act confers power on the Central Government to make Rules, sub-section (4) of Section 13 gives that power to the State Government. Section 13(3) provides that the Rules framed by the State Government should not be inconsistent with the provisions of the Act and the Rules made under sub-section (1). Sub-section (4) in clauses (a) to (j) stipulates the purposes for which the State Government can make the Rules. As per clause (e) of Section 13(4) of the Act, the State could make rules as regards, (a) the authority from whom; (b) conditions subject to which; (c) the fee subject to payment of which any form or certificate prescribed under sub-section (4) of Section 8 (as relevant in this case) may be obtained. In addition, this clause also permits the State to frame Rules so as to decide the manner in which such form shall be kept in custody and records relating thereto maintained and the manner in which any such form may be used or any such certificate or declaration may be furnished. Therefore, the rule making power available to the State under Section 13(4)(e) does not confer any authority on the respondent no.1 to frame a rule so as to provide cancellation of the ‘C’ form once issued. Rule 17(20) notified on 14.07.2014 by respondent no.1 is not only inconsistent with the Act but is also outside the scope of rule making power of the State. Invoking this Rule, the ‘C’ forms issued by the respondents no.4 and 5 have been illegally cancelled for which no provision exists under the Act. Reliance in support of this argument is placed on the judgments of the Supreme Court in Sales Tax Officer, Ponkunnam and Another Vs. K.I. Abraham – 1967 (2) STC 367 (SC), India Carbon Vs. State of Assam – (1997) 106 STC 460 (SC), Dawar Brothers, Bhopal Vs. State of M.P. and Others – (1979) 44 STC 286 (MP). Learned counsel, Mr. Rajesh Jain also relied on the judgment of the Supreme Court in General Officer Commanding-in-Chief and Another Vs. Dr. K.I. Abraham – 1967 (2) STC 367 (SC), India Carbon Vs. State of Assam – (1997) 106 STC 460 (SC), Dawar Brothers, Bhopal Vs. State of M.P. and Others – (1979) 44 STC 286 (MP). Learned counsel, Mr. Rajesh Jain also relied on the judgment of the Supreme Court in General Officer Commanding-in-Chief and Another Vs. Dr. Subhash Chandra Yadav and Another – (1988) 2 SCC 351 , and submitted that the Supreme Court therein held Rule 5-C of the Cantonment Fund Service Rules, 1937 to be ultra-vires of Section 280(2)(c) of the Cantonment Act, 1924. Reliance is also placed on the judgment of the Supreme Court in Laghu Udyog Bharti and Another Vs. Union of India and Others – (1999) 6 SCC 418 and judgment of the Delhi High Court dated 22.10.2018 in Areness Foundation Vs. Government of NCT of Delhi and Another in Writ Petition (Civil) No.9123/2018. 4. Mr. Rajesh Jain, learned counsel, argued that there exists no provision under the Act for cancellation of ‘C’ form. This has also been accepted by the department before Delhi High Court in the case of Jain Manufacturing (India) Pvt. Ltd. Vs. Commissioner of VAT Delhi – 2016 (93) VST 326 (Del). The Special Leave Petition preferred against that judgment was dismissed by the Supreme Court vide order dated 25.10.2016. The decision in Jain Manufacturing, supra, was followed by the Delhi High Court in Emami Agrotech Ltd. Vs. Commissioner of VAT. The Delhi High Court, vide order dated 30.08.2016, directed the respondent Commissioner to validate the statutory ‘C’ forms issued to the petitioner therein. 5. It is argued that the Central Government, while making the Rules, has not carved out any rule thereunder permitting cancellation of the declaration form. Even Section 13(1)(c) of the Act permits the Centre to make Rules providing for the cases and circumstances in which and conditions subject to which any registration granted under the Act may be cancelled. Quite contrary to the stipulations contained under Section 13(3), the respondent no.1 through the notification S.O. 50, dated 14.07.2014, introduced Rule 17(20) of the Rajasthan Rules after a gap of 57 years from the date of its introduction. Quite contrary to the stipulations contained under Section 13(3), the respondent no.1 through the notification S.O. 50, dated 14.07.2014, introduced Rule 17(20) of the Rajasthan Rules after a gap of 57 years from the date of its introduction. No other State in their Rules has any provision permitting the State authority to make Rules providing for cancellation of ‘C’ form once issued to the selling dealer, which would be evident from the set of rules of other States cited during the course of hearing. 6. On the question of cancellation of registration certificate, it is submitted that the registration certificates of the respondents no.4 and 5 have been cancelled on 07.12.2017 under Section 16(4) of the RVAT and not under Section 7(4)(b) of the Act. Registration certificate under the CST Act cannot be cancelled by applying the provisions of the RVAT. For this, reference is made to Section 9(2) of the Act, which starts with the expressions “subject to the other provisions of the Act and the Rules made thereunder”. RVAT can only be resorted to where the matter relates to “registration of the transferee’s business” and not for cancellation of registration under the Act. Thus, for cancellation of registration certificate under the Act, Section 7(4)(b) would be applicable where it has been made permissible at the instance of the department and Section 7(5) when it is at the instance of an assessee. Rules which contemplate the cancellation process are Rule 9(3) for Section 7(4)(b) and Rule 10 of the Rules for Section 7(5). In the rule making power available under Section 13(4) of the Act, none of the clauses from (a) to (g) deals with cancellation of the registration certificate. Thus, it is clear that the States have not been empowered to make Rules for cancellation of either ‘C’ forms or registration certificate validly issued under the Act. Even as per Section 16(4) of the RVAT where certificate of registration can be cancelled as may be deemed appropriate by the authority, the same cannot be understood to have conferred power on the authority to cancel the registration certificate retrospectively. Cancellation under Section 7(5) takes effect from the end of the year. Thus, when registrations of respondents no.4 and 5 were cancelled on 07.12.2017, such cancellation would take effect either from 07.12.2017 or on a subsequent date when such cancellations were hosted on the website of the department. Cancellation under Section 7(5) takes effect from the end of the year. Thus, when registrations of respondents no.4 and 5 were cancelled on 07.12.2017, such cancellation would take effect either from 07.12.2017 or on a subsequent date when such cancellations were hosted on the website of the department. Learned counsel, in support of his submissions, has placed reliance on the judgment of Delhi High Court in Chhabra Electric Stores Vs. Commissioner of Delhi – 1972 (30) STC 85 (Del). He submitted that as held by the Delhi High Court in Jain Manufacturing, supra, retrospective cancellation under the Act is not envisaged under Section 7(4)(b). It is argued that notwithstanding cancellation of the registration certificate of the purchasing dealers, the petitioner cannot be denied the benefit of deduction, who has acted on the strength of the registration certificates of respondents no.4 and 5, which were valid at the time of transactions. To buttress his argument, learned counsel also relied on the judgments of the Supreme Court in State of Maharashtra Vs. Suresh Trading Company – (1998) 109 STC 439 (SC) and State of Madras Vs. Radio Electricals Ltd. - (1966) 18 STC 222 (SC). 7. It is submitted that the preliminary objection raised by the respondents no.1, 2 and 3 as regards the maintainability of the writ petition, is liable to be rejected. Since vires of Rule 17(20) of the Rajasthan Rules have been challenged, therefore, it could only be done by invoking the writ jurisdiction of this Court under Article 226/227 of the Constitution of India. The authorities appointed under the Statute are creatures of the Statute who cannot go into the validity of the provisions of the Act and the Rules. Moreover, challenge by the petitioner is also supported with the judgment of Delhi High Court in Jain Manufacturing, supra. The judgment of the Supreme Court in Commissioner of Sales Tax Vs. Shree Krishna Engg. - (2005) 2 SCC 692 , relied upon by the respondents, is not applicable inasmuch as it deals with the situation where no ‘C’ forms have been issued and the selling dealers approached the Court for a direction to the concerned Sales Tax Department to issue of such ‘C’ forms. Shree Krishna Engg. - (2005) 2 SCC 692 , relied upon by the respondents, is not applicable inasmuch as it deals with the situation where no ‘C’ forms have been issued and the selling dealers approached the Court for a direction to the concerned Sales Tax Department to issue of such ‘C’ forms. In that case the court was dealing with a situation where no C-Form was issued and the selling dealer had approached the court for a direction to the concerned Sales Tax Department to issue such C-Form. In that context, the Supreme Court observed that the registration is really in the nature of a concession and not a matter of right and that it was conditional upon fulfillment of certain statutory requirements. The aforesaid judgment has been distinguished in Jain Manufacturing, supra. 8. Lastly, Mr. Rajesh Jain, learned counsel, submitted that cancellation of ‘C’ forms has adversely affected the petitioner. When transactions were effected under Section 3 of the Act, which have also been accepted by the authority in Delhi, then on the submission of the ‘C’ forms, obligation of the petitioner as contemplated under Section 8(1) and (4) of the Act stood discharged and came to an end. If the respondent authorities had any cause of action against respondents no.4 and 5, then they could invoke any proceedings under the Act against them including assessment of tax, interest and penalty for which petitioner has no grievance. Learned counsel in this connection has relied on the judgment of the Orissa High Court in State of Orissa Vs. Santosh Kumar and Co. - (1983) 54 STC 322 (Orissa). It is submitted that when the respondent no.4 stood registered with the respondents no.2 and 3 for over a period of three years and respondent no.5 for six months, then cancellation of ‘C’ forms is arbitrary and violative of Articles 14 and 19 (1)(g) of the Constitution of India. 9. On the contrary, Mr. R.B. Mathur, learned counsel appearing for the respondent submitted that the tax authorities at Delhi wrote a letter to the tax authorities in Rajasthan to verify the genuineness of the ‘C Forms’ issued by two traders, namely M/S H&G International and M/S Sarswati Enterprise, alleged to be registered dealers in the state of Rajasthan. 9. On the contrary, Mr. R.B. Mathur, learned counsel appearing for the respondent submitted that the tax authorities at Delhi wrote a letter to the tax authorities in Rajasthan to verify the genuineness of the ‘C Forms’ issued by two traders, namely M/S H&G International and M/S Sarswati Enterprise, alleged to be registered dealers in the state of Rajasthan. It was pointed out that vide the C- forms goods worth RS.4,89,51,010.00/- and Rs.7,20,53,338/- were purchased by the present petitioner from M/s H&G International and M/s Saraswati Enterprises, respectively on 06.07.2017. On due inquiry made by the tax authorities in Rajasthan, it was found that no business activity was done at the address given by the dealers, both the addresses were of residential areas and on inquiry made from the neighboring people, they denied any knowledge of any business activity at the given address. Giving a logical end to the enquiry, show-cause notices were issued to both the registered dealers by the sales tax authorities in Rajasthan. Despite notices, no one appeared and consequently the registration of the dealers were cancelled w.e.f 03.12.2014. The order cancelling the registration of the traders was never put to challenge before any of the authorities by the aggrieved parties, and thus has attained finality. The authorities at Delhi were also informed regarding the proceedings against the dealers at Rajasthan and the cancellation of their ‘C’ Forms. 10. Mr. R.B. Mathur, learned counsel, submitted that the petitioner in the present case challenged validity of the Central Sales Tax Rule, 1957, even though he is not even a dealer registered in the state of Rajasthan. It is submitted that following a due inquiry, registration of two dealers, namely, M/s H&G International and M/s Saraswati Enterprise was cancelled by the assessing authority vide an order passed under Rule 17(20) of Central Sales Tax rule, 1957, read with Rule 48, Rajasthan Value Added Tax Rules, 2006 and Section 16(4) Rajasthan Value Added Tax Act, 2003. The present petitioner is a stranger to the assessment/penalty order passed by the assessing authority and has no locus to challenge the vires of the Rules. Learned counsel argued that the said order was never challenged by the concerned dealers registered in Rajasthan before any appellate authority and hence has attained finality. The present petitioner is a stranger to the assessment/penalty order passed by the assessing authority and has no locus to challenge the vires of the Rules. Learned counsel argued that the said order was never challenged by the concerned dealers registered in Rajasthan before any appellate authority and hence has attained finality. Further, the registered dealers to whom the C-forms were issued have not even put in appearance before this court, raising a serious cloud of doubt on the actions of the present petitioner and filling of the present petition. It is a settled principle of law that no proceedings can be initiated by a person who is stranger to the case. Thus, the present writ deserves to be dismissed on this ground alone. 11. Mr. R.B. Mathur, learned counsel appearing for revenue, further submitted that the Central Sales Tax Act 1956 is a complete code in itself. The Act provides for a provision of appeal before the appropriate authorities. Neither the petitioner nor the dealer registered in the State of Rajasthan has made any challenge to the order cancelling ‘C’ forms. In such circumstances the order of the Assessing Officer after attaining finality cannot be challenged at this stage and the authority of this court cannot be used as a measure to bypass the provisions of the above mentioned Act. Learned counsel relying on the judgment of the Apex Court in the case of Tithagur Paper Mills v/s State of Orissa - AIR 1983 SC 603 has submitted that it has been held therein that courts should be slow in interfering in matters where adequate appellate machinery is available to the petitioner. The powers available to the court under Articles 226 of the constitution are discretionary in nature and should be applied with abundant caution, especially in taxation matters, where greater latitude is available to the authorities. Reliance in support of this argument is placed on judgment of the Supreme Court in Authorized Officer, State Bank of Travancore and Another Vs. Mathew K.C. - AIR 2018 SC 676 . Mr. R.B. Mathur, learned counsel for the respondent, submitted that it is a settled principle of law that while interpreting a question, challenging the vires of the act/rules, the court should be slow in holding an act/rules ultra vires, and there is a general presumption in favor of constitutionality of the statute. Mathew K.C. - AIR 2018 SC 676 . Mr. R.B. Mathur, learned counsel for the respondent, submitted that it is a settled principle of law that while interpreting a question, challenging the vires of the act/rules, the court should be slow in holding an act/rules ultra vires, and there is a general presumption in favor of constitutionality of the statute. It is submitted that the Supreme Court in the case of Hindustan Zinc Ltd. v/s Rajasthan Electricity Regulatory Commission - (2015) 12 SCC 611 , has held that where the validity of subordinate legislation is challenged, question to be asked is whether power given to the rule making authority has been exercised for the purpose for which it was given. The Court has to examine the nature, object and scheme of the legislation as a whole to consider what is the area over which powers are conferred upon the rule making authority. However, the court has to start with the presumption that the rule is intra vire and has to be read down only to save it from being declared ultra vires in case the court finds that the above presumptions stand rebutted and the impugned Regulations are relatable to the specific provisions contained in Section 86(1)(e) of the Act. Learned Counsel further submitted that the Supreme Court very recently in the case of TVS Company V/s. State of Tamil Nadu reported in (2018) AIR (SC) 5624 has reiterated the principle that the court should be slow in the reviewing the fiscal laws and any concession claimed should be strictly in accordance with law. Mr. R.B. Mathur, learned Counsel for the respondent, submitted that the Rajasthan Value Added Act, 2003 and the Central Sales Tax Act, 1956, each is a complete code. A bare perusal of the various provisions of either of the Acts, makes it amply clear that the rules envisaged under Rule 17(20) of the Central Sales Tax (Rajasthan) Rules, 1957, are in consonance therewith. Reference is made to various provisions of the Central Sales Tax Act, 1956, especially sections 8, 9, 13, 16 and Rules 9 and 17 of the Central Sales Tax (Registration and Turnover) Rules of 1967. Learned counsel, submitted that it is of utmost relevance that in an era of e-filing of documents and returns, the chances of physical verification by the sales tax authorities have been reduced. Learned counsel, submitted that it is of utmost relevance that in an era of e-filing of documents and returns, the chances of physical verification by the sales tax authorities have been reduced. This in turn has increased the possibility of sham transactions and filing of returns and declarations by shell companies. With a view to check the loss of state exchequer and safeguarding interest of the state revenue, the provisions relating to filling of returns and declarations were made more stringent. The apex court as well as various high courts of the country have consistently held that any rule to promote the cause of the Act should be held intra-vires. Once an Act is promulgated, a reasoning which gives it teeth to ensure the furtherance of purpose of the Act, should be adopted. It is submitted that the Apex Court in the case of Commissioner of Sales Tax V/s. Shree Krishna Engg. Co. & ors. reported in (2005) 2 SCC 693 has held that it is a settled law that equity plays only a minuscule role in fiscal matters, even if such considerations were to be applied, there would still be no justification for an application adverse to the interest of the state. The dealer who has chosen to trust the other dealer must suffer for his mercantile recklessness. 12. Learned Counsel further argued that a similar controversy came up before the Gujarat High Court in the case of Willowood Chemicals Pvt. Ltd. Vs. Union of India – 2018 (19) GSTL 228, wherein the court while examining the provisions of Section 13(4) of the Central Sales Tax Act, 1956, held that it was well within the legislative competence of the state to formulate rules for submission of declaration forms within the stipulated time period. 13. We have bestowed our anxious consideration to rival submissions, perused the material on record and studied the cited precedents. 14. Before proceeding to examine the merits of the case, we would begin with by referring to some of the cited case law. The Supreme Court in State of Maharashtra Vs. Suresh Trading Company, supra, was dealing with a case in which the respondents, who were registered dealers under the Bombay Sales Tax Act, 1959, purchased goods from Sulekha Enterprises Corporation between 1st January and 31st December, 1967. It was not disputed that on the date of such sale, Sulekha Enterprises Corporation held a valid registration. Suresh Trading Company, supra, was dealing with a case in which the respondents, who were registered dealers under the Bombay Sales Tax Act, 1959, purchased goods from Sulekha Enterprises Corporation between 1st January and 31st December, 1967. It was not disputed that on the date of such sale, Sulekha Enterprises Corporation held a valid registration. The respondent on that basis claimed deduction in the turnover of sales, however, the Sales Tax Officer disallowed the same on the premise that registration of Sulekha Enterprises Corporation stood cancelled on 20.08.1967 with retrospective effect from 01.01.1967. The Bombay High Court reversed the decision of the Sales Tax Officer. The Supreme Court while affirming the decision of the Bombay High Court held as under:- “….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 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 rejected. To accept it would be to notify the provisions of the statute which entitle persons dealing with registered dealers to act upon the strength of registration certificates.” 15. The aforesaid decision of the Supreme Court was followed by the Delhi High Court in Shanti Kiran India Pvt. Ltd. Vs. Commissioner Trade & Tax Department – (2013) 57 VST 405 (Delhi), by holding thus:- “This court is of the opinion that in the absence of any mechanism enabling a purchasing dealer to verify if the selling dealer deposited tax, for the period in question, and in the absence of notification in a manner that can be ascertained by men in business that a dealer's registration is cancelled (as has happened in this case) the benefit of input credit, under Section 9(1) cannot be denied. Furthermore, this Court notices that the cancellation of both selling dealers' registration occurred after the transactions with the appellant. The VAT authorities observed that the scanty amounts deposited by the selling dealers was incommensurate with the transactions recorded, and straightaway proceeded to hold that they colluded with the appellant. Furthermore, this Court notices that the cancellation of both selling dealers' registration occurred after the transactions with the appellant. The VAT authorities observed that the scanty amounts deposited by the selling dealers was incommensurate with the transactions recorded, and straightaway proceeded to hold that they colluded with the appellant. Such a prior conclusions are based on no material, or without inquiry, and accordingly unworthy of acceptance.” 16. The Orissa High Court in State of Orissa Vs. Santosh Kumar, supra, was dealing with a case where deduction in respect of sales made to a registered dealer was disallowed on the ground that the purchasing dealer was fictitious although it (purchasing dealer) held a valid registration on the date of the transaction. In those facts, it was held as under:- “….Once a certificate of registration is issued to a person and he becomes a registered dealer, he is entitled to certain benefits under the Act. Certificates granted by the public officers have their value and people in the commercial field would in normal course accept such 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.” 17. The Supreme Court in State of Madras Vs. 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.” 17. The Supreme Court in State of Madras Vs. Radio Electricals Ltd., supra, while considering as to what precaution a seller is required to exercise while entering into a transaction of sale with a buyer, observed as under:- “….He (the seller) must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificates but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules. and the representation is recorded in the certificate in Form 'C' the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under Section 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer. …..” 18. A somewhat identical controversy came up for consideration before the Delhi High Court in Jain Manufacturing, supra. The petitioner in that case was engaged in trading of duty entitlement pass book scrips and was having its registered office in Kanpur (Uttar Pradesh). The petitioner was also registered under the Central Sales Tax Act, 1956, and was given a Tax Identification Number (TIN) in the State of Uttar Pradesh. The petitioner was aggrieved by the action of the Commissioner, Value Added Tax (VAT) in the Department of Trade and Taxes, New Delhi, in, inter alia, cancelling the Form-C issued with regard to the purchases made from the petitioner by one Keshav Corporation (respondent no.2). It was conceded before the High Court on behalf of the department that there was no provision in the CST Act for cancellation of the C-Form and that registration once granted under the CST Act can be cancelled by the authority, which granted it only in accordance with the provisions of the CST Act, but retrospective cancellation of a registration is not contemplated. In those facts, the Delhi High Court held as under:- “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 further if such power exists then whether in the facts and circumstances of the present case such power was rightly exercised. No provision in the CST Act has been brought to the notice of the Court which enables an authority issuing a C-Form to cancel the C-Form. Rule 5(4) of the Central Sales Tax (Delhi) Rules, 2005 enables the authority which has to issue a C-Form to "withhold" the C-Form. The contingencies under which a C Form may be withheld are set out in Rule 5(4). For instance, Rule 5 (4) (v) envisages that some adverse material has been found by the Commissioner "suggesting any concealment of sale or purchase or furnishing inaccurate particulars in the returns." The Commissioner could, in terms of the proviso to Rule 5(4), instead of withholding the C-Form, issue to the applicant such forms in such numbers and subject to such conditions and restrictions, as he may consider necessary. However, there is no specific provision even under the aforementioned Rules which enables the Commissioner to cancel the C-Form that has already been issued. There is merit in the contention that one of the primary requirements for issuance of a C-Form is that the dealer to whom the C-Form is issued has to have a valid CST registration on the date that the C Form is issued. If the purchasing dealer does not possess a valid CST registration on the date of the transaction of sale, then the selling dealer cannot insist on being issued a CForm. In the present case, on the date of the transaction i.e. 10th March, 2015 the purchasing dealer viz., Respondent No. 2 did posses a valid CST registration. The name of the purchasing dealer as shown in the invoices, and the name and address of the registered purchasing dealer as reflected in the C-Forms issued by the DT&T matched. The cancellation of the CST registration of Respondent No. 2 took place subsequently on 4th August 2015. The name of the purchasing dealer as shown in the invoices, and the name and address of the registered purchasing dealer as reflected in the C-Forms issued by the DT&T matched. The cancellation of the CST registration of Respondent No. 2 took place subsequently on 4th August 2015. Therefore, there was no means for the Petitioner as the selling dealer to suspect as of the date of sale or soon thereafter that the payments made to it RTGS was not by Respondent No.2 but by some other entity with the same name. It is not possible, therefore, to straightaway infer any collusion between the Petitioner and Respondent No. 2 or for that matter the other entity of the same name spoken of by the DT&T. In any event, from the point of view of the Petitioner, the requirement 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.” 19. In Jain Manufacturing, supra, the argument was also raised with regard to locus of the petitioner to challenge the cancellation of C-Form issued to respondent no.2 and the registration of the respondent no.2. The Delhi High Court held that the petitioner was constrained to also challenge the cancellation of the registration of the respondent no.2 only because this was the main reason for cancellation of the C-Form. However, the court confined its consideration as to the validity of cancellation of CForm and did not go into validity of cancellation of the registration of the respondent no.2. It was held that the petitioner was directly affected by the decision of the Department to cancel the C-Form. It was held that 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%, however, the selling dealer would be directly affected by such decision. The writ petition was therefore entertained because an important question of law regarding the absence of power under the CST Act or the Rules made thereunder, to cancel a C-Form was raised. 20. The writ petition was therefore entertained because an important question of law regarding the absence of power under the CST Act or the Rules made thereunder, to cancel a C-Form was raised. 20. We are also of the view that in the present matter as well, not only important question of law regarding competence of the State to retrospectively cancel validly issued declaration form/form-C is involved, validity of Rule 17(20) of the Rules of 2017 is also under challenge. These issues cannot be decided by alternative foras provided in the Act. We therefore overrule the objection of alternative remedy. 21. In Sales Tax Officer, Ponkunnam and Another Vs. K.I. Abraham, supra, the respondent-assessee was a dealer in coconut-oil business having inter-State sales, who was assessed to sales tax for the year 1959-60 under Section 8 of the Central Sales Tax Act. Out of total turnover determined by the Sales Tax Officer, only a part thereof was supported by proper declaration Form ‘C’, with regard to which tax was imposed at concessional rate, and remaining part was not so supported with regard to which tax was imposed at higher rate on the premise that he did not file the declaration form on or before the prescribed date, i.e., 16.02.1961, but actually filed the declaration forms on 08.03.1961 but before the order of assessment was made. The assessee sought to explain the delay by submitting that he had received the declaration form late from the purchaser in Madras. Both the appeal and the revision filed by the assessee before the respective authorities were dismissed. The Kerala High Court, however, allowed his writ petition and quashed the orders of assessment of sales tax and directed the Sales Tax Officer to make a fresh order of assessment after taking into consideration the declaration forms furnished by the assessee on 08.03.1961. The State of Kerala in exercise of its powers delegated to it by Section 13(3) of the CST Act, framed the Central Sales Tax (Kerala) Rules, 1957, the third proviso to Rule 6(1) thereof stipulated that all declaration forms pending submission by dealers on 02.05.1960 shall be submitted not later than 16.02.1961. The State of Kerala in exercise of its powers delegated to it by Section 13(3) of the CST Act, framed the Central Sales Tax (Kerala) Rules, 1957, the third proviso to Rule 6(1) thereof stipulated that all declaration forms pending submission by dealers on 02.05.1960 shall be submitted not later than 16.02.1961. The argument of the assessee before the Supreme Court was that the third proviso to Rule 6(1) was ultra vires Section 8(4) read with Section 13(3) and (4) of the Central Sales Tax Act, 1956, and that prescription of outer date for submission of the declaration form cannot be covered by the expression “in the prescribed manner” even in Section 8(4) read with Section 13(3) and (4) of the Central Sales Tax Act, 1956. Upholding the argument, the Supreme Court held as under:- “….In our opinion, the phrase "in the prescribed manner" occurring in section 8(4) of the Act only confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold, and to which authority the form is to be furnished. But the phrase "in the prescribed manner" in section 8(4) does not take in the time-element. In other words, the section does not authorise the rule making authority to prescribe a time-limit within which the declaration is to be filed by the registered dealer. The view that we have taken is supported by the language of section 13(4)(g) of the Act which states that the State Government may make rules for "the time within which, the manner in which and the authorities to whom any change in the ownership of any business or in the name, place or nature of any business carried on by any dealer shall be furnished." This makes it clear that the Legislature was conscious of the fact that the expression "in the manner" would denote only the mode in which an act was to be done, and if any time-limit was to be prescribed. for the doing of the, act, specific words such as "the time within which" were also necessary to be put in the statute. …..” 22. Under challenge before the Supreme Court in India Carbon Ltd. Vs. State of Assam, supra, was the judgment of the Gauhati High Court. for the doing of the, act, specific words such as "the time within which" were also necessary to be put in the statute. …..” 22. Under challenge before the Supreme Court in India Carbon Ltd. Vs. State of Assam, supra, was the judgment of the Gauhati High Court. The appellants before the Supreme Court were engaged in the manufacturing and sale of petroleum coke. The appellants were registered dealer under the Central Act and were liable to pay Central sales tax on the petroleum coke, which was the subject of inter-State sales. The appellants were required by the respondent State, in exercise of its powers conferred under Section 35-A of the Assam Sales Tax Act, 1947, to pay interest at the rate of 24% per annum on the delayed payment of the tax for the assessment years 1974 to 1980. The appellants in the writ petition challenged imposition of such interest on the premise that there being no mention of interest in the first part of Section 9(2) of the CST Act, the appellants were not liable to pay interest. Considering the question of competence of the State in demanding the interest while interpreting Section 9(2) of the CST Act, and relying on its earlier Constitution Bench judgment in Khemka & Company Vs. State of Maharashtra – 1975 (3) SCR 753 , the Supreme Court in para 14 of the report held as under:- “Now, the words "charging or payment or interest" in Section 9(2) occur in what may be called the letter part thereof. Section 9(2) authorises the sales tax authorities of a State to assess, reassess, collect and enforce payment of the Central sales tax payable by a dealer as if it was payable under the State Act; this is the first part of Section 9(2). By the second part thereof, these authorities are empowered to exercise the powers they have under the State Act and the provisions of the State Act, including provisions relating to charging and payment of interest, apply accordingly. Having regard to what has been said in the case of Khemka & Co., it must be held that the substantive law that the States' sales tax authorities must apply is the Central Act. In such application, for procedural purposes alone, the provisions of the State Act are available. Having regard to what has been said in the case of Khemka & Co., it must be held that the substantive law that the States' sales tax authorities must apply is the Central Act. In such application, for procedural purposes alone, the provisions of the State Act are available. The provision relating to interest in the latter part of Section 9(2) can be employed by the States' sales tax authorities only if the Central Act makes a substantive provision for the levy and charge of interest on Central sales tax and only to that extent. There being no substantive provision in the Central Act requiring the payment of interest on Central sales tax the States' sales tax authorities cannot, for the purpose of collecting and enforcing payment of Central sales tax, charge interest thereon.” 23. Adverting now to the facts of the present case, it may be noted that the CST Act came into force on 05.01.1957 and has throughout substantially retained Section 13 in its original form, which invests the States with the power to frame Rules. The Central Act did not confer any authority on the States to frame the Rules empowering them to cancel the declaration form/C-Form once issued. This has been taken to so mean by all other State except the State of Rajasthan, which perhaps is the only State providing so in sub-rule (20) in Rule 17 of the Rajasthan Rules on 14.07.2014, i.e., more than 61 years thereafter. This provision is apparently not only contrary to the provisions of Section 8(4) but also Section 13(1)(d), 13(3) and (4)(e). As would be seen from the Central Sales Tax Rules framed by different States, which have been produced by the petitioner for perusal of the court during the course of argument, no other State has any such provision in their Rules, like the one which is impugned in the present writ petition, i.e., Rule 17(20) of the Rajasthan Rules, conferring unto itself power for cancellation of validly issued declaration form/C-Form. Rule 17(20) of the Rajasthan Rules reads thus:- “(20) Where any dealer has generated declaration Form(s) or Certificate(s) by misrepresentation of facts or by fraud or in contravention to the provisions of the Central Sales Tax Act, 1956 and rules made there under, the assessing authority or any officer authorised by the Commissioner, after affording such dealer an opportunity of being heard cancel such declaration Form(s) or Certificate(s), and the list of declaration Form(s) or Certificate(s) so cancelled shall be published on the official web-site of the Department. The declaration Form(s) or Certificate(s) so cancelled shall be deemed to have not been generated through the official web-site of the Department.” 24. Section 7(4)(a) of the CST Act provides that a certificate of registration granted under this Section either on the application of a dealer to whom it has been granted or, where no such application has been made, after due notice to the dealer, be amended by the authority granting it. Section 7(4)(b) and Section 7(5) of the CST Act are the only provisions in the Act which provide for cancellation of the registration once granted. Section 7(4)(b) stipulates that such registration can be cancelled by the granting authority, 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. As per Section 7(5) of the CST Act, registration of a dealer may be cancelled on his own application provided he is not liable to pay tax. Since, in the case in hand, we are confining our consideration only to the validity of Rule 17(20) of the Rajasthan Rules, therefore, except for what is observed above, we have restrained ourselves from going into the correctness of the order cancelling the registration certificate. Since, in the case in hand, we are confining our consideration only to the validity of Rule 17(20) of the Rajasthan Rules, therefore, except for what is observed above, we have restrained ourselves from going into the correctness of the order cancelling the registration certificate. This is for two reasons; firstly, that the validity of Rule 17(20) can be independently decided without going into the validity of cancellation of registration and; secondly, registration having been cancelled otherwise than on own application of the dealer, it is always open to the dealer, whose registration has been cancelled, to assail the correctness of the same and also equally open to the authorities concerned, to defend whether in the scope of Section 7(4)(b) such cancellation could be justified. 25. The Delhi High Court in Chhabra Electric Stores, supra, was dealing with the question referred under section 21(3) of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, whether the order cancelling the registration could be enforced with retrospective effect. It was held that the dealer who sold goods to a purchasing dealer during the period 1st April to 30th June, 1956, could not be deprived of the benefit of the deduction contemplated by Section 5(2) of the Act in respect of the sales, on the ground that the certificate of registration of the purchasing dealer was cancelled in November, 1956, subsequent to the dates of sale, with retrospective effect from 1st April, 1956. It was further held that the words “from such date as may be specified in the order” in Rule 12(1)(d) of the Delhi Sales Tax Rules, 1951 should be construed to mean either the date of the order cancelling the registration certificate or a date subsequent to the date of the order and not a date prior to the date of the order. 26. In General Officer Commanding-in-Chief, supra, the Supreme Court held that any rule must conform to the provisions of the statute under which it is framed. It must also come within the scope and purview of the Rule making power of the authority framing the Rules. If either of the two conditions is not fulfilled, the Rules so framed would be void. It must also come within the scope and purview of the Rule making power of the authority framing the Rules. If either of the two conditions is not fulfilled, the Rules so framed would be void. Applying these two tests, the Supreme Court held that Rule 5-C framed by the Central Government was in excess of its Rule making power as contained in Clause (c) of sub-section (2) of Section 280 of the Cantonment Act before its amendment by the substitution of Clause (c). It is therefore void. 27. The Supreme Court in State of Tamil Nadu Vs. P.Krishnamoorthy – (2006) 4 SCC 515, delineated the law on the scope of judicial review while examining the validity of a subordinate legislation in the following terms:- “15. There is a presumption in favour of constitutionality or validity of a subordinate legislation and the burden is upon him who attacks it to show that it is invalid. It is also well recognised that a subordinate legislation can be challenged under any of the following grounds: (a) Lack of legislative competence to make the subordinate legislation. (b) Violation of fundamental rights guaranteed under the Constitution of India. (c) Violation of any provision of the Constitution of India. (d) Failure to conform to the statute under which it is made or exceeding the limits of authority conferred by the enabling Act. (e) Repugnancy to the laws of the land, that is, any enactment. (f) Manifest arbitrariness/unreasonableness (to an extent where the court might well say that the legislature never intended to give authority to make such rules). 16. The court considering the validity of a subordinate legislation, will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate legislation conforms to the parent statute. Where a rule is directly inconsistent with a mandatory provision of the statute, then, of course, the task of the court is simple and easy. But where the contention is that the inconsistency or nonconformity of the rule is not with reference to any specific provision of the enabling Act, but with the object and scheme of the parent Act, the court should proceed with caution before declaring invalidity.” 28. But where the contention is that the inconsistency or nonconformity of the rule is not with reference to any specific provision of the enabling Act, but with the object and scheme of the parent Act, the court should proceed with caution before declaring invalidity.” 28. No doubt, there is always a presumption in favour of constitutionality or validity of a subordinate legislation and burden is upon the person who attacks it to show that it is invalid. However, lack of legislative competence to make the subordinate legislation and failure to conform to the statute under which it is made or exceeding the limits of authority conferred by the enabling Act, are well recognised parameters for judicial review of a subordinate legislation. 29. The obligation of a registered dealer selling the goods to another registered dealer to avail the benefit of tax provided under Section 8(1) is only confined to furnish to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom he sells the goods. Such declaration should contain the prescribed particulars in the prescribed form and manner. Proviso to Section 8(4) stipulates that the selling dealer has to furnish such declaration within the prescribed time or within such further time as the authority may, for sufficient reason, extend. Rule 12 of the Central Rules provides a form of declaration, the particulars to be contained therein, the period within which it has to be furnished, consequence of loss of the declaration form, and the course to be adopted in that event. However, this provision does not provide for cancellation of Form C issued. No doubt, Section 13(3) of the CST Act empowers the State to make the Rules but with the rider that such Rules should not be inconsistent with the provisions of the CST Act and the Rules made by the Central Government under Section 13(1), to make the Rules to carry out the purpose of the Act. Section 13(4) of the CST Act inter-alia provides that in particular and without prejudice to the powers conferred by sub-section (3), the State Government may make rules for all or any of the purposes listed therein from Clauses (a) to (g). Section 13(4) of the CST Act inter-alia provides that in particular and without prejudice to the powers conferred by sub-section (3), the State Government may make rules for all or any of the purposes listed therein from Clauses (a) to (g). Clause (e) provides that the State Government may make rules prescribing “the authority from whom, the conditions subject to which and fees, subject to payment of which, any form of certificate prescribed under clause (a) of the first proviso to sub-section (2) of section 6 or of declaration prescribed under sub-section (1) of section 6A or subsection (4) of section 8, may be obtained, the manner in which such forms shall be kept in custody and records relating thereto maintained and the manner in which any such form may be used and any such certificate or declaration may be furnished;” Beyond and in addition to that, no authority has been conferred on the States and therefore it can be safely deduced therefrom that no power has been conferred on the States to frame any Rule for cancellation of the declaration once validly issued. Rule 17(20) of the Rajasthan Rules is thus marred by lack of legislative competence and does not conform to the CST Act, having exceeded the authority conferred on the State Government under which it is purported to have been made. 30. In view of what we have held above, we are inclined to hold that State has no authority to frame a rule providing for cancellation of validly issued declaration form/form-C. 31. In the result, the writ petition deserves to succeed and is hereby allowed. Rule 17(20) of the Rajasthan Rules is declared ultra vires Section 8(4), 13(1)(d), 13(3) and 13(4)(e) of the CST Act. The communications dated 20.11.2017 and 30.11.2017 sent by the respondent no.3 to the VATO Ward-17, New Delhi, with regard to cancellation of ‘C’ Form, are declared illegal and consequently quashed and set aside. The cancellation of ‘C’ Forms made vide order dated 07.12.2017 is also quashed and set aside. The petitioner is held entitled to avail benefit of rates of tax under Section 8 of the CST Act. 32. This also disposes of stay application.