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2019 DIGILAW 410 (GUJ)

Nanavati Motors v. State of Gujarat

2019-04-12

BHARGAV D.KARIA, HARSHA DEVANI

body2019
JUDGMENT : Bhargav D. Karia, J. 1. Rule. Mr. Soaham Joshi, learned Assistant Government Pleader waives service of notice of rule on behalf of the respondents. 2. Having regard to the controversy involved in the present petition which lies in a very narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for final hearing today. 3. The petitioners, in this petition under Article 226 of the Constitution of India, have prayed for the following substantive relief’s: "9. The petitioners, therefore, pray as under: (a) That this Honourable Court be pleased to issue a Writ of mandamus or any other appropriate writ, direction or order directing the respondent No. 3 to restore certificates of registration with effect from 01.07.2016 and to allow the Petitioner No. 1 to generate "C" form declaration for the period from 01.07.2016 to 30.06.2017; and (b) That this Honourable Court be pleased to issue a Writ of mandamus or any other appropriate writ, direction or order quashing and setting aside the impugned Order, dated 25.10.2016 passed by the Respondent No. 3, the Commercial Tax Officer (2), Unit 64, Surat annexed as Annexure-D hereto; and (c) That this Honourable Court be pleased to issue a Writ of mandamus or any other appropriate writ or direction to the Respondent No. 2 to decide appeals filed before him under the Vat Act and the CST Act;" 4. The brief facts of the case are as under: 4.1 The petitioner No. 1 is the authorized dealer of Chevrolet cars being manufactured by M/s. Chevrolet Sales India Pvt. Ltd., which has two manufacturing units, one at Talegaon, Maharashtra and another in Halol, Gujarat. The petitioner No. 1 was purchasing some models from Maharashtra plant and some from Gujarat plant and therefore, it had obtained Certification of Registration in Form 102 under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the VAT Act"), and also under the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act"). Both these Certification of Registration were effective from 1.7.2002. Both these Certification of Registration were effective from 1.7.2002. 4.2 The respondent No. 3-State Tax Officer (2), Ghatak-8, (Unit 64), Surat issued a notice in Form 104 under section 27 of the VAT Act read with rule 10 of the Gujarat Value Added Tax Rules, 2006 (hereinafter referred to as "the VAT Rules"), proposing to cancel or suspend Certificate of Registration granted to the petitioner No. 1 under the VAT Act and the CST Act due to non-payment of Entry tax and interest thereon for the period 2014-15, 2015-16 and 2016-17 under the provisions of Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 (hereinafter referred to as "Entry Tax Act"). 4.3 The petitioners by reply dated 25.10.2016, submitted that the petitioner is facing financial difficulties and therefore, the payment of Entry tax is not made in time. It was however submitted that the petitioners had already paid a sum of Rs. 54,98,700/- towards the outstanding dues and only a small portion of Entry tax remained to be paid. 4.4 It is the case of the petitioners that on the same day, i.e. on 25.10.2016, the respondent No. 3 passed an order under sub-section (5) of section 27 of the VAT Act, whereby the registration of the petitioners under the VAT Act as well as under the CST Act came to be suspended with effect from 1.7.2016 till 31.3.2017. 4.5 Being aggrieved by the aforesaid order, the petitioners preferred two separate appeals before the appellate authority, that is, the respondent No. 2. During the pendency of the appeals, the respondent No. 3 initiated recovery proceedings under the Bombay Land Revenue Code, 1879 by virtue of provisions of section 46 of the VAT Act. 4.6 Vide letter dated 11.7.2018, the petitioner No. 1 requested the respondent No. 3 to generate task so that it can generate pending "C" forms for the period from 1.7.2016 to 31.3.2017 and from 1.4.2017 to 30.6.2017 as the respondents after the suspension period was over on 31.3.2017, did not restore the registrations of the petitioners under the VAT Act and the CST Act. On 31.7.2018, the petitioners filed additional submissions in the appeal before the respondent No. 2, and prayed to quash the impugned order and to restore the Certificate of Registration under the VAT Act and the CST Act with effect from 1.7.2016. On 31.7.2018, the petitioners filed additional submissions in the appeal before the respondent No. 2, and prayed to quash the impugned order and to restore the Certificate of Registration under the VAT Act and the CST Act with effect from 1.7.2016. 4.7 It is the case of the petitioners that as the respondent No. 2 did not decide the appeals and the respondent No. 3 did not restore the registration certificates of the petitioners, the petitioners have approached this court seeking the relief’s noted hereinabove. 5. Mr. Kuntal Parikh, learned advocate for the petitioners submitted that the respondent No. 3, for non-payment of Entry tax, has suspended the registrations of the petitioners under sub-section (5A) of section 27 of the VAT Act, which is without jurisdiction, because, under sub-section (5A) of section 27 of the VAT Act, the Commissioner can exercise power of suspension if the dealer has failed to inform changes as required under sub-section (1) of section 26; or, has failed to furnish return under section 29; or, has failed to pay tax under section 30; or, has failed to file declaration or intimate the changes as required under section 65 or 66; or, has failed to produce the books of accounts required under section 67 of the VAT Act, and after recording the reasons in writing and after giving an opportunity of being heard, the Commissioner can suspend the certificate of registration from such date not earlier than the date of order of suspension, as may be specified by him in the order. It was submitted that on a perusal of the impugned order dated 25.10.2016, it is clear that none of the ingredients of section 27(5A) of the VAT Act have been complied with, inasmuch as the Commissioner has passed the impugned order on 25.10.2016 for suspension of the registration certificates under the VAT Act and the CST Act with effect from 1.7.2016, which is prior to the date of the order. Moreover, for the purpose of passing the order of suspension, no opportunity of hearing was provided to the petitioners as on the date on which the petitioners submitted the written submissions, the impugned order was passed. It was submitted that the order of suspension can be passed under sub-section (5A) of section 27 of the VAT Act for any failure which is referred to therein. 5.1. It was submitted that the order of suspension can be passed under sub-section (5A) of section 27 of the VAT Act for any failure which is referred to therein. 5.1. It was submitted that admittedly, the registration under VAT Act and CST Act cannot be suspended for failure of to pay Entry tax. It was submitted that "tax" is defined under section 2(26) of the VAT Act which does not include Entry tax payable by the petitioner under the Entry Tax Act. It was submitted that under sub-section (26) of section 2 of the VAT Act, "tax" means a tax leviable and payable under the VAT Act on sales or purchase of goods and includes lump sum tax leviable or payable under section 14, 14A, 14B, 14C or 14D. It was therefore, submitted that as Entry tax is not included in the definition of "tax", the impugned order passed by the respondent authority is without any jurisdiction and is required to be quashed and set aside. 5.2. It was submitted that the registration certificates of the petitioner are suspended up to 31.03.2017 and thereafter, the same are not restored and therefore, the petitioner is not able to generate "C" form which is required to be given to its sellers under the CST Act and therefore, undue hardship is caused to the petitioner on account of the inaction on the part of the respondents and also on account of passing of the impugned order without jurisdiction. 5.3. It was submitted that though the "C" Form of Rs. 47,67,553/- were issued for the duration from 1.7.2016 to 31.9.2016, the petitioner is unable to down load the same as of its registration number being suspended by the respondent No. 3 and therefore, the learned advocate prayed that the "C" forms for the entire period from 1.6.2017 to 30.6.2017 are required to be issued by the respondents to the petitioners. 5.4. The learned advocate for the petitioners, in support of his contentions, placed reliance upon the judgment, dated 17/07/2017 passed by this Court in case of M/s. Manan Autolink Pvt. Ltd. v. State of Gujarat in Special Civil Application No. 4518 of 2017, wherein it is held that none of the rules prescribe that before the purchasing dealer can generate a request for authentication of 'C' form by the appropriate authority, the dealer must have discharged its full liability of VAT. It is also held that the action of the Respondents in not allowing the Petitioner to generate "C" form solely on the ground that the petitioner had not paid the self-assessed tax for the relevant period under the VAT Act is illegal. It was therefore, held that granting of "C" form declarations cannot be stalled on the ground of unpaid dues of a dealer, indirectly taking such measure by way of tax collection and recovery. Relying upon this judgment the Petitioner stated that pursuant to the order of suspension, the petitioner is unable to issue "C" Form to its dealers under CST Act. 6. On the other hand, Mr. Soaham Joshi, learned Assistant Government Pleader submitted that the Commissioner of Commercial Tax has passed the impugned order as the petitioner has defaulted on payment for more than three times with regard to the Entry tax and the notice under section 104 of the VAT Act was also issued to the petitioners on 27.9.2016 for non-payment of the amount of Rs. 1,78,29,882/- and another notice dated 25.10.2016 was issued for non-payment of an amount of Rs. 1,33,35,651/-. It was submitted that as far as the issue with respect to "input tax credit" of Entry tax under section 11(1)(a)(iii) of the VAT Act is concerned, the same is permitted to be paid as an Entry tax. However, in the facts of the case, the petitioner did not pay any Entry tax, but adjusted the same under the returns filed under the VAT Act, which is not permissible. It was submitted that it is undisputed that the cancellation and suspension of registration certificates is already under challenge before the respondent No. 2-Deputy Commissioner and therefore, it would be in the interest of the issue that such adjudication of cancellation may be first carried out which would ultimately result in much better factual details along with the reasoning before the higher authority and this court. 6.1. It was further submitted that there are dues to the tune of Rs. 34,50,386/- payable under Entry Tax Act and in addition to such dues, the dealer has not filed any return regularly for which conveniently the input tax credit under the head of Entry tax has been disclosed and availed. 6.1. It was further submitted that there are dues to the tune of Rs. 34,50,386/- payable under Entry Tax Act and in addition to such dues, the dealer has not filed any return regularly for which conveniently the input tax credit under the head of Entry tax has been disclosed and availed. It was pointed out that the petitioner has all throughout filed returns at a belated stage and the details of such belated filing of returns is annexed along with the affidavit-in-reply in a tabular form. It was submitted that it has come on record that the dealer has failed to pay the Entry tax within 22 days of the next month of the month in which the goods entered into the State and though such tax has not been paid, input tax credit has already been availed wrongly. It was submitted that for the duration of 01.04.2016 to 31.09.2016 the 'C' Form to the extent of Rs. 47,67,553 have already been issued, and therefore, only to the extent of Rs. 51,160/- are pending for the period of 01.10.2016 to 30.06.2017 for which the Petitioner has not filed any returns within month and therefore, there is no question of issuance of 'C' form. It was therefore, submitted that the suspension of the registration certificate of the petitioner is just and proper and therefore, no interference is warranted in view of the appeals before the respondent No. 2 filed by the petitioners. 7. In rejoinder, the learned advocate for the petitioners submitted it has already filed its quarterly returns along with its annexure for the period from 01.10.2016 to 31.12.2016 on 14.02.2017 and for the period from 01.01.2017 to 31.03.2017 on 06.07.2017. These returns were filed manually because the registration of the petitioner was suspended by the Respondent No. 3 on 25.10.2016 and such suspension was effected from 01.07.2016. Learned advocate for the petitioner referred to affidavit in rejoinder filed by the petitioner and submitted that accountant of the petitioner provided copy of manual returns on 04.12.2018 to the Respondent No. 3 as it was requested by him, after filing of the present petition. It was therefore submitted that it cannot be said that the Petitioner had filed its returns for the first time on 04.12.2018. It was therefore submitted that it cannot be said that the Petitioner had filed its returns for the first time on 04.12.2018. It is further stated by the Petitioner in its rejoinder that when its accountant personally visited to the office of the Respondent No. 3 to re-submit returns on 04.12.2018, he verified inward Entry register maintained in office of the Respondent No. 3 and it was noticed that inward Entry nos. 4252 and 1242 were pertaining to filing of Vat returns of the Petitioner company for the period 01.10.2016 to 31.12.2016 on 14.02.2017 and for the period from 01.01.2017 to 31.03.2017 on 06.07.2017 respectively. The petitioner therefore denied the averments of the Respondent No. 3 that the Petitioner had filed its returns for the first time on 04.12.2018. With respect to submission of the Respondent that 'C' Form of Rs. 47,67,553/- were already issued to the Petitioner for the period of 01.07.2016 to 31.09.2016, the Petitioner stated that it is unable to download them because its registration number has been suspended by the Respondent No. 3 with effect from 01.07.2016. The Petitioner also denied averments of the Respondent No. 3 that 'C' Form of Rs. 51,160/- are only pending for the period from 01.10.2016 to 30.06.2017. The Petitioner submitted that sum of Rs. 51,160/- is the amount which represents transportation and insurance charges which are included in purchase invoices of 01.07.2016 to 31.09.2016. Thus, the learned advocate for the petitioners submitted that pending 'C' forms are of Rs. 47,67,553/- for the period from 01.07.2016 to 31.09.2016 (first quarter); of Rs. 56,76,744/- for the period from 01.10.2016 to 31.12.2016; (second quarter); of Rs. 85,19,160/- for the period from 01.01.2017 to 31.03.2017 (third quarter); and of Rs. 17,53,460/- for the period from 01.04.2017 to 30.06.2017 (fourth quarter). 8. Only short question which arises for consideration is whether impugned order of suspension of certificate of registration is sustainable in law or not and for that it would be germane to refer to sub-section (5A)(1) of section 27 of the VAT Act which reads as under: "Section 27: Suspension or cancellation of registration. 8. Only short question which arises for consideration is whether impugned order of suspension of certificate of registration is sustainable in law or not and for that it would be germane to refer to sub-section (5A)(1) of section 27 of the VAT Act which reads as under: "Section 27: Suspension or cancellation of registration. xxxxx xxxxx xxxxx (5A): (1) If a dealer,- (a) has failed to inform changes as required under subsection (1) of section 26; (b) has failed to furnish return under section 29; (c) has failed to pay tax under section 30; (d) has failed to file declaration or intimate the changes as required under section 65 or 66; or (e) has failed to produce the books of accounts required under section 67, the Commissioner may, at any time, for reasons to be recorded in writing and after giving the dealer an opportunity of being heard, suspend his certificate of registration from such date not earlier than the date of order of suspension, as may be specified by him in the order." 9. On bare perusal of the aforesaid provision which grants powers to the Commissioner to suspend the registration of a dealer, it is crystal clear that such power can be exercised only for the failure on the part of the dealer to pay the tax under section 30 of the VAT Act. Further, under sub-section (27) of section 2 of the VAT Act, "tax" means a tax leviable and payable under the Act on sales or purchase of goods and includes lump sum tax leviable or payable under section 14, 14A, 14B, 14C or 14D. 10. Admittedly, on the facts of the case, the order of suspension of registration of the petitioners is passed on failure of the petitioners in non-payment of Entry tax, which is evident from the documents produced along with the affidavit-in-reply filed by the respondents wherein it is revealed that for the year 2014-15, 2015-16 and 2016-17, a total amount of Entry tax not paid by the petitioner was Rs. 16,53,961/- whereas the VAT Act not paid is Rs. 61,186/-. Moreover, the proposal made by the respondent No. 3 on 27.9.2016 at page nos. 70 and 71 filed along with affidavit in reply also refers to non-payment of Entry tax by the petitioners. 16,53,961/- whereas the VAT Act not paid is Rs. 61,186/-. Moreover, the proposal made by the respondent No. 3 on 27.9.2016 at page nos. 70 and 71 filed along with affidavit in reply also refers to non-payment of Entry tax by the petitioners. Thus, from the aforesaid facts, it is clear that the petitioners' certificate of registration has been suspended from 1.6.2016 to 31.3.2017 for non-payment of Entry tax by the petitioner for which the provisions of sub-section (5A) of section 27 of the VAT Act have been invoked by the respondents, which could not have been invoked by the respondents in view of the aforesaid clear provisions of the VAT Act as jurisdiction to suspend certificate of registration of the petitioner under VAT Act can be assumed only in case when any of the clause from (a) to (e) of the section 27(5A) of VAT Act is attracted. 11. It is also apparent from the record that though the impugned order is passed for the period from 1.7.2016 to 31.7.2017, the certificates of registration have not been restored thereafter for the period from 1.4.2017 onwards. The respondents are, therefore, not justified in not restoring the certificates of registration under the VAT Act and the CST Act. Moreover, order of suspension is passed with retrospective effect which is also in violation of the provision. 12. In view of the suspension of certificate of registration of the petitioners, the petitioners are unable to generate Form "C" under section 8(4) of the CST Act which is required to be delivered to the sellers of the goods by the petitioners so as to avail the benefit under the CST Act of reduced rate of tax. As the certificate of registration is not restored after the suspension period is over, the petitioner is also suffering from non-issuance of Form "C" under the CST Act. 13. For the forgoing reasons, as the impugned order of suspension of registration of the petitioner under VAT act and CST Act is without jurisdiction, the same is hereby quashed and set aside. The respondents are directed to restore the certificates of registration of the petitioners under the VAT Act as well as the CST Act with effect from 1.7.2016 and allow the petitioner No. 1 to generate Form "C" declaration for the period 1.7.2016 to 30.6.2017. The respondents are directed to restore the certificates of registration of the petitioners under the VAT Act as well as the CST Act with effect from 1.7.2016 and allow the petitioner No. 1 to generate Form "C" declaration for the period 1.7.2016 to 30.6.2017. It is clarified that if it is not possible to generate Form "C" for the aforesaid period Online, then the respondents are directed to issue such Form "C" manually and certify the same. 14. The petition therefore succeeds and is allowed in terms of the aforesaid directions. Rule is made absolute accordingly with no order as to costs.