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City theatres Private Ltd. Vs. Sales Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberO.P. No. 650 of 1962
Judge
Reported in[1963]14STC1060(Ker)
AppellantCity theatres Private Ltd.
RespondentSales Tax Officer
Appellant Advocate P. Subramonian Potti,; S.A. Nagendran and; K. Sudhakaran
Respondent AdvocateGovernment Pleader
Excerpt:
.....cancelling the certificate of registration issued to the petitioner under section 7(2) of the central sales tax act, 1956, exhibit p-6 dated 10th january, 1962. 2. in one respect this is a rather curious attack that is made as against the order of assessment, because ordinarily the grievance of assessees would be that the order making them liable for payment of tax is arbitrary or illegal or opposed to or in violation of the principles of natural justice. 7. i am not inclined to go into the question, in this writ petition, regarding the construction to be placed upon a particular transaction like exhibit p-2. if the petitioner is aggrieved by the construction that has been placed upon exhibit p-2, it is open to him to challenge the same before the appropriate appellate authorities..........cancelling the certificate of registration issued to the petitioner under section 7(2) of the central sales tax act, 1956, exhibit p-6 dated 10th january, 1962.2. in one respect this is a rather curious attack that is made as against the order of assessment, because ordinarily the grievance of assessees would be that the order making them liable for payment of tax is arbitrary or illegal or opposed to or in violation of the principles of natural justice. on the other hand, the order exhibit p-3, which is under attack in these proceedings, holds the petitioner not liable for payment of sales tax for the year 1960-61. notwithstanding this fact, his learned counsel rather strenuously urged that this vie that his client is not liable for payment of sales tax is not correct.3. there is.....
Judgment:

C.A. Vaidialingam, J.

1. In this writ petition, Mr. P. Subramonian Potti, learned counsel for the petitioner, challenges the order of nil assessment passed by the Sales Tax Officer, I Circle, Trivandrum, dated 20th December, 1961, under exhibit P-3, as well as the order of the same officer cancelling the certificate of registration issued to the petitioner under Section 7(2) of the Central Sales Tax Act, 1956, exhibit P-6 dated 10th January, 1962.

2. In one respect this is a rather curious attack that is made as against the order of assessment, because ordinarily the grievance of assessees would be that the order making them liable for payment of tax is arbitrary or illegal or opposed to or in violation of the principles of natural justice. On the other hand, the order exhibit P-3, which is under attack in these proceedings, holds the petitioner not liable for payment of sales tax for the year 1960-61. Notwithstanding this fact, his learned counsel rather strenuously urged that this vie that his client is not liable for payment of sales tax is not correct.

3. There is some significance in the nature of the attack that is made as against the order exhibit P-3, because, according to the learned Government Pleader, inasmuch as the party is not able to satisfy the authority concerned, that he is liable for payment of sales tax in the circumstances of this case, the order of cancellation of the certificate of registration issued under Section 7(2) of the Central Sales Tax Act will have to be held to be valid.

4. The petitioner obtained a certificate of registration under Section 7(2) of the Central Sales Tax Act as is evidenced by exhibit P-1.

5. The petitioner entered into a transaction, regarding what he calls a transaction by way of sale, under exhibit P-2. That was a transaction which was very strongly relied upon by the petitioner in respect of the assessment for the year in question to satisfy the officer that there has been a transaction of sale by the petitioner for the year in question which attracts his liability to pay sales tax. But so far as that is concerned, the vie of the assessing authority in the order exhibit P-3 appears to be that exhibit P-2 cannot be considered to be a transaction of sale as the expression 'sale' is understood under the General Sales Tax Act.

6. No doubt, Mr. P. Subramonian Potti, learned counsel for the petitioner, urged that the vie taken by the assessing authority in the order of assessment exhibit P-3 regarding the construction to be placed on the document, exhibit P-2, is not correct in law.

7. I am not inclined to go into the question, in this writ petition, regarding the construction to be placed upon a particular transaction like exhibit P-2. If the petitioner is aggrieved by the construction that has been placed upon exhibit P-2, it is open to him to challenge the same before the appropriate appellate authorities constituted under the statute itself.

8. If a decision in this case has to be given merely on the construction to be placed upon exhibit P-2, I would have straightaway dismissed the writ petition. But, notwithstanding the fact that I am not inclined to go into the question regarding the construction to be put on exhibit P-2, the other question arises as to whether the order of the Sales Tax Officer cancelling the certificate of registration under Section 7(2) of the Central Sales Tax Act, as is evidenced by his order exhibit P-6, is justified in the circumstances of this case.

9. It will be seen that under Section 7(2) of the Central Sales Tax Act, any dealer, liable to pay tax under the sales tax law of the appro, priate State, among other persons, notwithstanding the fact that he is not liable to pay tax under the Central Sales Tax Act, may apply for registration under the Act to the authority referred to in Sub-section (1) of Section 7, and every such application shall contain such particulars as may be prescribed. There is an explanation to Sub-section (2) of Section 7 to the effect that for the purposes of this Sub-section, namely Sub-section (2), a dealer shall be deemed to be liable to pay tax under the sales tax law4 of the appropriate State, notwithstanding that under such a law a sale or purchase made by him is exempt from tax or a refund or rebate of tax is admissible in respect thereof. By virtue of the Explanation to Sub-section (2) of Section 7, even though a party would not be actually paying sales tax at a particular time under the sales tax law of the appropriate State, in vie of the fiction created under Section 7, Sub-section (2), he may be entitled to get a certificate of registration.

10. Sub-section (3) of Section 7 of the Central Sales Tax Act gives power to the authority concerned, to whom the application under Sub-section (1) or (2) is made, to register the applicant, if the authority is satisfied that the application is in conformity with the provisions of the Act and the rules made thereunder.

11. Sub-section (4) of Section 7 deals with (a) amending a certificate of registration granted under the Act, and (b) cancelling the certificate of registration issued by the authority, under the circumstances mentioned therein.

12. Sub-section (5) again gives freedom to a party to apply, within the period mentioned therein, for cancellation of the registration certificate, and there is an obligation on the part of the authority to cancel the registration as desired by the applicant, except in cases where the dealer is liable to pay sales tax under the Central Act. It is further provided in this Sub-section that the cancellation of the certificate of registration shall take effect from the end of the year.

13. Clause (b) of Sub-section (4) of Section 7 of the Central Sales Tax Act, which requires to be noted in this case, is as follows :-

(4) A certificate of registration granted under this section may-

(a)...

(b) be cancelled by the authority granting it where he is satisfied, after due notice to the dealer to whom it has been granted, that he has ceased to carry on business or has ceased to exist, or in the case of a dealer registered under Sub-section (2) has ceased to be liable to pay tax under the sales tax4w of the appropriate State or for any other sufficient reason.

It will be seen that Clause (b) of Sub-section (4) of Section 7 of the Central Sales Tax Act extracted above, gives authority or jurisdiction to the officer concerned to cancel the certificate of registration under one or other of the circumstances mentioned therein, namely (1) when the dealer has ceased to carry on the business, (2) when he has ceased to exist, and (3) in the case of the 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.

14. In this case, the assessing authority sent the notice exhibit P-4 on 1st January, 1962, to the petitioner, stating that he has been declared not liable to pay sales tax as per the Central Sales Tax Act during the years 1959-60 and 1960-61. The officer further states that as per Section 7(4) of the Central Sales Tax Act, a certificate granted under that Act will have to be cancelled when a dealer has ceased to be liable to pay tax under the sales tax law of the appropriate State. Then the officer winds up exhibit P-4 by stating that inasmuch as the petitioner has ceased to be liable to pay tax under the Central Sales Tax Act, the officer proposes to cancel the Central Sales Tax Registration Certificate No. 8-50/C dated 25th October, 1958, issued in his name, and the petitioner is requested to file his objections, if any, within the time mentioned therein, as to why the certificate of registration should not be cancelled.

15. To exhibit P-4 the petitioner sent a reply on 4th January, 1962, under exhibit P-5 wherein the petitioner states that for the assessment year 1960-61, the petitioner has made a sale and has credited an amount of Rs. 12,000 on 31st December, 1960, towards the sale of the pictures mentioned by him. The petitioner also states that the said amount has been received from M/s. Kumaraswamy & Co., and credited in their account. Finally, under exhibit P-5, the petitioner requests the Sales Tax Officer to reconsider the question, and not to cancel the certificate of registration issued to him.

16. The Sales Tax Officer evidently was not satisfied with the explanation furnished by the petitioner, as will be seen from the order exhibit P-6 dated 10th January, 1962. After referring to the fact that during the years 1959-60 and 1960-61 the petitioner has been declared non-assessee and as such not liable to pay sales tax under the sales tax law of the appropriate State, and also to the notice issued by the officer under exhibit P-4 as well as the reply exhibit P-5 sent by the petitioner, the assessing authority finally says that the Central Sales Tax Registration Certificate No. 8-50/C issued to the petitioner is cancelled, and the petitioner was directed to return the original certificate as well as the unused forms with him forthwith.

17. Therefore, it will be seen from the various matters mentioned above, that the one and only reason given by the officer for taking action in cancelling the certificate of registration issued to the petitioner under the Central Sales Tax Act is the circumstance that the petitioner has not paid sales tax under the State Act for the years 1959-60 and 1960-61.

18. No doubt, at one stage Mr. P. Subramonian Potti, learned counsel for the petitioner, was prepared to take up the position that the fiction created by the Explanation to Sub-section (2) of Section 7 of the Central Sales Tax Act will also apply when the officer takes action under Clause (b) of Sub-section (4) of Section 7 of the Central Act. But when the anomaly which would result when this provision is extended to Section 7(4)(b) was pointed out, the learned counsel, rightly in my opinion, did not pursue this matter further. The provision in the Explanation to Section 7(2) will assist a dealer only in the matter of getting a certificate of registration under Section 7(2) of the Central Act, and that Explanation clearly states that it is really 'for the purposes of this Sub-section', which means for the purposes of Sub-section (2) of Section 7, which gives a right to a dealer who is liable to pay tax under the sales tax law of the appropriate State, to obtain a certificate of registration. The Explanation cannot certainly be invoked for the purpose of Section 7(4)(b) of the Act.

19. According to Mr. Subramonian Potti, learned counsel for the petitioner, the Legislature has used expressions in Clause (b) of Sub-section (4) of Section 7 of the Central Sales Tax Act, detailing the circumstances under which the authority concerned can cancel the certificate of registration, namely (a) when the dealer has ceased to carry on business, (b) when he has ceased to exist, and (c) when a'dealer registered under Sub-section (2) of Section 7 has ceased to be liable to pay tax under the sales tax law of the appropriate State or for any other sufficient reason. The learned counsel urged that the expression 'has ceased to be liable to pay tax' under the third contingency, must have the same meaning that is to be given to the expression 'has ceased to carry on business or has ceased to exist' occurring in the earlier part of Clause (b) of Sub-section (2) of Section 7. Therefore, the learned counsel urged that just as the Legislature gives a right to the authority to cancel the certificate of registration in the case of a person who has ceased to carry on business or has ceased to exist, that is under a circumstance which has become more or less permanent or certain, the same idea must again be understood to be incorporated when dealing with the third contingency, namely, when a dealer registered under Sub-section (2) of Section 7 has ceased to be liable to pay tax under the sales tax law of the appropriate State or for any other sufficient reason. On the other hand, Mr. Subramonian Potti, learned counsel for the petitioner, urged that what the authority has actually done is not to consider the applicability of the third contingency under Clause (b) of Sub-section (4) of Section 7, but to take into account the fact that the petitioner has not paid tax under the General Sales Tax Act in the State for the years 1959-60 and 1960-61. Payment or non-payment of tax under the sales tax law of the appropriate State for a particular year or years, according to the learned counsel, has no bearing in considering the question as to whether a dealer 'has ceased to be liable to pay tax under the sales tax law of the appropriate State'. According to the learned counsel, that condition can be said to be satisfied only if the dealer has placed himself in such a position that the State can no longer expect sales tax under the provisions of the General Sales Tax Act.

20. The learned Government Pleader, on the other hand, rather strenuously urged that the Sales Tax Officer has correctly considered the point to be considered and found that for the years 1959-60 and 1960-61 the petitioner has not paid any sales tax to the State. The learned Government Pleader also urged that the idea underlying Sub-section (2) of Section 7 of the Central Sales Tax Act is that a party will be eligible to get a certificate of registration under that Sub-section when he is liable to pay sales tax. Therefore, having obtained a certificate of registration on that basis, the learned Government Pleader urged that it is not open to the petitioner to contend that there is no jurisdiction in the officer to cancel the certificate of registration when, as a matter of fact, the petitioner has not been made liable for tax and not paid tax for the years 1959-60 and 1960-61.

21. I am not inclined to accept this contention of the learned Government Pleader. What the officer has done, and in this respect the criticism levelled against the order of the officer by Mr. Subramonian Potti, learned counsel for the petitioner, no doubt, is not to consider , the question whether the petitioner has ceased to be liable to pay sales tax, but has proceeded on the basis that inasmuch as the petitioner has not paid tax for two years, namely 1959-60 and 1960-61, there is jurisdiction in the officer to take action under Clause (b) of Sub-section (4) of Section 7. In my view, the approach made by the officer cannot be justified. The fact that a dealer has not paid or may not have paid sales tax for one or two years or for a continuous period of a fe years is something different from what the law contemplates, viz., a dealer ceasing to pay sales tax.

22. So far as that is concerned, in Murray's 'Ne English Dictionary', the expression 'cease' is defined to mean 'to come to an end, fail, become extinct, pass away'. Again, in the same Dictionary, the expression 'ceased to exist' means 'that has come to an end'. In this connection, it is also significant to note that even in respect of the two other contingencies on the happening of which power is given for cancellation of the certificate of registration, Section 7(4)(b) deals with a dealer ceasing to carry on business or ceases to exist. That means that there must be some sort of permanency, i.e., when a dealer has stopped his business, or again when the dealer has ceased to exist, which means the dealer has become extinct or practically dead for the purposes of the Sales Tax Act. The expression, in my view, occurring in relation to a dealer who has been registered under Sub-section (2) of Section 7, has ceased to be liable to pay tax under the sales tax law of the appropriate State, which is the third contingency provided for taking action for cancellation of the certificate of registration, must bear the same meaning, namely that the dealer has practically placed himself in a more or less permanent position when no longer sales tax can be levied as against him under the State statute.

23. That is certainly not the approach made by the officer in this case, and, as I mentioned earlier, he has proceeded on the basis that inasmuch as the party has not paid tax under the General Sales Tax Act for the years 1959-60 and 1960-61, that fact by itself gives him jurisdiction to cancel the certificate of registration. That approach is absolutely erroneous; and in this case, from the materials on record it is not the case of the department that the petitioner has placed himself in such a position more or less permanently as not to be liable for payment of sales tax under the State law.

24. No doubt, the learned Government Pleader urged that there is a further provision in Clause (b) of Sub-section (4) of Section 7 of the ' Central Act, which gives jurisdiction to the officer to cancel the certificate of registration, namely 'for any other sufficient reason'. This contention need not detain me, because the authority in this case has not proceeded to take action for cancellation of the certificate of registration except on the ground that the petitioner has not paid tax for the years 1959-60 and 1960-61.

25. Therefore, it follows that the order under attack in these proceedings, namely, exhibit P-6, cancelling the certificate of registration granted to the petitioner under the Central Sales Tax Act, has to be set aside; and it is accordingly set aside. I express no opinion whatsoever regarding the vie taken by the authority in the assessment order exhibit P-3 in so far as it relates to the interpretation to be placed on the rights of the parties to the document exhibit P-2. That is a matter for the petitioner, if so advised, to challenge before the appropriate appellate authorities.

26. In the result the writ petition is allowed to the above extent and the parties will bear their respective costs.


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