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Commercial Tax Officer and ors. Vs. Dawood and Co. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberAppeal from Original Order No. 281 of 1965
Judge
Reported in[1974]34STC98(Cal)
AppellantCommercial Tax Officer and ors.
RespondentDawood and Co.
Appellant AdvocateS.C. Dasgupta, ;G.P. Datta and ;S.N. Datta, Advs.
Respondent AdvocateSasti Charan Roy, Adv.
DispositionAppeal allowed
Cases ReferredA.K. Kraipak v. Union of India A.I.R.
Excerpt:
- .....of registration. on 27th may, 1961, the commercial tax officer passed an order cancelling the dealer's registration certificate under section 7(6)(a) of the act and wrote to the dealer as follows : you are hereby informed that your registration certificate no. cl/2350a has been cancelled under section 7(6)(a) of the bengal finance (sales tax) act, 1941. you are, therefore, directed to return your said registration certificate and unused declaration forms, if any, to this office within 3 days from the date of receipt of this letter. commercial tax officer,central section, west bengal. 4. the respondent filed a writ petition challenging the order cancelling his registration certificate on which a rule nisi was issued on 13th june, 1961. on 5th august, 1964, the trial court made the.....
Judgment:

Alak Chandra Gupta, J.

1. On an application made to the prescribed authority, the respondent in this appeal was registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941, on 24th May, 1952. On 25th June, 1961, the respondent received a notice from the Commercial Tax Officer, Central Section, West Bengal, which reads :

Government of West BengalOffice of the Assistant Commissioner, Commercial Taxes,Central Section, West Bengal, 10, Madan Street, Calcutta-13.Memorandum No. CL/2350A/4679 dated Cal. the 25-5-1961Sri M. Popli, Proprietor.ToM/s. Dawood & Co.,12, Lower Chitpur Road, Calcutta.You are hereby informed that as desired by the Commissioner, Commercial Taxes, your file under the Bengal Finance (Sales Tax) Act, 1941 (R.C. No. CL/2350A) has been transferred to this section and I have assumed jurisdiction over the said file.I have information that you are not carrying on any business. You are, therefore, being given an opportunity to adduce evidence of your business on 27-5-61 at 10.30 a.m. by producing before me or causing to be produced before me on that date and time, the following records:1. Cash book (from 1-1-61 to 26-5-61)2. Ledger do.3. Sales tax register do.4. Stock book do.5. Purchase vouchers do.6. Copies of cash memo and sales bills (from 1-1-61 to 26-5-61)7. Copies of challans (from 1-1-61 to 26-5-61)8. All bank pass books or bank statements (from 1-1-61 to 26-5-61)9. Register XXIII10. Counterfoils of declaration forms.Commercial Tax Officer,Central Section, West Bengal.

2. To this notice the respondent sent a reply praying for time and stating that the records called for had been mislaid and that the accountant who was in-charge of the said records being ill, it was 'absolutely impossible' for the respondent to produce the records on 27th May, 1961, as directed. The Commercial Tax Officer rejected the prayer for time on several grounds. On the material before him, he was not inclined to believe that the accountant was so ill as sought to be made out. He further found on perusal of the dealer's case records that on all previous occasions Sri Madanlal Popli, the proprietor of the business, had himself explained all his books of account to the Commercial Tax Officers concerned without the assistance of the accountant. The Commercial Tax Officer also found it hard to believe that the records had been mislaid. The Commercial Tax Officer therefore held that there was no valid cause for non-production of the records by the respondent. Having rejected the petition for time the Commercial Tax Officer proceeded to enquire whether the dealer was still carrying on the business in respect of which he had been granted the registration certificate. On perusal of the dealer's file the Commercial Tax Officer found as follows :

(a) Sri S.K. Chatterjee, Commercial Tax Officer, Central Section, on 8th August, 1959, had directed the respondent to produce on 10th August, 1959, its records of purchases and sales since 10th February, 1959. The respondent failed to produce these records and had asked for time. Sri Chatterjee then agreed to accompany the dealer to his registered place of business to inspect the records there. But the dealer declined to show him the records.

(b) Sri Chatterjee on 17th August, 1959, again directed the dealer to produce before him on 22nd August, 1959, its then current purchases and sales records. On this occasion also the dealer failed to produce the records and asked for time. Sri Chatterjee again offered to accompany the dealer to his registered place of business to inspect the records, but the dealer refused to accept the offer.

(c) Another Commercial Tax Officer, Central Section, Sri N.D. Sarma, who visited the dealer's registered place of business on 29th March, 1961, also failed to get inspection of any of the dealer's books of account.

3. It appears that after the dealer's file was transferred to the Commercial Tax Officer who had issued the notice dated 25th May, 1961, the said officer, having received an information that the dealer had discontinued the business, visited his registered place of business earlier on the same day, i.e., 25th May, 1961, along with two Inspectors of the Central Section. On searching that place the Commercial Tax Officer could not find any books of account nor any trace of business activity. As stated already, on 27th. May, 1961, also the dealer did not produce his records. The dealer's continued reluctance to produce his records led the Commercial Tax Officer to believe that he was trying to prevent any proof as regards his alleged business. On the basis of the dealer's past records and present conduct, the Commercial Tax Officer came to the conclusion that the dealer had discontinued the business in respect, of which he had been granted certificate of registration. On 27th May, 1961, the Commercial Tax Officer passed an order cancelling the dealer's registration certificate under Section 7(6)(a) of the Act and wrote to the dealer as follows :

You are hereby informed that your registration certificate No. CL/2350A has been cancelled under Section 7(6)(a) of the Bengal Finance (Sales Tax) Act, 1941.

You are, therefore, directed to return your said registration certificate and unused declaration forms, if any, to this office within 3 days from the date of receipt of this letter. Commercial Tax Officer,Central Section, West Bengal.

4. The respondent filed a writ petition challenging the order cancelling his registration certificate on which a rule nisi was issued on 13th June, 1961. On 5th August, 1964, the trial court made the rule absolute, quashed the order of cancellation by a writ of certiorari and also issued a writ of mandamus commanding the sales tax authorities and the State of West Bengal, who are the appellants before us, to forbear from giving effect to the said order. The learned Judge observed in his judgment:

I am of the opinion that the sales tax authorities did not notify the petitioner (the respondent in this appeal) that the sales tax authorities proposed to cancel the registration certificate. The petitioner was entitled to be heard in that matter. Natural justice demands that the parties should be told what the proposed action is. The authorities have the jurisdiction to decide, but before they decide they must specifically inform the petitioner what the proposed action is under the statute.

The propriety of the decision of the trial court is in question in this appeal.

5. Admittedly, the dealer was not asked to show cause why his registration certificate should not be cancelled. But on the facts stated above, it cannot be said that the dealer was not given any opportunity to represent his case before it was found that the business in respect of which the certificate of registration was granted had been discontinued. These facts, set out in the affidavit filed on behalf of the Commercial Tax Officer, are gathered from the dealer's file with the said officer and have not been denied. The proprietor of the business himself presented the petition for time before the Commercial Tax Officer. It appears that the petition was rejected not in his presence, but later in the day after he had left. However, this does not seem to have caused any injury because in the petition for time the respondent stated that it was 'absolutely impossible' to produce the records asked for on that day. The Commercial Tax Officer rejected the prayer for adjournment, not unreasonably, and proceeded to decide whether the dealer had discontinued his business. On the material before him, the Commercial Tax Officer found that the dealer had ceased to carry on the business in respect of which the registration certificate was granted. On this finding the only course open to the Commercial Tax Officer was to cancel the dealer's registration certificate under Section 7(6)(a) of the Bengal Finance (Sales Tax) Act, 1941. Section 7(6)(a) of the Act is in these terms:

Section 7. (6) When-

(a) any business in respect of which a certificate has been granted to a dealer on an application made, has been discontinued, or... the Commissioner shall cancel the registration.

6. The question is where a dealer has been given an opportunity to prove that he was still carrying on the business in respect of which the certificate of registration was granted, would a second notice be necessary asking him to show cause against cancellation of his registration if it was found that the business had been discontinued. The answer seems to us to be in the negative. In the case of Arjan Singh v. The Excise and Taxation Commissioner, Jullundur City [1056] 7 S.T.C. 457, referred to in the judgment of the trial court and relied on by the learned Advocate for the respondent, it was held that the relevant section of the East Punjab General Sales Tax Act, 1948, 'does not make mention of any opportunity for showing cause which must be furnished to any dealer before his registration certificate is cancelled, but it is a principle of natural justice that no order to the detriment of a subject should be passed before he has been heard'. This decision does not lay down that two notices would be necessary, one before an enquiry is started to find out whether or not the dealer was still carrying on the business and another before cancellation of his registration certificate when it is found that the dealer has discontinued the business. Section 7(6)(a) of the Bengal Finance (Sales Tax) Act, 1941, clearly provides that after it is found that the dealer has discontinued the business his registration must be cancelled, no option or discretion is left with the Commissioner or any authority to whom he may have delegated his power under Section 15 of the Act. The notice on the dealer requiring him to prove that he was still carrying on the business is also a notice of the step that under the law the Commissioner or the authority to whom he may have delegated his power must take if it is found that the business has been discontinued. The view we take finds support from a decision of this Court in Saha Stores v. Commercial Tax Officer and Anr. [1059] 10 S.T.C. 311. In this case Sinha, J., held that the word 'shall' in Section 7(8) of the Act denotes compulsion. It was observed that :

The Commissioner was under compulsion to cancel the registration if any business, in respect of which a certificate has been granted to a dealer on an application made, has been discontinued. Whether such business has been discontinued or not is a question of fact. The duty to find out whether a business has been discontinued or not is an administrative act. Although it is not laid down in the Act and the Rules it would be necessary to give an opportunity to the dealer to show cause if it is intended to act under the provisions of Sub-section (6)(a) of Section 7, because it might affect the fundamental rights of the dealer to carry on business.

7. It therefore seems clear that a dealer, who has been given an opportunity to adduce evidence to prove that he was carrying on business, cannot insist on a further notice to show cause against the cancellation of his certificate of registration if it is found that he had discontinued the business. The rule of natural justice requiring that the person likely to be affected must be informed of the step proposed to be taken against him is not a formula to be mechanically applied. As observed by the Supreme Court in A.K. Kraipak v. Union of India A.I.R. 1970 S.C. 150, the 'aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice'. After it is held that the dealer has ceased carrying on the business, there is no possible cause that he can show against cancellation of his registration having regard to the terms of Section 7(6)(a) of the Act. We therefore think that the dealer in this case has not suffered any injury and there is no merit in the writ petition filed by him.

8. The appeal is accordingly allowed. The judgment and order appealed from are set aside and the writ petition is dismissed. Interim orders, if any, are vacated. In the circumstances of the case, we make no order as to costs.

Salil Kumar Datta, J.

I agree.


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