1. Heard Sri Aditya Pandey, learned counsel for the revisionist and learned Standing Counsel.
2. Present revision has been filed against the order of the Commissioner Tax Tribunal, Bench-2, Agra dated 20.09.2018 passed in Second Appeal No.82 of 2018 for assessment year 2016-17 (Registration). The present revision has been pressed on the following questions of law:
A. Whether the order of cancellation cancelling the assessee's registration could have been made and sustained by the appellate authority and the Tribunal on grounds different from those disclosed in the show cause notice?
B. Whether in registration of the assessee could have been cancelled with retrospective effect?
3. Briefly, the admitted facts of the case are that the assessee was registered under the U.P. Value Added Tax Act, 2008 (hereinafter fererred to as the Act), under Section 17 (11) of the Act. A show cause notice was issued to the assessee by the Assistant Commissioner proposing to cancel its registration. Perusal of the notice reveals that it was issued on three points:
(i). records revealed that the assessee was engaged in purchasing and selling goods to the same seller/ purchaser. Thus, it was alleged that the assessee was engaged in bogus sales. Relevant to the present revision, it may be noted that details of such other dealer/s was not disclosed in the notice. However, it was informed that the assesse was engaged in trading with bogus firms.
(ii). the assessee was engaged in purchasing and selling goods with firms that stood closed, only for the purpose illegally obtaining Input Tax Credit (I.T.C.). Again the names and other details of the dealer/s with whom assessee was alleged to be involved in such bogus transactions were not disclosed.
(iii). It was alleged that in the survey conducted by the Special Investigation Branch of the Commercial Tax department dated 19.10.2016, no trading activity was found to be observed.
4. In response to the above notice, the assessee appears to have filed a reply dated 28.10.2016 to the general allegations made in the notice dated 24.10.2016. Considering the aforesaid reply, the assessing authority vide order dated 18.11.2016 cancelled the assessee's registration from the date of service of the notice dated 24. 10.2016.
5. Against the above order, asseessee preferred a first appeal. That was rejected and the second appeal filed therefrom has also been rejected.
6. Learned counsel for the assessee submits that under Section 17 (11) opportunity of hearing is a mandatory condition to be fulfilled before any registration may be cancelled. For an adequate opportunity of hearing, it is necessary that the assessee be confronted with the exact charge levelled against him and also with the adverse material relied against him. Neither the exact charge was disclosed to the assessee vide notice dated 24.10.2016 nor the adverse material was disclosed to the assessee. Referring to the order dated 18.11.2016, it has been submitted that it for the first time disclosed the names of the other dealers M/S Shiva Traders & Contractors, M/S Ashoka Elignce Amantran, M/S A.K. Contraction Company and M/S Mithlesh Enterprises with whom the assessee is alleged to have performed bogus transactions.
7. Again for the first time, by means of the order dated 18.11.2016 it was disclosed that M/S Mithilesh Enterprises was closed with effect from 31.10.2015. Thus, it has been submitted that the assessee's fundamental right to do business has been illegally infringed inasmuch as the registration has been cancelled in violation of provisions of Section 17 of the Act.
8. On the other hand, learned Standing Counsel would submit that the assessee's registration has been rightly cancelled inasmuch as it has not been denied that the assessee had purchased and sold goods from the same firms and had also developed a business practice of bogus sales with firms that were closed from before.
9. As to the violation of the principles of the justice, learned Standing Counsel would submit that the assessee declined the opportunity to explain the adverse circumstances cited against him. At the stage of appeal, since the assessee failed to offer any explanation in the appeal proceedings, the cancellation of registration is in order.
10. Having heard learned counsel for the parties and perused the record, there can be no dispute that before cancellation of registration, a reasonable opportunity of hearing has to be afforded to the affected dealer. In the present case, the notice does not disclose the exact nature of the charge leveled against the assessee inasmuch as it does not disclose the names of the other dealers with whom the asessee is alleged to have entered into fake and bogus transitions. Neither the show cause notice disclosed the exact nature of such transactions, nor the volume of such transactions nor the name of the dealer with whom asseessee is alleged to have traded in goods after cancellation of the registration of the other dealers or after closure of business by the other dealer. Unless the aforesaid facts were clearly adverted to in that notice and unless the adverse material relied against the assessee had been disclosed to him, the same could not have been read against him, in evidence.
11. In absence of such disclosure contained in the show cause notice dated 24.10.2016, it is difficult to contemplate how a person in the shoes of present assessee could have responded to the show cause notice and defended the proceedings for cancellation of his registration. Unless the assessee had been confronted with the names of the dealers with whom it was alleged to have entered into bogus transactions and unless the details of such transactions had been disclosed in the notice itself and unless similar details of other dealers, who are alleged to have closed their business been disclosed the assessee could never have effecitively responded to the charge/s leveled against him of having engaged in bogus transactions only for the purpose of availing I.T.C. Cancellation of registration is a very serious proceeding. It takes away the right of an assessee to do business. Therefore such a proceeding should be approached with that much more seriousness and case by the assessing authority. In the first place, the charge must be such as may clearly fall within one of qualifying events specified under section 17 (11) of the Act. Then a clear narration of the fact allegations leading to such charge specification must be contained in the notice itself. The notice must also disclose the nature and details of documents that are to be relied against the assessee. Also, the assessee must be confronted with that averse material during the course of thhe proceedings and he must be afforded reasonable opportunity to rebut the same before final order may be passed.
12. Examined in that light, at present the assessing authority appears to have passed a wholly ex parte order inasmuch as in first place it had not disclosed to the assessee the exact nature of the charge leveled against him or the facts and circumstances in which his registration was being cancelled and in any case material that formed the basis of the charge was completely cancealed from the assessee.
13. The appellate authority and the Tribunal have erred in not correcting the mistake thus committed by the assessing authority. The first question of law is thus answered in the negative i.e. in favour of the asseessee and against the revenue.
14. In view of the above, the second question does not require to be answered in the present case. At the same time, keeping in mind the nature of allegation leveled against the assessee, the proceeding cannot be allowed rest here. It is then provided that the assessing authority shall issue a fresh notice in terms of the order dated 18.11.2016 and proceed in accordance with law .
15. In view of the observation made above, the revision is partly allowed.
Order Date :- 19.2.2021 Pr/-