The petitioner in this writ petition is carrying on the business of purchase and sale of Mentha Oil and the business is being carried out at Masauli District Barabanki from where purchase and sale are being done. In the writ petition it has been stated that the proprietor of the Firm met with a major Heart Attack as a result of which he requested the Addl. Commissioner (Law) Commercial Tax Lucknow to be permitted to change his Head Office from Masauli, Barabanki to Kanchanpur Matiyari Chauraha, Faizabad Road, Lucknow. This application has been filed as Annexure-2 page 34 of the writ petition. This application was considered by the Addl. Commissioner (Law) Commercial Tax, Head Office, Lucknow who by his order dated 19.11.2013 permitted the petitioner to change his Head Office from Masauli, Barabanki (Khand-I) to Kanchanpur Matiyari Chauraha, Faizabad Road, Lucknow (Khand-II).
On 27.6.2014 a survey was conducted at the business premises of the petitioner at Masauli, Barabanki by the Dy. Commissioner, Commercial Tax, Lucknow where stock of Menthal Oil as well as books of account were found. The report of the Dy. Commissioner, Commercial Tax is at page 37 of the paper book of the writ petition, which clearly mentions that the entire stock register were found at Masauli, Barabanki and the stock of Menthal Oil weighing 43,920 kg. was also found there. An inspection was also conducted at the Head Office of the Company at Kanchanpur, Matiyari Chauraha, Faizabad Road, Lucknow (Khand-II). However, on 4.7.2014 a show cause notice was issued by the Dy. Commissioner, Commercial Tax, Lucknow to the petitioner to show cause to as why his registration certificate under the U.P. VAT Act 2008 be not cancelled on the ground that in the survey made at the Head Office of the petitioner at Lucknow neither books of account nor stock of Menthal Oil were found. The show cause notice has been filed as Annexure-4 to the writ petition. This was a notice issued under section 17(11) of the U.P. VAT Act.
The petitioner submitted his reply to the show cause notice on 7.7.2014 (Annexure-5 to the writ petition) stating clearly therein that no business of Menthal Oil is carried out from the Head Office and therefore no stock is kept there and only some books of account of the previous year is kept at the Head Office. It was also stated that under section 17(11) of the U.P. VAT Act registration can be cancelled only on the following grounds:
(a) dealer's liability for payment of tax has ceased; or
(b) the dealer has discontinued the business; or
(c) of order of cancellation, where-
(i) the dealer has obtained registration certificate by fraud or by misrepresentation of facts; or
(ii) the dealer has failed to furnish security or additional security, as the case may be; or
(iii) the dealer has transferred any prescribed form of declaration or certificate obtained by him to any person against the provisions of this Act or the rules made thereunder; or
(iv) the dealer has permitted some other person to carry on business in his name; or
(v) the dealer has issued any tax invoice to a dealer without making actual sale of goods; or
(vi) where a transporter or carrier or transporting agent or railway container contractor fails to file return or otherwise acts in contravention of the provisions of this Act or rules made thereunder;
(vii) a person acts in contravention of provisions of Section 43;
(viii) where a dealer has failed to pay the tax, penalty or other dues within three months of the date such tax, penalty or other dues become payable;
(ix) registration certificate has been cancelled for any other sufficient cause.
On 8.7.2014 an order was passed by the Dy. Commissioner, Commercial Tax, Lucknow wherein he notices that on 27.6.2014 when a survey was conducted at the site of business no stock was found nor any business activity was noticed at Lucknow nor any books of account were found. He has however, noticed that on 27.6.2014 in a similar survey conducted at Mausali, Barabanki all the books of account and other documents were found and stock was also found and that from this it is established that the Trader has not maintained any books of account and other documents at Kanchanpur Matiyari Chauraha, Lucknow and that his center of business is elsewhere. However, inspite of these findings the Dy. Commissioner, Commercial Tax, Lucknow has held that registration of the petitioner-Trader ought to be cancelled and has accordingly cancelled the same.
Against this order of cancellation of registration the petitioner filed a writ petition no. 6211 of 2014 and the Division Bench of this Court disposed of the writ petition on the ground of alternative remedy and gave liberty to the petitioner to file an appeal before the competent authority within 15 days under the U.P. VAT Act by order dated 17.7.2014. It is stated that the appeal has been filed and the same has also been rejected by order dated 23.7.2014 (Annexure-8 to the writ petition). Aggrieved by this order the petitioner has preferred a second appeal before the Commercial Tax Tribunal Bench-III, Lucknow. Alongwith the appeal the petitioner has also filed an application under section 57(9) of the U.P. VAT Act praying for stay of the operation of the impugned order under section 17(11) of the U.P. VAT Act dated 8.7.2014. Copy of the application has been filed as Annexure-9 to the writ petition. In the application it has been specifically stated by the petitioner-Trader that he had only applied for change of Head Office from Masauli, Barabanki to Kanchanpur Matiyari Chauraha, Lucknow and that no business was being carried out from the said place and that the entire business was being carried out from Lucknow. A reference was also made to the survey report dated 27.6.2014 which also mentions that all the books of account and other documents including stock was found at the place of business at Masauli, Barabanki. The petitioner has also referred specifically to the provisions of Section 17(11) of the U.P. VAT Act stating that none of the conditions laid down therein have been violated by the petitioner which may warrant cancellation of the registration of his business. However, the Member, Commercial Tax Tribunal, Lucknow has rejected the stay application of the petitioner by the order dated 28.7.2014 which has been impugned in the present writ petition.
I have heard Shri Bharat Ji Agarwal and Shri S.M.K. Chaudhary, learned senior counsel assisted by Shri Rahul Srivastava and Shri Sanjay Sareen, learned Standing Counsel for the respondents.
With the consent of the learned counsel for the parties, this writ petition is being disposed of at the admission stage itself.
From a perusal of the impugned order dated 28.7.2014 it will be noticed that several case law have been cited before the authority and the same have neither been referred to nor even considered and infact the plea of the petitioner for stay has been rejected on the ground that the judgements referred to by the petitioner were in matters which were finally decided in Trade Tax Revisions and not in any matter where the appeal was still pending.
Shri Bharat Ji Agarwal has referred to some of the decisions. The first judgment referred to is reported in (2011) 16 VLJ 201 Sai Traders Vs. Commissioner, Commercial Tax U.P. Lucknow wherein while considering the provisions of Section 17(11) of the U.P. VAT Act, the Court held in paragraph 11 that non-transacting of any business during a particular period causes no loss to the revenue and as such would not constitute 'sufficient cause' for cancellation of registration. It may be mentioned that in that case the Court was also considering the phrase 'for any other sufficient cause'. In paragraph 16 the Court further held that the phrase 'for any other sufficient reason' no doubt is wide enough but three reasons on which the cancellation of registration has been ordered would not even fall under its canopy as in all the above three events the revenue is not likely to be affected or is shown to be affected. Paragraphs 11 and 16 of the said judgement reads as under:
"11. Non-transacting of of any business during a particular period causes no loss to the revenue and such would not constitute 'sufficient cause' for cancellation of registration.
12. ............
13. ............
14. ............
15. .............
16. The phrase 'for any other sufficient cause' used in sub clause (ix) of section 17(11) of the Act no doubt is wide enough but three reasons on which the cancellation of registration has been ordered would not even fall under its canopy as in all the above three events the revenue is not likely to be affected or is shown to be affected."
The next referred case is reported in 2010 U.P.T.C. 1152 M/s Honda Siel Cars India Ltd. Vs. The Commissioner, Commercial Taxes, U.P. Lucknow wherein the High Court referring to a decision of the Supreme Court reported in 1983 (I) LCD 109 Mool Chand Yadav and another V. Raza Buland Sugar Co. Ltd. Rampur and others has held that where a statutory appeal has been entertained or admitted for consideration and the order impugned is likely to visit the party with civil consequences judicial approach requires that during the pendency of the appeal the operation of such order must be suspended. This is for the reason to avoid undue hardship to the party concerned and to preserve the rights of the parties pending adjudication of the lis. Paragraph 13 of the judgment reads as under:
"13. It is well recognized vide Mool Chand Yadav and another Vs. Raza Buland Sugar Co. Ltd., Rampur and others, 1983 (I) LCD 109 that where a statutory appeal has been entertained or admitted for consideration and the order impugned is likely to visit the party with civil consequences judicial approach requires that during the pendency of the appeal the operation of such order must be suspended. This is for the reason to avoid undue hardship to the party concerned and to preserve the rights of the parties pending adjudication of the lis"
The third judgment referred to by Shri Bharat Ji Agarwal, learned senior counsel is reported in 2005 (1840 E.L.T. 347 (All.) I.T.C. Ltd. V. Commissioner (Appeals), Cus. and C. Ex., Meerut-I. The said case is also one where the application for stay/waiver of pre deposit of the amount demanded by the assessing authority had been rejected during the pendency of the appeal and His Lordship Dr. B.S. Chauhan (as His Lordship then was) writing the judgment in the Division Bench referred to the judgment of the Supreme Court in Income Tax Officer V. M.K. Mohammad Kunhi, AIR 1969 SC 430 and held that the stay should be granted if a strong prima facie case has been made out or in the most deserving and appropriate case where entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue, during the pendency of the appeal. Paragraph 18 of the said judgment reads as under:
"18. In Income Tax Officer V. M.K. Mohammad Kunhi, AIR 1969 SC 430 the Apex Court held that the stay should be granted if a strong prima facie case has been made out or in the most deserving and appropriate case where entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue, during the pendency of the appeal."
In paragraph 35 of the said judgment in ITC (supra) the Division Bench of this Court held that the Court should not grant interim relief/stay of the recovery merely on the asking of a party. It has to maintain a balance between the rights of an individual and the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be no financial restrain on the appellant running in a good financial condition. Paragraph 35 of the said judgment reads as under:
"35. In view of the above, the aforesaid authorities make it clear that the Court should not grant interim relief/stay of the recovery merely by asking of a party. It has to maintain a balance between the rights of an individual and the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be no financial restrain on the appellant running in a good financial condition. The arguments that appellant is in a position to deposit or if he succeeds in appeal, he will be entitled to get the refund, are not the considerations for deciding the application. The order of the Appellate Authority itself must show that it had applied its mind to the issue raised by the appellant and it has been considered in accordance with the law. The expression 'undue hardship' has a wider consideration as it takes within its ambit the case where the assessee is asked to deposit the amount even if he is likely to exonerate from the total liability on disposal of his appeal. Dispensation of deposit should also be allowed where two views are possible. While considering the application for interim relief, the Court must examine all pros and cons involved in the case and further examine that in case recovery is not stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary power by the authority to stay/waive the pre-deposit condition, would be reduced to nugatory/illusory. Undoubtedly, the interest of the Revenue cannot be jeopardized but that does not mean that in order to protect the interest of the Revenue, the Court or authority should exercise its duty under the law to take into consideration the rights and interest of an individual. It is also clear that before any goods could be subjected to duty, it has to be established that it has been manufactured and it is marketable and to prove that it is marketable, the burden is on the Revenue and not on the manufacturer."
In the present case also the impugned order is absolutely cryptic and does not even refer to the facts of the case nor to the case laws referred to by the petitioner. It has failed to consider that the case of the petitioner throughout was that he had only applied for permission for transfer of his Head Office from Mausali, Barabanki to Kanchanpur Matiyari Chauraha, Faizabad Road, Lucknow whereas the business continued to function from Masauli, Barabanki. The Member, Tribunal while passing the impugned order has also failed to take into account whether the cancellation of the registration of the petitioner would result in loss of revenue to the State or otherwise that if registration was not cancelled it would result in financial loss to the State.
Shri Bharat Ji Agarwal, learned senior counsel has however informed that the appeal preferred before the Tribunal, Bench III, Lucknow by the petitioner is still pending and no decision has been rendered so far.
Considering the matter in the totality of the facts and circumstances of the case and in the light of the observations made herein above and the case law referred to, this writ petition is finally disposed of with a direction that the impugned order of cancellation of registration dated 8.7.2014 shall remain stayed during the pendency of the appeal of the petitioner before the Tribunal and shall be subject to the outcome of the final decision of the Tribunal.
The writ petition stands disposed of with the above observations.
Order Date :- 1.8.2014 o.k.