(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Rule. Ms. Shruti Pathak, learned Assistant Government Pleader waived service of rule on behalf of the respondents. Considering the nature of the dispute involved, the petition is taken up for final disposal presently.
2. The petitioner has challenged an order, gist of which was communicated to the petitioner under communication dated 12/15.10.2012. The respondent No.2 – Assistant Sales Tax Commissioner under the purported exercise of powers under section 67(6) of the Gujarat Value Added Tax Act, 2003 (“VAT Act” for short), detained the goods belonging to the petitioner lying in the godown situated at Unja. The Assistant Commissioner styled his order as “stop delivery” order. Brief facts may be noted at this stage.
3. The petitioner is the proprietary concern and is engaged in the business of trading in various commodities like jeera etc. For such purpose, the petitioner is a registered dealer under the provisions of the VAT Act and files its regular returns under the said Act. The petitioner trades in such commodities through the commodities exchange. The goods are warehoused at notified warehouses and upon sale of the goods, only the ownership changes hands, whereas the goods continue to lie at the same place.
4. The petitioner purchased the goods in question, mainly jeera, which is lying at godown in Unja.
5. The respondent No.2 under the impugned communication dated 12/15.10.2012, conveyed to the petitioner that such goods are under “stop delivery” order. It was not possible to lift such prohibitory order due to the reason that the petitioner had made certain purchases in the past from one M/s Surya Vinayak Industries Ltd., whose registration under the VAT Act was cancelled with effect from 1st January, 2011. The petitioner had made purchases from said M/s Surya Vinayak Industries Ltd. and upon such purchases, had claimed credit to the tune of Rs.18,66,689/- for such purchases made after 1st January, 2011. Since the registration of M/s Surya Vinayak Industries Ltd. was cancelled with effect from 1st January, 2011, according to the respondent No.2, the petitioner was not entitled to take any such credit on the purchases made after that date. The impugned communication further recorded that the petitioner was instructed to pay such amount by depositing the same with the Department. He had, however, failed to do so.
6. Since in the impugned communication dated 12/15.10.2012, the exact date of the order of cancellation of registration of M/s Surya Vinayak Industries Ltd. is not forthcoming, nor the exact date thereof has been provided by the respondents in the affidavit in-reply dated 3rd November, 2012, we have gathered from learned Assistant Government Pleader who on the basis of the order in question available from the file, could point out that such cancellation was ordered on 6th March, 2012.
7. The case of the petitioner is that the respondents cannot deny any tax credit on the purchases made by the petitioner from M/s Surya Vinayak Industries Ltd. till cancellation order was published as required under the VAT Act and at any rate, till 6th March, 2012 when the order was passed. Another contention of the petitioner is that in any case, the respondents have no power to detain the goods, that too, under section 67(6) of the Act.
8. On the other hand, the case of the respondents is that since the registration of M/s Surya Vinayak Industries Ltd. was cancelled with effect from 1st January, 2011, any purchase made by the petitioner from such agency would not qualify for tax credit in terms of section 11(5) of the VAT Act. The learned Assistant Government Pleader also submitted that the Assistant Commissioner has wide powers under section 67, as also under section 45 of the said Act, to order detention of the goods in order to protect the interest of the revenue. The learned Assistant Government Pleader also raised contention of alternative remedy available to the petitioner.
9. Having, thus, heard the learned counsel for the parties and having perused the documents on record, insofar as the availability of alternative remedy is concerned, it is by now well settled that availability of remedy is not a bar to the Court exercising writ jurisdiction under Article 226 of the Constitution of India. If it is pointed out that the order passed by the authority is either exfacie illegal or is opposed to the principles of natural justice or is passed without any authority or jurisdiction, the Court may, at its discretion, entertain the petition.
10. Insofar as the main matter is concerned, we may first examine the contention with respect to the availability of the tax credit to the petitioner for the purchases made from M/s Surya Vinayak Industries Ltd. after 1st January, 2011.
11. Section 11 of the VAT Act pertains to tax credit. Sub- section (1) (a) thereof provides that a registered dealer who has purchased the taxable goods shall be entitled to claim tax credit equal to the amount specified in clauses (i) to (iii) thereof. Sub-section (5) of section 11, however, provides that notwithstanding anything contained in the Act, tax credit shall not be allowed for purchases specified in clauses (a) to (p) thereof. Sub-clauses (a) and (mmmm), which are relevant for our purpose, read as under :-
“(a) made from any person other than a registered dealer under this Act;
(mmmm) made from a dealer after the name of such dealer has been published under sub-section (11) of section 27 or section 97;”
12. Section 27 of the VAT Act pertains to suspension or cancellation of registration. Sub-section (1) of section 27 pertains to various reasons, where due to discontinuation of business, the transfer of the whole of the business, dissolution of firm or association of persons etc., registration is liable to be cancelled, and provides that the Commissioner, in such cases, may cancel the certification of registration from such date as may be specified by him. Sub-section (4) of section 27 pertains to the cases where the certificate of registration shall be deemed to be inoperative. Sub-section (5) of section 27 pertains to the cases where due to various defaults and omissions and commissions on the part of the dealer, the Commissioner can order cancellation of certificate of registration. Clause (a) thereof pertains to a case where a dealer has failed to file three consecutive returns under the Act. Sub-section (5) of section 27 reads as under:
“27. Suspension or cancellation of registration.
[5] If a dealer -
[a] has failed to file three consecutive returns under this Act;
[b] knowingly furnishes incomplete or incorrect particulars in his returns with a view to evade tax;
[c] has failed to pay the tax due for three consecutive tax periods from him under the provisions of this Act;
[d] having issued tax invoice or retail invoices, has failed to account for the said invoices in his books of account;
[e] holds or accepts or furnishes or causes to be furnished a declaration, which he knows or has reason to believe to be false;
[xxx]
[g] has been convinced of an offence under this Act, or under the earlier law;
[h] discontinues his business and has failed to furnish information regarding such discontinuing.
[i] without entering into a transaction of sale issues to another dealer tax invoice, retail invoice, bill or cash memorandum, with intention to defraud the Government revenue; or
[j] who has been found evading tax on account of variation in physical stock compared with his regular books of accounts;
the Commissioner may at any time, for reasons to be recorded in writing and after giving the dealer an opportunity of being heard, cancel his certificate of registration from such date as may be specified by him.”
13. Sub-section (11) of section 27 provides for publication of the particulars of dealers whose certificate of registration has been suspended or cancelled under the provisions of the Act. Section 27(11) reads as under :
“Section 27(11)- The Commissioner shall publish in the manner as may be prescribed the particulars or dealers whose certificate of registration has been suspended or cancelled under the provisions of this Act.”
14. From the above statutory provisions, it can be noticed that under section 11 of the VAT Act, a registered dealer who has purchased taxable goods can claim tax credit as specified therein. Sub-section (5) thereof, however, provides for cases where such credits shall not be allowed for purchases specified therein. Clause (a) of sub-section (5) of section 11 pertains to the purchases made from any person other than a registered dealer under the Act. In contrast, clause (mmmm) of sub-section (5) of section 11 pertains to the purchases made from a dealer after the name of such dealer has been published under sub- section (11) of section 27 or section 97. In particular, section 27(11) pertains to publication of particulars or dealers whose whose certificate of registration has been suspended or cancelled under the Act.
15. In case of a dealer whose registration has been cancelled or suspended, thus, the purchases made from such a dealer would be ineligible for tax credit in terms of clause (mmmm) of sub-section (5) of section 11 of the VAT Act, where the dealer makes such purchases after the name of such dealer has been published under section 27(11) of the said Act.
16. We are unable to see how the present case would be covered under clause (a) of sub-section (5) of section 11 of the VAT Act since the registration of the dealer from whom the petitioner purchased the goods was cancelled with the back date. The case has to be covered under clause (mmmm) of sub-section 5 of section 11 of the said Act because the dealer from whom the petitioner made such purchases, his registration came to be cancelled by the competent authority. Any purchase made from such a dealer after the necessary particulars were published as required under section 27(11) of the VAT Act, would not qualify for tax credit. Significantly, clause (mmmm) of sub-section (5) of section 11 of the VAT Act uses the language “purchases made from a dealer after the name of such dealer has been published under sub- section (11) of section 27 of the Act”. If the legislature had used the phraseology of purchases made from dealer
in whose case, particulars have been published under sub-section (11) of section 27 of the Act, perhaps an argument may arise that the cancellation of registration may be ordered subsequently, however, with a back date as permitted under section 27(5) of the VAT Act and that, therefore, any purchases made during the interregnum would also not qualify for tax credit. The legislature, however, has advisably used the words “purchases made from a dealer after the name of such dealer has been published under sub-section (11) of section 27”.
17. In the present case, admittedly, the order of cancellation of registration of M/s Surya Vinayak Industries Ltd. was passed on 6th March, 2012. Therefore, obviously, the publication as required under section 27(11) of the VAT Act would be sometime thereafter. In any case, therefore, for the purchases made by the petitioner from such dealer prior to 6th March, 2012, tax credit cannot be denied under sub-section (5) of section 11 of the VAT Act.
18. Additionally, we also do not find any provision under which the respondent No.2 could have detained the goods in the facts of the present case. The respondent No.2 has referred to sub-section (2) of section 67 of the VAT Act. Section 67 of the VAT Act pertains to production and inspection of accounts and documents and search of premises. Sub-section (6) thereof, on which reliance was placed, reads as under :
“[6] Where -
[a] a carrier or bailee or any person to whom goods were delivered for transport has kept the said goods in any vehicles, vessel or place; and
[b] the Commissioner has reason to believe that tax on such goods is or is likely to be evaded, the Commissioner, may stop the vehicle or the vessel carrying such goods and enter and search the vehicle, vessel or place and inspect the goods and records relating to such goods and elicit such information from the carrier, bailee or any person as is relevant.”
19. A perusal of the said provision would make it clear that the Commissioner can stop the vehicle or the vessel carrying the goods and enter and search the vehicle, vessel or place in cases where the clauses (a) and (b) apply and inspect the goods and records relating to such goods and elicit such information from the carrier, bailee or any person as is relevant.
20. Clauses (a) and (b) of sub-section (6) of section 67 of the VAT Act pertain to cases where a carrier or bailee or any person to whom goods were delivered for transport has kept the said goods in any vehicles, vessel or place and the Commissioner has reason to believe that tax on such goods is or is likely to be evaded. In such cases, the Commissioner may, as noted earlier, stop the vehicle or vessel, enter and search the vehicle, vessel or the place and inspect the goods and records.
21. In the present case, neither clause (a) nor clause (b) is satisfied. Firstly, the goods are not kept in any vessel, vehicle or place by a carrier or bailee or any person to whom the goods were delivered for transport. Further, the Commissioner cannot be stated to have reason to believe that the tax on such goods is or is likely to be evaded. Even if the stand of the respondents that the petitioner was not entitled to take tax credit on the purchases made from M/s Surya Vinayak Industries Ltd. was valid, we fail to see how the authority can hold a belief that the goods which are detained, are such on which the petitioner was likely to evade tax payment. Even if both these conditions were satisfied, the power with the Commissioner was only to enter the vehicle, vessel or the place, and inspect the goods and records relating to the goods in question and elicit such information as was relevant. In the present case, the respondent No.2 has acted well beyond such powers. Plainly, the power under section 67(b) of the said Act was simply not available with the respondent No.2 for passing “stop delivery” order.
22. We may refer to section 45 of the VAT Act which pertains to provisional attachment. Of course, it is not the case of the respondents that in the present case, such powers have been exercised. Even otherwise, section 45 empowers the appropriate authority during pendency of any proceedings of assessment or re-assessment of turnover escaping assessment, to attach provisionally any property belonging to the dealer, if the Commissioner was of the opinion that for the purpose of protecting the interest of the revenue, it was necessary to do so. In the present case, the respondents have not invoked such powers. Without further elaboration, therefore, we do not examine the scope of section 45 of the VAT Act.
23. In the result, the action of the respondents in ordering “stop delivery” of the goods of the petitioner communicated through the impugned communication dated 12/15.10.2012 is declared illegal and hereby quashed. The respondents shall not prevent the petitioner from movement of the goods. Rule is made absolute, accordingly, with no order as to costs.
[AKIL KURESHI, J.] [HARSHA DEVANI, J.] parmar*