M/S Tarulata Trading PVT LTD vs. State Of Gujarat

Held

The Court held that while the cancellation of registration might be upheld in the revision petition, the retrospective effect of such cancellation, from inception, was questionable. The Court reasoned that even if registration is cancelled, purchasing dealers could still argue for the genuineness of their transactions to claim input tax credit. Conversely, if registration is not cancelled retrospectively, the department could still pursue non-genuine past transactions with purchasing dealers. Therefore, pending the revision petition before the Tribunal, the Court decided to stay the retrospective operation of the cancellation of registration. The cancellation of registration from the date of the order would continue to operate.

Facts

The petitioners, M/s Tarulata Trading Pvt Ltd and others, challenged orders from the Deputy Commissioner of Value Added Tax cancelling their GST registrations retrospectively. The cancellations were based on a spot visit that prima facie indicated bogus billing activities without genuine sale and purchase of goods, particularly concerning transactions with three other dealers. The petitioners argued that their accounts were audited and presented, and they were open to assessment. The Value Added Tax Tribunal admitted their appeals but rejected their requests for a stay. The petitioners then filed these writ petitions before the High Court, challenging the Tribunal's order rejecting the stay.

Key Issues

1. Whether the retrospective cancellation of a dealer's registration, ab initio, is permissible under the Gujarat Value Added Tax Act, 2003, when the dealer has been registered since 2008 and has conducted business over several years? Petitioner's arguments: The petitioner contended that retrospective cancellation of registration was not justified. They argued that their transactions were duly recorded in audited accounts and that the department could not point to any revenue linkage or proof of inflated turnover for bank loans. They also submitted that frequent transactions between entities or the inability to show physical movement of goods, especially in commodities dealt with under warehousing regulations, did not automatically imply bogus billing. Revenue's arguments: The Revenue argued that the competent authority passed a speaking order after providing an opportunity for representation, and the Tribunal provided reasons for not granting interim relief. They contended that granting interim protection would lead to complications.