Dealer registration cannot be denied or cancelled merely because most turnover comes from outside-State sales in a composite business.

A dealer remained entitled to registration under the Bihar Sales Tax Act where the composite business included selling or supplying goods in Bihar, even though most turnover arose from outside-State or inter-State sales. The Court treated local sales as part of the same business and held that the presence of non-taxable turnover did not defeat dealer status in the absence of false or fabricated returns. On that footing, cancellation of the registration certificate under the Act could not stand, because it rested on the mistaken assumption that registration was unavailable. The registration was restored and costs were awarded.

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Issues: (i) whether the petitioner was entitled to be registered as a dealer under Section 2(c) of the Bihar Sales Tax Act, 1944 and Section 7(1) of that Act; (ii) whether the Sales Tax Officer had jurisdiction under Section 20(4) of the Bihar Sales Tax Act, 1944 to cancel the registration certificate.

Issue (i): entitlement to registration as a dealer under Section 2(c) and Section 7(1)

Analysis: The statutory scheme required only that the applicant be a dealer carrying on business of selling or supplying goods in Bihar and that the gross turnover exceed the prescribed limit. The authorities had treated the fact that a major part of the business consisted of sales outside Bihar, and that no tax was payable on much of the turnover, as disqualifying. That approach was incorrect. A dealer does not lose the character of a dealer merely because the bulk of the business is in inter-State or outside-State sales, so long as there is business of selling or supplying goods in Bihar. Occasional or limited local sales remain part of the same composite business and do not become a separate or insignificant activity for denying registration. There was also no finding that the returns were false or fabricated.

Conclusion: The petitioner was entitled to be registered as a dealer and the answer to this issue was in the affirmative.

Issue (ii): jurisdiction under Section 20(4) to cancel the registration certificate

Analysis: The cancellation had proceeded on a mistaken view that the petitioner was not entitled to registration. Once that premise failed, the cancellation could not stand. The delegation of powers and the previous sanction obtained from the Deputy Commissioner did not save the order because the substantive basis for cancellation was absent and the officer had acted on an erroneous construction of the Act.

Conclusion: The Sales Tax Officer had no jurisdiction to cancel the registration certificate on the facts and in the manner adopted.

Final Conclusion: The reference was answered in favour of the petitioner, with the registration certificate restored and costs awarded.

Ratio Decidendi: A person carrying on a composite business of selling or supplying goods in Bihar remains a dealer for registration purposes even if the larger part of the turnover arises from sales outside the State, and registration cannot be refused or cancelled merely because no tax is payable on part of the turnover.

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