Subsisting stay preserves dealer registration, preventing sales tax liability and supporting turnover deduction for the seller.

A subsisting High Court stay preserving a purchaser's registration certificate kept that certificate operative for sales made during the stay, so the seller could treat the purchaser as registered and those sales were not chargeable to sales tax. Cancellation of the registration certificate could not be relied on to deny deduction from turnover where it was neither notified in the official Gazette nor surrendered to the assessing authority as required by the rules. The disallowance of the claimed deduction was therefore unsustainable, and the turnover adjustment had to be made in favour of the assessee.

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Issues: (i) Whether sales made during the subsistence of a High Court stay order in favour of the purchasing dealer could be treated as sales to a dealer holding a valid registration certificate and therefore not chargeable to sales tax. (ii) Whether cancellation of the purchasing dealer's registration certificate, not notified in the official Gazette and not surrendered to the assessing authority, could be relied upon to deny deduction from turnover.

Issue (i): Whether sales made during the subsistence of a High Court stay order in favour of the purchasing dealer could be treated as sales to a dealer holding a valid registration certificate and therefore not chargeable to sales tax.

Analysis: A stay order operates to preserve the status quo and places the parties in the position existing before the impugned cancellation. During the currency of the stay, the registration certificate of the purchasing dealer must be treated as valid. The selling dealer was entitled to act on that subsisting registration and could not be expected to collect sales tax merely because the underlying dispute was later decided against the purchasing dealer.

Conclusion: The sales made during the period of stay were not chargeable to sales tax and the issue is decided in favour of the assessee.

Issue (ii): Whether cancellation of the purchasing dealer's registration certificate, not notified in the official Gazette and not surrendered to the assessing authority, could be relied upon to deny deduction from turnover.

Analysis: The statutory rules required cancellation of the registration certificate to be notified in the official Gazette and the certificate to be surrendered to the assessing authority. In the absence of such publication and surrender, cancellation could not be imputed to the selling dealer as notice, and the dealer was entitled to continue treating the purchaser as registered.

Conclusion: The cancellation could not be used to disallow the deduction and the issue is decided in favour of the assessee.

Final Conclusion: The disallowance of the claimed deduction was unsustainable and the turnover adjustment had to be made in favour of the assessee.

Ratio Decidendi: Where a registration certificate remains protected by a subsisting stay order, and cancellation of that certificate is not duly published or otherwise brought into effect in the manner prescribed by the rules, sales made on the basis of that certificate cannot be denied deduction or treated as taxable against the selling dealer.

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