Renewal fee default does not make a registered dealer unregistered unless registration is cancelled; penalty fails.

A dealer whose registration has not been cancelled cannot be treated as unregistered merely because the renewal fee for the registration certificate was paid late. The Tamil Nadu sales tax scheme keeps registration alive until cancellation, while default in renewal fee payment only gives the department a right to recover the fee. On that interpretation of section 21 and rule 24, the dealer remained registered during the relevant period. Penalty for collecting sales tax on the footing that the dealer was unregistered was therefore not sustainable under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959.

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Issues: Whether a dealer whose registration had not been cancelled could be treated as an unregistered dealer merely because the renewal fee for the registration certificate had not been paid in time, and whether penalty could be levied for collecting sales tax during that period.

Analysis: Section 21(3) of the Tamil Nadu General Sales Tax Act, 1959 provides that a registration certificate is valid for a year and is to be renewed annually on payment of the prescribed fee. Section 21(7) further states that a dealer remains liable to pay the fee for every subsequent year until registration is cancelled, subject to the proviso where the dealer has ceased business and given notice. Rule 24(9) of the Tamil Nadu General Sales Tax Rules, 1959 reflects the same scheme by requiring renewal applications and fee payment while the registration continues until cancellation. On this scheme, default in paying the renewal fee gives the department a right to recover the fee, but it does not automatically convert a registered dealer into an unregistered dealer unless the registration itself has been cancelled.

Conclusion: A dealer cannot be treated as unregistered merely for failure to pay renewal fee when registration has not been cancelled, and penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 was not sustainable.

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