Cancellation of sales tax registration cannot rest on mere allegations without proof of bogus sales or misuse of declarations.

Cancellation of registration certificates under the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956 was held unjustified where the department relied only on allegations of bogus sales and misuse of declaration forms. The Court found that the purchasing firms were registered dealers at the relevant time, the ST-XXII declaration forms were not shown to be bogus, and the material on record did not prove that the sales were fictitious. Mere discrepancies in the buyers' records, or an allegation that forms had been issued to others, was insufficient to sustain cancellation under section 7(4). The petitioner could not be penalised for the alleged negligence or irregularities of other dealers, and the cancellation was liable to be quashed.

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Issues: Whether the cancellation of the petitioner's registration certificates under the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956 was justified on the allegation that the petitioner had made bogus sales and misused its registration certificate.

Analysis: The cancellation was founded on the allegation that the sales made against ST-XXII declarations were fictitious and that the registration certificate had been misused. The Court found that the purchasing firms were registered dealers at the relevant time, that the declaration forms and their possession were not shown to be bogus, and that the departmental material did not establish that the sales were not genuine. Mere discrepancy in the purchasing dealers' records, or an allegation that the forms had been issued to others, was held insufficient to conclude that the petitioner had made bogus sales. The Court held that cancellation of registration under section 7(4) could not rest on a mere allegation without proof, and that the petitioner could not be penalised for the alleged negligence or irregularities of other dealers.

Conclusion: The cancellation of the registration certificates was not justified and was liable to be quashed.

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