Form 24-B exemption and effective cancellation notice protected the seller from tax, interest and penalty on sales.

Sales made against Form 24-B declarations remained exempt where the buyer's registration cancellation was not effectively notified to dealers and interim court orders had maintained the status quo. The High Court noted conflicting cancellation dates and held that the statutory cancellation rule required both a written order and publication on the notice board so persons dealing with the registered dealer would have notice. In the absence of reliable proof that the seller knew of an effective cancellation at the time of sale, tax, interest and penalty could not be fastened on the seller for those transactions. The assessment was to be reframed on that basis, while action against the buyer was left open.

---

---

Issues: Whether the petitioner could be fastened with tax, interest and penalty on sales of groundnuts made against Form 24-B declarations to a buyer whose registration had been cancelled, where the cancellation was not effectively brought to the notice of persons dealing with the buyer and interim court orders had operated in the meantime.

Analysis: The petitioner's claim for exemption arose from sales made to a dealer who had furnished Form 24-B declarations, and such sales were treated as exempt under the statutory scheme. The dispute turned on whether the buyer's registration had actually ceased to be operative so as to deny the petitioner the benefit of the exemption. The record showed conflicting dates of cancellation and also showed that civil court orders had maintained the status quo for a period, which made the respondent's stand on cancellation difficult to accept. The governing registration-cancellation rule required not only an order in writing but also publication of the cancellation on the notice board, so that dealers dealing with the registered person would have notice of the change. In the absence of reliable proof that the petitioner was aware of an effective cancellation when the sales were made, the petitioner could not be treated as liable for the demand raised on those sales.

Conclusion: The petitioner was not liable to pay tax, interest or penalty on the sales made to the buyer on the footing adopted by the assessing authority. The assessment was required to be reframed by reconsidering those sales, while leaving it open to the authorities to proceed against the buyer in accordance with law.

---