Cross-examination and natural justice bar cancellation of sales tax registration based on untested third-party statements.

Cancellation of a registration certificate under section 26(10)(a) of the West Bengal Sales Tax Act, 1994 is permissible only where the registered business has been discontinued. Where the authority relies on a material third-party statement to infer discontinuance, the dealer must be given an opportunity to cross-examine that witness; denial of cross-examination breaches natural justice and vitiates the proceeding. The oral statement, inspection report, and surrounding materials were found insufficient to support a definite finding of discontinuance, and the cancellation was therefore invalid, with restoration of the registration certificate ordered from 10 July 2002.

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Issues: Whether the cancellation of the registration certificate under section 26(10) of the West Bengal Sales Tax Act, 1994 was lawful, particularly when the dealer was not afforded an opportunity to cross-examine the witness whose statement was relied upon and when the authority proceeded on an inference of discontinuance of business.

Analysis: Section 26(10)(a) permits cancellation of registration only where the registered business has been discontinued. The authority relied materially on the statement of a third person to infer that the petitioner had ceased business, but no opportunity was given to test that statement by cross-examination. Where a material statement is used against a party, denial of cross-examination amounts to breach of natural justice and vitiates the proceeding. The surrounding materials, including the continued receipt of accounts and the absence of a proper call for relevant documents, did not justify a definite finding of discontinuance. Reliance solely on the oral statement and the inspection report was held to be insufficient and the procedure followed was found to be perfunctory and unjustified.

Conclusion: The cancellation order was invalid and liable to be set aside. The registration certificate was directed to be restored with effect from July 10, 2002.

Ratio Decidendi: A registration certificate cannot be cancelled on the basis of a material third-party statement without affording cross-examination where such statement is relied upon to establish discontinuance of business.

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