VAT registration cancellation requires examination of belated returns and tax liability before adverse action

Cancellation of VAT registration could not be sustained merely for non-filing of returns where the statutory basis referred to arrears of tax liability and the assessee had later filed returns. The High Court noted that an ex parte cancellation order had been passed without properly examining the belated returns or the liability position. Because the material on record required reconsideration and the dealer had not been given a fair opportunity, the matter was remanded to the assessing authority for fresh adjudication on merits after considering the returns and tax liability.

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Issues: (i) Whether the cancellation of VAT registration could be sustained merely on the basis of non-filing of returns when the statutory ground referred to arrears of tax liability. (ii) Whether, after taking note of the belatedly filed returns and additional material, the matter required remand for fresh consideration.

Issue (i): Whether the cancellation of VAT registration could be sustained merely on the basis of non-filing of returns when the statutory ground referred to arrears of tax liability.

Analysis: The registration cancellation was made by an ex parte order. The record showed that the assessee had subsequently filed the returns, and the dispute as to whether tax was payable under those returns required consideration. The statutory basis relied upon by the appellant also indicated that cancellation was not to be treated as automatic merely because returns were filed belatedly, without examining the liability position.

Conclusion: The cancellation could not be sustained solely on the ground of non-filing of returns without examining the actual tax liability and the returns filed by the assessee.

Issue (ii): Whether, after taking note of the belatedly filed returns and additional material, the matter required remand for fresh consideration.

Analysis: Since the cancellation order was ex parte and the materials relating to filing of returns and liability had not been properly considered, fairness required an opportunity to the assessee before any adverse action was taken. The proper course was to send the matter back for a fresh decision in accordance with law.

Conclusion: The matter was liable to be remanded to the assessing officer for fresh adjudication after giving due opportunity and considering the returns and liability position.

Final Conclusion: The questions of law were answered in favour of the assessee and the controversy was sent back for reconsideration on merits by the assessing authority.

Ratio Decidendi: Cancellation of registration cannot rest on a purely mechanical or ex parte approach; where belated returns are produced and the tax liability is disputed, the authority must examine the returns and liability before taking adverse action and must afford a fair opportunity to the dealer.

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