Premature cancellation of composition tax permission is unsustainable when the underlying assessment remains pending.

Cancellation of composition permission under the Gujarat Value Added Tax Act, 2003, before assessment on alleged suppressed sales was finally concluded, was held premature and unsustainable. The Tribunal found that withdrawing the composition option while the assessment proceedings were still pending was unfair and unreasonable because the dealer's tax liability had not yet been finally determined. The High Court agreed, upheld quashing of the cancellation order, and restored the composition permission, while leaving the authority free to take a fresh decision after the assessment proceedings were concluded in accordance with law. The revenue appeal failed for want of any substantial question of law.

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Issues: Whether the cancellation of permission for composition tax under Section 14D of the Gujarat Value Added Tax Act, 2003, before the assessment on alleged suppressed sales was finally determined, was valid and whether any substantial question of law arose.

Analysis: The cancellation order was founded on alleged suppression of sales, but the assessment orders dealing with that very allegation were passed only later. The composition permission was thus withdrawn before the liability issue was conclusively determined. The Tribunal found such pre-emptive cancellation to be unfair, unreasonable, and legally unsustainable, especially when the assessment proceedings were still pending and the dealer's tax liability had not yet been finally decided. The High Court agreed with that view and held that the Tribunal had correctly quashed the cancellation order and restored the composition permission, while leaving it open to the authority to take a fresh decision after the assessment proceedings were concluded in accordance with law.

Conclusion: The cancellation of composition permission before final assessment on the alleged suppression issue was not sustained, and the revenue appeal failed for want of any substantial question of law.

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