Cancellation of registration takes effect only as prescribed by the rules, preserving input tax credit for the transition period.

Under the KVAT framework, cancellation of registration took effect only in the manner and from the date prescribed by the rules, namely service of the cancellation order on the dealer or publication of the cancellation, whichever was later. A closure letter could not by itself advance the effective date of cancellation to an earlier period unsupported by that statutory process. On that basis, the dealer was treated as registered during the transition period, and input tax credit for purchases made in that interval was upheld.

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Issues: Whether the assessee was entitled to input tax credit for purchases made during the transition period when the dealer's registration was treated as cancelled only from a later effective date, and whether the cancellation of registration could take effect from the date mentioned in the closure letter despite the statutory procedure for service and publication.

Analysis: The entitlement to input tax credit turned on the legal effect of cancellation of registration under the KVAT framework. The cancellation process under the rules required service of the order on the dealer or publication of the cancellation, and the cancellation became effective only from the later of those steps. The closure letter dated 20.2.2014 could not, by itself, make the cancellation operative from 31.12.2013. On the facts, there was no adequate basis to treat the dealer as unregistered from the earlier date, and the Tribunal's finding that the dealer was entitled to input tax credit for the intervening period was sustained.

Conclusion: The assessee was held entitled to input tax credit for the relevant transition period, and the revision was rejected.

Final Conclusion: The statutory procedure governing cancellation of registration controlled the effective date, and the Tribunal's allowance of input tax credit was left undisturbed.

Ratio Decidendi: Cancellation of registration becomes effective only in the manner and from the point of time prescribed by the rules, and input tax credit cannot be denied on the basis of an earlier date of closure unsupported by that statutory process.

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