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Sagar Trading Co v. State Of U.P. & Others - WRIT TAX No. 1236 of 2005 [2005] RD-AH 2310 (2 September 2005)


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Court No.10

Civil Misc. Writ Petition No.1236 of 2005.

Sagar Trading Company


State of U.P. and others.


Hon'ble A.K.Yog,J.

Hon'ble Dilip Gupta,J.

We have heard learned counsel for the petitioner and Sri S.P. Kesarwani, learned counsel appearing on behalf of the Department.

Petitioner is a trader registered under the U.P. Trade Tax Act, 1948 (hereinafter referred to as the ''Act') and the Central Trade Tax Act, 1956. Proceedings were initiated against the petitioner under Section 8C (3) of the Act vide notice purporting to be dated 8-8-2005 (Annexure 1 to the Writ Petition). Under the said notice the petitioner was required to appear on 12.8.2005 and explain as to why an order be not passed requiring him to furnish additional security. The petitioner submitted his reply-dated 12.8.2005 before Respondent no.2 (Annexure 2 to the Writ Petition) through the application and made a prayer that he be afforded an appropriate and sufficient opportunity of hearing by granting 15 days time as he had received the notice only on 11.8.2005.  On 12.8.2005 Respondent no.2 passed an order mentioning therein that on the application filed by the petitioner on 17.8.2005 was noted; that neither the assessee nor his counsel appeared and that an appeal had been filed against the provisional assessment order for the month of April, May June of 2004-05. By the said order the assessee was directed to furnish additional security of  Rs.5.00 lacs in the form of a bank guarantee for 5 years on or before 29 August, 2005 and in case of failure the proceedings for cancellation of registration could be initiated.

The contention of the petitioner is that reasonable opportunity had not been provided to the petitioner as the Assistant Commissioner on 12.8.2005 had fixed 17.8.2005 but he passed the order on 12.8.2005 itself imposing additional security and in support of his contention, the learned counsel for the petitioner referred to the reported decision of this Court in the case of M/s Rajeshwari Traders Versus Trade Tax Officer, Sector-14, Agra, 1998 U.P.T.C 206 (DB).

Relevant paragraphs 5 & 6 of the said judgment are reproduced below-

"5.It is true that orders passed under Section 8-C demanding the additional security and the cancellation of registration under Section 8-A(1-B) are appealable but that by itself on the facts of the present case, in our opinion is not a sufficient ground for which the petitioner should be deprived of the relief sought for in this writ petition.  The cancellation of registration is a serious matter which may adversely affect the petitioner to carry on the business because of the penal provisions in that behalf under the U.P. Trade Tax Act. Likewise the additional amount of security can also be not demanded at the pleasure of the concerned authority. It can only be done for adequate reasons to be recorded and if the case falls within the ambit of clauses (a) to (c) set out in sub-section (2) of Section 8-C of the Act that too after providing a reasonable opportunity of being heard to the concerned person and this also is an elementary principle of natural justice.

6. On the material that has been placed before us in the record of this writ petition we are fully satisfied that the petitioner has not been given a fair deal in the matter.  No opportunity was given to him before the additional security was demanded and his objections have not been dealt with at all. In these circumstances it cannot be said that the petitioner was in default in furnishing the additional security on the basis of which its registration could have been cancelled."

Reliance has also been placed by the learned counsel for the petitioner in the case of Aditya Trading Company, Ghaxiabad Versus State of U.P. and another, reported in 1999 U.P.T.C. 1332 (DB).  

Relevant extract of the said decision is reproduced below-

" By this petition under Article 226 of the Constitution of India, the petitioner is aggrieved of a notice-cum-order dated 30th October, 1999 by which the petitioner, a dealer under the U.P. Trade Tax Act has been directed to furnish additional security in the form of a bank guarantee for Rs.20,00,000.

2. We have heard Sri Kunwar Saxena, learned Counsel for the petitioner and Sri R.D. Gupta, learned Standing Counsel.  No counter affidavit was proposed to be filed and the petitioner has been heard finally and is disposed of on merits.

3. The petitioner is a registered dealer and has already furnished security as required under Section 8-C(1) of the Act.  By the impugned notice-cum-order, the petitioner has been directed to file additional security in the sum of Rs. 20 lacs in the forms of a bank guarantee.  Such an order could have been passed in terms of sub-section (2) of Section 8-C where it appears necessary to do so for the proper realization of any tax, penalty or other sums due or payable under the Act or for the proper custody or use of the forms etc. The order demanding additional security adversely effects a dealer and it is necessary before passing an order demanding additional security to give the dealer an opportunity of hearing. That is why the impugned order purports to be a show-cause notice as well though in fact it does not give any opportunity to the petitioner to show cause and a final order had been passed. The order mentions that on the examination of the records, it has come to notice that the dealer was claiming that it was selling iron scrap on which tax had already been paid and that on the verification of the dealers so-called tax paid on the purchases for the years 1997-98 and 1998-99 the result of enquiry by the special investigation branch made out a case of tax evasion. Thus, the notice is extremely vague and does not contain any facts brought out from the record or from the investigation against which the dealer may make an effective representation.

4. The notice-cum-order also does not mention the amount of security already furnished. The extent of the existing or probable tax liability and how the demand of a security of Rs.20 lacs and that too in the form of a bank guarantee could be justified. In our view, the order-cum-notice is illegal and cannot be sustained.

5. The writ petition is allowed and the impugned order-cum-notice dated 30th October, 1999 is hereby quashed. It will be permissible to the assessing officer to proceed afresh, in accordance with law, if necessary."

The facts reveal that reasonable opportunity had not been afforded to the petitioner before passing the order imposing additional security. The Assistant Commissioner had on 12.8.2005 adjourned the matter to 17.8.2005 but surprisingly he passed the order on 12.8.2005 itself. This apart, we find that the Assistant Commissioner has not even entered the dates himself on any of the relevant notice/orders (reference may be made to the notice under Section 8C(3) dated 8.8.2005 and the order 12.8.2005) copies of which have been filed as Annexure 1 and 3 to the Writ Petition.

It will therefore be expedient, in the facts and circumstances of the case, particularly when the Assistant Commissioner had adjourned the matter to 17.8.2005 on 12.8.2005 but still passed the order requiring additional security on 12th of August itself, and when even the dates have not been mentioned that the matter be decided by competent authority, other than Respondent no.3.

We, therefore, set aside the order dated 12.8.2005, passed under Section 8C(2) of the Act (Annexure 3 to the Writ Petition) and the impugned notices dated 23.8.2005 (letter no.1657 and 1658-both issued by Santosh Kumar, Assistant Commissioner, Trade Tax) (Annexure 12 & 13 of the Writ Petition). We further direct the Respondent no.1 and/or Commissioner, Trade Tax, Lucknow or the Additional Commissioner, Trade Tax, Kanpur (whosoever is competent) to assign the case to some other officer for being decided after giving a reasonable opportunity to the petitioner.  

Learned Counsel appearing for the petitioner is directed to communicate a certified copy of this order to the concerned competent authority within two weeks from today otherwise the respondents will not be obliged to give effect this judgment.

The Writ Petition stands allowed subject to the above directions and observations.

No order as to costs.




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