STATE OF RAJASTHAN Vs. COMBINED TRADERS

JUDGEMENT

(1.) The first appellant is the State of Rajasthan. A writ petition was filed before the High Court of Judicature for Rajasthan by the respondent-Combined Traders invoking jurisdiction of the High Court under Article 226 of the Constitution of India for challenging the validity of subrule (20) of rule 17 of the Central Sales Tax (Rajasthan) Rules, 1957 (for short, 'the Rajasthan Rules'). Sub-rule (20) of Rule 17 was incorporated by way of an amendment with effect from 14/7/2014. Sub-rule (20) of Rule 17 provided that where any dealer had generated declaration forms or certificates by misrepresentation of fact or by fraud or in contravention of the provisions of the Central Sales Tax Act, 1956 (for short, 'the CST Act') and rules made thereunder, the assessing authority or any other authority authorised by the Commissioner after affording such dealer an opportunity of being heard, is empowered to cancel such declaration forms or certificates. By the impugned judgment, the High Court held that the first appellant-State had no rule-making power to frame a rule providing for the cancellation of validly issued declarations/forms. The High Court held that sub-rule (20) of Rule 17 of the Rajasthan Rules was ultra vires Ss. 8(4), 13(1)(d), 13(3) and 13(4)(e) of the CST Act.

(2.) During 2017-18, the respondent sold certain goods to M/s. H.G. International and M/s. Saraswati Enterprises (originally respondent Nos.2 and 3, whose names were deleted from the array of parties) against Form C amounting to Rs.4.89 crores and Rs.7.20 crores respectively. Goods were sold in the first quarter of the year 2017-18.

(3.) The revenue authorities inspected the places of business of M/s. H.G. International and M/s. Saraswati Enterprises. On inspection, it was revealed that no business activity was carried out at the places and registration of M/s. H.G. International and M/s. Saraswati Enterprises was completely bogus. Notices were issued to the respondent for the cancellation of Form C. To claim reduced rates of taxes as per Sec. 8(1) of the CST Act, the respondent had furnished Form C as required by Sec. 8(4) of the CST Act. A single Form C is required to be submitted for a quarter as provided in the second proviso to sub-rule (1) of Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 (for short, 'the Central Registration Rules').