The cancellation of a registration certificate of a dealer cannot be given retrospective operation and a selling dealer is entitled to the deduction for sales to a registered dealer even if the registration certificate of the purchasing dealer is subsequently cancelled.

R. S. Narula, J.

1. The petitioners were registered dealers under the Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi and as amended upto 1958 (here in after called the Act ). Returns of their taxable turnover for the four quarters of the financial year 1957-58 were filed by them. In working out the taxable turnover, the petitioners had deducted sales worth Rs.1,05, 530/87 np. in favour of Messrs. L. C. Trading Company (Registration No.134 99 dated 26-8-1953) under sec. 5 (2) (b) (ii) of the Act. The claim for the above-said deductions was supported by the prescribed declarations of Messrs. L. C. Trading Company.

2. By order dated October 30, 1958 (annexure A (respondent No.4, the Sales Tax Officer, disallowed the petitioners claim for the deductions in question on the ground that the registration certificate Messrs L. C. Trading Company had been cancelled by order dated 25-8-1958 (annexure R.2) with retrospective effect from 16th March, 1956 under sec. 7 (6) (a) of the Act. I need not refer to deductions regarding sales to Messrs Makan and Company which were also disallowed by the same order as the learned counsel for the petitioners has, at the hearing of the writ petition, expressly withdrawn the challenge against that part of the order and has stated that he does not want to impugn the same though that was also sought to be questioned in this writ petition which was filed on 2-12-1958 and admitted by the Motion Bench (Bishan Narain and S. B. Kapoor, JJ.) on 3-12-1958.

3. By way of return to the rule issued in this case the respondents have filed an affidavit dated 15-4-1959 of Shri Jagan Nath, Sales Tax Officer, Delhi. By way of preliminary objections it has been stated there in that the petitioners have not exhausted their remedies by way of appeal and revision under the Act before approaching this Court and that Moti Sagar has no locua stundi to move this Court on behalf of Messrs A. D. M. Stores. On the merits the impugned part of the order, annexure A, is supported on the solitary ground that for the period to which the turnover of the petitioners relates, the registration certificate of Messrs L. C. Trading Company had been cancelled by a subsequent order. It is averred in the written statement that the petitioners claimed the deduction only on the basis of the declarations signed by the purchasing dealer and that the registration having been cancelled the declarations were of no avail

4. At the hearing of the writ petition it has been argued by Mr. A. C. Chawla, Advocate that the registration of a dealer cannot be cancelled with retrospective effect and that in any case a selling dealer, who has not charged sales tax from a registered purchasing dealer cannot be penalised by a subsequent cancellation of the registration of the purchasing dealer with retrospective effect. Sec.4 of the Act is the charging section which lays down that every dealer whose gross turnover exceeds the taxable quantum shall be liable to pay tax under the Act on all sales effected by him after the notified date; Sub-section (2) of sec. 4 provides for payment of sales tax under the Act by person to whom sub-section (1) of that section does not apply. The amount of tax depends on the taxable turnover and on the nature of the goods sold or purchased. Taxable turnover is defined in sub-section (2) of the Act as the dealers gross turnover during any period which remains after deducting therefrom, amongst other things, sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer provided a declaration duly filled up and signed by the registered dealer to whom goods are sold and containing prescribed particulars on a prescribed form obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods.

5. It is not disputed in this case that the goods in respect of which deduction is claimed, were of the class or classes specified