Rule 51A of Punjab VAT Rules has been added in the Punjab VAT Rules 2005 w.e.f 12-09-2008 to provide for the locking of TIN No of a dealer in certain circumstances.
Locking the TIN no means the temporary stoppage of interstate movement of goods of the concerned person for the purpose of verification or further legal action. Temporary stoppage is done by locking the TIN No of the concerned person in the server of the software used by the VAT Department all over the state including at barriers set up at the various borders of the state.
TIN no of a person can be locked as per rule 51A if
– he fails to pay any tax, penalty or interest payable under the Act or
– fails to furnish a return or returns or annual statement by the prescribed date or
– has filed incomplete or incorrect returns or
– has conducted huge transactions as per Information Collection Centre data available in the computer system but has not filed corresponding returns or
– no business at the declared place is being conducted or
– has failed to comply with the requirements of any notice issued by a designated officer
If a dealer commits default in filling of any of his return u/s 26 of PVAT Act within due date then his TIN No is locked immediately by the computer system of the Excise and Taxation Department in Punjab resulting in stoppage of interstate movement of goods of the person concerned.
Proviso to the rule 51A provides that a notice in form VAT 58 shall be issued immediately after locking of the Tax Identification Number by the designated officer to the person concerned stating therein the action taken and the reasons thereof. Any TIN No whenever is locked or reopened this fact shall be displayed in office notice board.
It is clear from the plain reading of Rule 51-A of PVAT Rules 2005 that after locking the TIN No of a registered person a proper notice needs to be issued stating therein the reasons for the action taken to the person concerned and the action taken regarding opening or locking of TIN No needs to be displayed at the official notice board.
The return defaulter’s TIN Nos are locked immediately after the due date by the department in Punjab. But It is seen that no notice is being issued in VAT form 58 after locking the TIN No of the defaulting dealer in many cases, nor any information is displayed in the office notice board after locking or opening of any TIN No. which is a clear violation of Rule 51A and is also violation of rules of natural justice which are guaranteed under Article 14 of the constitution of India, since the person concerned is denied the reasonable opportunity of being heard. If a person does not know the reasons why his TIN No is locked, then how can he take remedial steps to remove the errors for which his TIN No is locked.
Once a person comes to know about the default for which his TIN No is locked he can very well compile with the default and once the default is completed TIN No. should be unlocked immediately thereafter.
For example if a dealer B’s TIN No is locked due to late filling of his quarterly return by two days from the due date then notice in form VAT 58 of such action taken under rule 51-A must be given to B stating the reason therein about why his TIN No is locked i.e. non filing of his return within due date.
B’s TIN No should be unlocked after filing of the return after two days. Whether any penalty proceedings u/s 54 for late filing of return has been started or not, should not be considered for the purpose of unlocking TIN No of B since the reason for locking the TIN NO was default in filing the return and if it is compiled with, the TIN No should be unlocked. Penalty proceedings are separate proceedings and should be considered separately. If after the final order of levying penalty for late filing of return u/s 54, the penalty is not deposited then TIN No may be locked again for non deposit of penalty but that too should be done after issuing another notice as required under rule 51-A after the locking of TIN No.
If no notice as required under rule 51A is issued after locking the TIN No of a defaulting dealer, It may render the locking of TIN No as illegal as violative of not only rule 51-A but also render the locking of TIN No as an arbitrary action violative of Article 14 of the Constitution of India which guarantees right to equality before law and attacks at arbitrariness in administrative actions.
Locking of TIN No without a notice after the locking also restricts the Fundamental right under Article 19(1)(g) of the constitution which guarantees right to practice any profession, or to carry on any occupation, trade or business by restraining such person from carrying on his business inter-state, since the TIN No is locked without complying with the provisions of rule 51-A i.e. without issuing a notice afterwards.
Thus in view of clear provisions of the law the requisite notice under rule 51-A must be issued, thereby proper and fair opportunity of being heard be provided to the defaulter so that the default if any on the defaulter person’s part against whom action is taken can be compiled with by such person and such clear mandatory provisions must be compiled with.