TAX LAW PROJECT ON

REGISTRATION OF DEALERS

Submitted to:

MOHAMMAD ENAM FIRDOS

FACULTY OF LAW

Submitted by:

SUSHANT NAIN

SECTION - A

Semester- VII, B.A. LLB. (Hons.)

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 Acknowledgement

I would like to express my special thanks of gratitude

to my teacher MOHAMMAD ENAM FIRDOS who gave
me the golden opportunity to do this wonderful
project, which also helped me in doing a lot of
Research and I came to know about so many new
things I am really thankful to him.

SUSHANT

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 CONTENTS

1. Definition
2. Registration of Dealer
3. Types of Registration
4. Procedure to be followed by the Dealer
5. Procedure to be followed by the Authority
6. Security from dealers
7. Cancellation of certificate of Registration
8. Exempted Dealer

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The term ‘dealer’ is defined under Section 2(b) of Central
Sales Tax, 1956 (‘Act’ for short) as any person who
carries on (whether regularly or otherwise) the business of
buying, selling, supplying or distributing goods directly or
indirectly, for cash, or for deferred payment, or for
commission, remuneration or other valuable
consideration, and includes-
 A Local Authority, a body corporate, a company, any
co-operative society, or other society, club, Firm,
Hindu Undivided Family or other association of
persons which carries on such business;
 A factor, broker, commission agent, del credere
agent, or any other mercantile agent, by whatever
name called and whether of the same description as
hereinbefore mentioned or not, who carries on the
business of buying, selling, supplying or distributing
goods, belonging to any principal whether disclosed
or not; and
 An Auctioneer who caries on the business of selling
or auctioning goods belonging to any principal,
whether disclosed or not and whether the offer of the
intending purchaser is accepted by him or by any
principal or a nominee of the principal.
Section 6(1-A) of the Act provides that a dealer shall be
liable to pay tax under this Act on a sale of any goods
effected by him in the course of inter-State trade or

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commerce notwithstanding that no tax would have been
leviable, whether on the seller or the purchaser, under the
Sales Tax of the appropriate State if that sale had taken
place inside that State.
Registration of Dealer
 Every dealer liable to pay tax under this Act shall
make an application for registration to such authority
in the appropriate State as the Central Government
may, by general or special order, specify and every
such application shall contain such particulars as may
be prescribed;
 Any dealer liable to pay tax under the Sales Tax Law
of the appropriate State or where there is no such law
in force in the appropriate State or any part thereof,
any dealer having a place of business in that State or
part, may apply for registration to the authority even
though he is not liable to pay tax. Such application
shall contain such particulars as may be prescribed;
 The application for registration shall be made by a
dealer in Form A. The form shall be-
 Signed by the proprietor of the business, or, in
the case of a Firm, by one of its Partners, or, in
the case of a Hindu undivided family, by the
Karta, or Manager of the family, or in the case
of a company by a director, managing agent or
principal officer thereof, or, in the case of a
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 Government, by an Officer duly authorized by
that Government, or, in the case of any other
association of individuals, by principal officer
managing the business; and
 Verified in the manner provided in the said
Form A;
 Where a dealer has more than one place of business
within a State, he shall make a single application in
respect of all such places, name in such application
one of such places as the principal place of business
for the purpose of the rules and submit such
application specified in respect of the principal place
of business so named;
 Any place so named shall not in any case be different
from the place, if any, declared by him to be the
principal place of business, by whatever named
called, under the general sales tax law of the State;
 The application shall not be made later than 30 days
from the date on which the dealer becomes liable to
pay the tax;
 A fee of Rs.25/- shall be payable in respect of
registration by means of court fee stamps affixed on
the application;
 Where the authority is satisfied, after making such
enquiry as it thinks necessary, that the particulars
contained in the application are correct and complete
and the fee has been paid it shall register the dealer
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 and grant him a certificate of registration in Form B
and also a copy of such certificate for every place of
business within the State other than principal place of
business mentioned therein;
 The certificate of registration granted shall be kept at
the principal place of business mentioned in such
certificate and a copy of such certificate shall be kept
at every place of business within the State other than
the principal place of business, mentioned in such
certificate.
Registration of dealers
Every dealer carrying on the business of sale or purchase
in the course of inter-State trade or commerce has to get
his name and other particulars registered with the Sales-
Tax Officer of the appropriate State. It is known as
registration of dealers. After studying this chapter we will
be able to understand-
(1) Advantages and types of registration.
(2) Procedure of registration.
Advantages of Registration
(1) A registered dealer is liable to pay tax at a lower
rate as compared to an unregistered dealer.
(2) When a registered dealer sells goods in the course
of inter-State trade or commerce, he can collect tax from
the buyers.
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Types of Registration
The registration is of two types under this Act:

(1) Compulsory Registration [Sec. 7(1)]

Every dealer carrying on the business of sale or purchase
in the course of inter-State trade or commerce has to get
himself compulsorily registered under this Act
irrespective of the amount of turnover.

(2) Voluntary Registration [Sec. 7(2)]

In the following cases a dealer may get himself registered
voluntarily:

(a) Where a dealer does not carry on inter-State trade or

commerce, but he is a registered dealer under a State
sales -tax Law;

(b) Where there is no State Sales-tax Law in a State or

any part thereof, any dealer having a place of business in
that State or part as the case may;

(c) Where a dealer deals in exempted goods in a State or

a refund or rebate of tax in admissible in respect thereof.

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Procedure for Registration to be followed by the
dealer
An application for registration shall be made by a dealer
to the appropriate authority in Form ‘A’. Such application
shall be verified in the manner provided in the Form ‘A’
and shall be signed by:
(i) In case of proprietary business – Proprietor.
(ii) In case of firm – one of its partners.
(iii) In case of a H.U.F. – the Karta or manager of the
family.
(iv) In case of a company – director or Principal officer
thereof.
(v) In case of Government – duly authorized officer.
(vi) In case of association of individuals – the Principle
officer managing the business.
Where a dealer has more than one place of business
within a State, he shall choose one of such place as the
principle place of business and submit the application for
registration to the notified authority specified in respect of
the principle place of business so named. If there is a
registered dealer under the Ceneral Sales-tax law of the
State, the principle place of business must be the same for
state Sales-tax and Central Sales-tax. It is important to
note that if a dealer has business places in more than one
State, he has to apply for registration under the C.S.T. Act
separately for each State.
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Procedure of Registration to be followed by the
Authority
After receiving a application for registration the authority
shall make such enquiry as it thinks necessary that the
particulars contained in the application are correct and
complete and the registration fee has been paid. Further,
before granting a certificate of registration the authority
may ask for a security in cash or in the form of personal
bond to ensure proper realization of Sales-tax payable and
the proper use and custody of the forms (Form C, D, E-I
and E-II) issued to him under the Act. It is not necessary
for the assessing authority to ask for security from every
applicant. But where it appears necessary the authority
shall pass an order in writing and for reasons to be
recorded therein. The dealer shall furnish in the
prescribed manner and within such time as may be
specified in the order such security as may be so
specified.

Grant of Registration Certificate [Sec. 7(3)]

If the authority is satisfied it shall register the dealer and
grant him a certificate of registration in Form ‘B’ and also
a copy of such certificate for every place of business
within the State other than the principle place of business.
The authority shall specify in the certificate that it shall

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be effective from the date of application. The certificate
of registration shall be kept at the principle place of
business and a copy of such certificate shall be kept at
every place of business within the State.
Where the application for registration was defective and
the dealer rectified the defects. when required to do so,
the certificate of registration shall be effective from the
date of the application.

Security from dealers

Where it appears necessary to the authority granting
a certificate of registration that for the proper realization
of tax payable under this Act or for proper custody and
use of the forms (Form C,D,E-I and E-II) issued to the
dealer, they may, after providing an opportunity of being
heard to the dealer, pass on order in writing and for
reasons to be recorded therein to furnish security or
additional security as the case may be.

Quantum of Security
The amount of security or additional security in the
aggregate shall not exceed the tax payable on the
estimated turnover of such dealer for the year in which
security or additional security is required to be furnished.

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Forfeiture of security
(1) Sub-sec (3C)- where the security furnished by a dealer
under sub-section (2A) or subsection (3A) is in the form
of a surety bond and the surety becomes insolvent or dies,
the dealer shall, within thirty days of the occurrence of
any of the aforesaid events, inform the authority granting
the certificate of registration and shall within ninety days
of such occurrence furnish a fresh surety bond or furnish
in the prescribed manner other security for the amount of
the bond. As per sub-sec(3D) the authority granting the
certificate of registration may by order and for good and
sufficient cause forfeit the whole or any part of the
security furnished by a dealer, -
(a) for realising any amount of tax or penalty payable by
the dealer;
(b) if the dealer is found to have misused any of the forms
referred to in subsection (2A) or to have failed to keep
them in proper custody .
Provided that no order shall be passed under this sub-
section without giving the dealer an opportunity of being
heard. As per sub-sec (3E) where by reason of an order
under sub-section (3D), the security furnished by any
dealer is rendered insufficient, he shall make up the
deficiency in such manner and within such time as may be
prescribed.

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(2) Sub-sec (3F)- The authority issuing the forms referred
to in sub-section (2A) may refuse to issue such forms to a
dealer who has failed to comply with an order under that
subsection or sub-section (3A), or with the provisions of
sub-section (3C) or sub-section (3E), until the dealer has
complied with such order or such provisions, as the case
may be.
(3) Sub-sec (3G)- The authority granting a certificate of
registration may, on application by the dealer to whom it
has been granted, order the refund of any amount or part
thereof deposited by the dealer by way of security under
this section, if it is not required for the purposes of this
Act.
(4) Sub-sec (3H)- Any person aggrieved by an order
passed under sub-section (2A), subsection (3A), sub-
section (3D) or sub-section (3G) may, within thirty days
of the service of the order on him, but after furnishing the
security, prefer, in such form and manner as may be
prescribed, an appeal against such order to such authority
(hereafter in this section referred to as the “appellate
authority”) as may be prescribed:
Provided that the appellate authority may, for sufficient
cause, permit such person to present the appeal, -
(a) after the expiry of the said period of thirty days; or
(b) without furnishing the whole or any part of such
security.

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(5) Sub-sec(3I)- The procedure to be followed in hearing
any appeal under sub-section (3H),
and the fees payable in respect of such appeals shall be
such as may be prescribed. As per Sub-sec(3J) the order
passed by the appellate authority in any appeal under
subsection (3H) shall be final.
Death of Security
Where the security furnished by a dealer is in the form
of surety bond and the surety becomes insolvent or dies,
the dealer shall within 30 days of the occurrence of any of
the aforesaid events, inform the authority and shall within
90 days of such occurrence furnish a fresh surety bond or
furnish other security for the amount of the bond.
Forfeiture of security
In the following cases the whole or any part of the
security may be forfeited:
(i) For realizing any amount of tax or penalty payable by
the dealer;
(ii) Of the dealer is found to have misused any of the
forms issued to him or to have failed to keep them in
proper custody.
Where on account of forfeiture of security or a part of it,
the security is rendered insufficient, the dealer shall make
up the deficiency in such manner and within such time as
may be prescribed. The authority may refuse to issue the
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forms to a dealer who has failed to submit the security
[u/s 7(2-A)] or additional security [u/s 7(3-A)] or has
failed to inform about insolvency or death of the surety
and to furnish a fresh surety bond [u/s 7(3-C] or has failed
to make up the deficiency of the security [u/s 7-E)], until
the dealer has complied with such orders or such
provisions as the case may be.
Refund of Security
The authority may on an application by the dealer, order
the refund of any amount or part thereof deposited by the
dealer by way of security, if it is not required for the
purposes of this Act.
Appeal
Any person aggrieved by an order passed relation to
security, additional security, forfeiture of security or
refund of security may, within 30 days of the service of
the order on him, prefer any appeal against such order to
the appellate authority. The appellate authority may, for
sufficient cause, permit such person to present the appeal
after the expiry of appeal mentioned above shall be final.
Rejection of application
When the authority is not satisfied that the particulars
contained in the application are correct and complete; or
where the required fees has not been paid or that dealer
has failed to furnish the required security u/s 7(2A), the

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authority shall reject the application after providing the
applicant an opportunity of being heard or after providing
an opportunity to correct or complete the application or to
pay the fees or security as the case may be.
Amendment of Certificate of Registration
[Sec. 7(4) (a)]
A certificate of registration may be amended:
(a) on the application of the dealer; or
(b) when authority deems necessary.
Where a dealer desires the certificate of registration to be
amended, he shall submit an application for this purpose
to the authority setting out the specific matters in respect
of which he desires such amendment and the reasons
thereof. He shall also submit the certificate of registration
and the copies thereof, if any, with the application. If the
authority is satisfied by the reasons given for the
amendment, make such amendment as it think necessary,
in the certification of registration and the copies thereof
granted to him. The amendment shall be effective from
the date of application.
Where the authority is satisfied that a registered dealer
has changed the name or place or nature of his business or
the class or classes of goods in which he carries on
business or for any other reason (where the dealer has not
applied for the amendment in the certificate of
registration) the authority after due notice and after
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providing an opportunity of being heard to the dealer may
amend the certificate of registration.
Cancellation of certificate of Registration
A certificate of registration may be cancelled:
(a) When authority deems necessary [Sec7(4) (b)]
(b) On the application of the dealer [Sec 7(5)]
Where the authority granting the certificate of registration
is satisfied after providing an opportunity of being heard
to the dealer that:
(i) The dealer has ceased to carry on business; or
(ii) He has ceased to exist; or
(iii) He has failed, without sufficient cause, to furnish
the security or additional security as required of him; or
(iv) He has failed to inform about the insolvency or
death of the surety or failed to furnish a fresh surety
bond; or
(v) He has failed to make up the deficiency of the
security which has become insufficient on account of
forfeiture of it; or
(vi) He has failed to pay tax or penalty payable under
this Act; or
(vii) Where the dealer is registered under the C.S.T.
Act voluntarily, he has ceased to be liable to pay tax
under the Sales-tax of the State; or

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(viii) For any other sufficient reason.
May cancel the certificate of registration. If the
certificate of registration is cancelled, the dealer shall
forthwith surrender to the authority the certificate of
registration and the copies thereof granted to him.
A registered dealer, who is not liable to pay tax
under this Act, may apply for cancellation of his
registration, not later than six months before the end for a
year. He should enclose the registration certificate and
copies thereof, if any, with the application. If the authority
is satisfied that the dealer is not liable to pay tax under
this Act, they shall cancel the registration and such
cancellation shall take effect from the end of the year.
The certificate of registration can be amended or
cancelled prospectively and not retrospectively.

Exempted Dealer
In order to discuss whether exempt dealer be registered
under section 7(2) of CST Act, it will be imperative to go
through the provisions
of the central sales Act, 1956. The relevant provision of
the central sales Tax Act, 1956 is as follow-
Section 7(2)- Any dealer liable to pay tax under the sales
tax law of the appropriate state, or where there is no such
law in force in the
appropriate state or any part thereof, any dealer having a
place of business in that state or part, as the case may be,
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may, notwithstanding that he is not liable to pay tax under
this act, apply for registration under this Act to the
authority referred to in sub-section (1), and
every such application shall contain such particulars as
may be prescribed. Explanation:- For the purpose of this
sub- section, a dealer shall be deemed to be liable to pay
tax under the sales tax law of the appropriate state
notwithstanding that under such law a sales or purchase
made by him is exempt from tax or a refund or rebate of
tax is admissible is respect thereof. From the perusal of
section 7(2) of the act it is evident above provision it is
crystal clear that section 7(2) deals with Voluntary
Registration. Any dealer liable to pay tax under the
Uttarakhand Value Added Tax Act, 2005, may
notwithstanding that he is not liable to
pay tax under Central Sales Tax Act as he does not make
any inter- state sale, apply for registration voluntarily in
the following cases :-
(I) He is registered under local sales tax act but is not
liable to pay tax under the Central Sales Tax Act.
(ii) He deals in taxable goods in state.
(iii) He purchases goods from other state but sales are
made within the state only.
From the perusal of explanation given to section 7 (2)
above it is evident that a dealer shall be deemed to be
liable to pay tax under the sales tax law of the appropriate
state notwithstanding that under such law a sales or
purchase made by him is exempt. Meaning thereby that
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even if the transaction of sales or purchase of a dealer is
exempt under schedule IV even then he may apply for
registration voluntarily. The aforesaid view has also been
affirmed in a judgment of The honorable Supreme Court.
Rendered in the case of Commissioner of sales tax v/s
Pine chemicals Ltd.(1995) 96 STC 355 (SC) 58: !995
NTN (6) 19 (SC). By government order no.159 DT. 26-3-
1971 issued under the J&K general sales tax act, 1962
exemption from tax was granted under the act to the
goods, the sale or purchase of which is claimed to be
exempt from tax, are manufactured by a large or medium
scale industry and the said goods are manufactured and
sold within five years from the date the said industrial unit
has gone into production. The question is whether
exemption under the Central Act is applicable to the case.
Held: The idea behind sub-s. (2a) of s.8 of the Central
Sales Tax Act is to exempt the sale/ purchase of such
goods is exempt generally under the State sales tax. Sub-s
(2A) requires specifically that such exemption must be a
general exemption and not an exemption operative in
specified circumstances or under specified conditions.
Goods are exempt from tax only when they are
manufactured in a large or medium scale industrial unit
within five years of its commencement of production and
sold within the said period, I.e., in certain specified
circumstances alone. The exemption is not a general one
but a conditional one. The exemption is not with reference
to goods or a class or category of goods but with
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reference to the industrial unit producing them and their
manufacture and sale within a particuing period. For the
purpose of the government order, the nature, class or
category of goods in irrelevant; it may be any goods. It is
concerned only with the industrial unit producing them
and the period within which they are manufactured and
sold. So long as it is (I) a large or medium scale industry
and (ii) it manufactures and sells goods within the five
years of its going into production, the sale of such goods
is exempt irrespective of the nature or classification of
goods. Similar goods may be manufactured by another
unit but if it does not satisfy the above two requirements,
the goods manufactured and sold by it would not be
entitled to exemption from tax. Indeed, the goods
manufactured by that very unit would not be eligible for
exemption if they are manufactured after the expiry of
five years from the date it goes into production and/or
sells them beyond the said period. The period of
exemption may also vary from unit to unit depending on
the date of commencement of production in each unit.
The exemption granted under the aforesaid government
order does not satisfy the requirements of s.
8(2A).Registration under sub- section (2) is, however,
voluntary. A dealer who is liable to pay tax under the
general sales tax law of his state, may apply for
registration even under the Central Act, even
though he is not liable to pay tax there under, and an
application for registration by such a dealer may be
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moved at any time.Now coming to Doctrine of unjust
enrichment which means the unjust obtaining money
benefits at the expense of another. In my opinion by
virtue of registering exempt dealer u/s 7(2) of CST Act,
he will be unjust enriched because he is already exempt
with in the state and he will be also enjoying partial
exemption on purchases from outside the state.Another
famous legal maxim is Nemo debet ex alieno damno
lucrari- no one should be enriched out of the loss or
damage sustained by another.Therefore, as a sequel to the
above discussion, it is clear that if a dealer is selling the
goods which are exempt as per schedule I of The
Uttarakhand Value Added Tax Act, 2005, he legally can
not be registered under section 7 (2) of The Central Sales
Tax Act, 1956. Similarly if a dealer is manufacturing the
goods which are exempt under schedule I of The
Uttarakhand Value Added Tax Act, 2005 even then he
legally cannot be registered under section 7 (2) of the
Central Sales Tax Act, 1956. Yourself Uttarakhand Vat
Department has issued and is still issuing CST
registrationu/s 7(2) to exempt dealers such as cattle feed
manufactures , electricity producers, flour mills etc. By
virtue of issuance of CST registration, the dealers are
issuing Form C against the purchases of out of State
resulting into loss of central sales tax to the central
government upto the tune of 100s of crores of rupees.
Therefore Honorable Minister kindly take necessary
action in interest of the central government revenue .
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 REFERENCES

1.V. S. Datey: Indirect Taxes Law and Practice,

Taxmann Publications, New Delhi.
2.https://www.taxmanagementindia.com
3.http://www.legalserviceindia.com

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