Facts of the Case

The appellant, Parveez Ahmad Baba, challenged the judgment/final order passed by the Writ Court in WP(C) No. 1997/2021. The original writ petition had questioned three principal actions.

First, the appellant challenged the cancellation of his GST registration. The registration granted in his favour was cancelled by the State Taxes Officer, Circle F-Kashmir, with the effective date of cancellation being 16 April 2021.

Second, the appellant challenged the licence dated 15 May 2019 issued by the Designated Officer/State Licensing Authority under the Food Safety and Standards Act, 2006 in respect of Samci Restaurant, Residency Road, Srinagar.

Third, the appellant challenged communication No. FDA/FSSA/SGR/313-316 dated 2 December 2020 issued by the Assistant Commissioner, Food Safety, Department of Drug and Food Control Organisation, J&K, District Srinagar. The communication stated, in substance, that the licence had been issued to the premises of Samci Restaurant and not to respondent No. 5, and proposed insertion of the appellant’s name in the application form as the person in charge of operations and responsible for compliance with licence conditions.

The appellant asserted that he was the sole proprietor of Samci Restaurant, Residency Road, Srinagar, and that he had been carrying on the business under valid licences issued by the concerned authorities from time to time.

During the course of business, the appellant came to know that a licence bearing No. 11019430000178 dated 15 May 2019 had been issued in favour of respondent No. 5 by the Designated Officer/State Licensing Authority under the Food Safety and Standards Act, 2006.

The appellant sought cancellation of that licence. The Food Safety authority disposed of his application by observing that the licence had been issued to the premises of Samci Restaurant and not to the non-applicant. The authority considered it appropriate that the appellant’s name also be inserted in the application form as the person in charge of operations and responsible for compliance with the licence conditions, noting that the parties were real brothers.

Thereafter, the appellant’s GST registration was cancelled. The judgment records that the State Taxes Officer, Circle F-Kashmir, passed the cancellation order dated 20 March 2021, providing 16 April 2021 as the effective date of cancellation.

The appellant then filed WP(C) No. 1997/2021 seeking, among other reliefs, quashing of the impugned food licence, the communication dated 2 December 2020, cancellation of his GST registration, and the GST registration issued in favour of respondent No. 5. He also sought restoration of the Food Safety licence and GST registration in his favour and restraint against respondent No. 5 from interfering with his alleged exclusive operation of Samci Restaurant.

Issues Involved

The principal issues before the Division Bench were:

  1. Whether the Writ Court was justified in restraining the competent Food Safety authority from issuing a licence to either party until the private dispute between the appellant and respondent No. 5 was resolved.
  2. Whether the Writ Court could direct the GST registering authority to proceed on similar lines and withhold registration from both parties pending settlement of their dispute.
  3. Whether the competent statutory authority should instead remain free to independently examine which claimant fulfilled the applicable legal criteria for grant or renewal of the licence.
  4. What should be the consequence of the appellant’s pending application seeking revocation of cancellation of his GST registration.
  5. Whether the High Court should adjudicate the underlying private dispute concerning the unpartitioned property and business concern, or confine itself to examining the legality of the Writ Court judgment.

Petitioner’s / Appellant’s Arguments

The appellant’s case originated from his assertion that he was the sole proprietor of Samci Restaurant, Residency Road, Srinagar, and had been conducting the business under valid licences issued by the competent authorities from time to time.

He challenged the licence dated 15 May 2019 concerning respondent No. 5 and sought restoration of the Food Safety licence and GST registration in his own favour.

Regarding cancellation of GST registration, the record noted that the appellant had approached the Deputy Commissioner (Appeals), Sales Tax Department, Kashmir Division, Srinagar, seeking revocation of the cancellation order.

The appellant’s case in relation to the GST cancellation was that the application for cancellation of the registration of Samci Restaurant had been fraudulently shown as having been filed by him, whereas, according to him, it appeared to be the mischief of an employee-accountant.

The appellant also sought protection against interference by respondent No. 5 in the operation of Samci Restaurant, claiming exclusive proprietary rights over the business.

Respondent’s Arguments

The respondents resisted the writ petition on various grounds.

They denied that any existing document had been transferred into the name of respondent No. 5. Their position was that a fresh licence had been issued to Samci Restaurant after verification of documents, including proof of possession and the title of the property standing in the name of the applicant/respondent No. 5.

The respondents further stated that the appellant had submitted an application dated 4 July 2019 seeking cancellation of the licence on the allegation that his brother had deceitfully obtained the licence under the Food Safety and Standards Act.

Upon that application, a show-cause notice was issued to respondent No. 5. Respondent No. 5 stated that he and the appellant were real brothers and relied upon circumstances including registration under the Shops Establishment Act, an electricity bill in his name, payment of taxes to the Srinagar Municipal Corporation and his claim of physical possession of the restaurant.

The judgment also records that the physical possession of respondent No. 5 was testified to by the Food Safety Officer, Zone-I, through a report dated 1 November 2019.

During arguments before the Division Bench, the learned Advocate General submitted that the appellant himself had filed an application seeking cancellation of the registration of his business unit and that the registration was cancelled accordingly.

It was further argued that, because the cancellation was based upon the appellant’s own request, there was no question of revocation merely on his subsequent request.

The Advocate General also disputed the possibility of fraud by a third person in the online cancellation process, contending that the process could be initiated only upon the proprietor’s request because confidential information was required to confirm the bona fides of the applicant.

Writ Court’s Earlier Findings

The learned Single Judge had held that, so long as the premises proposed to be licensed remained under dispute between the appellant and respondent No. 5, the designated authority under the Food Safety and Standards Act was within its power not to grant or renew a licence in favour of one party to the exclusion of the other.

The Writ Court stated that the parties needed to settle their dispute either amicably or through intervention of the Court.

It further permitted the appellant and respondent No. 5 to apply jointly for grant of licence and observed that, if they fulfilled the requirements of the Act and Regulations, the requisite licence should be granted by the designated authority.

The Writ Court directed that the registering authority under the GST Act should also act on similar lines.

It further held that, until the dispute between the appellant and respondent No. 5 was settled amicably or through a competent Court, neither the designated authority should issue the Food Safety licence nor should GST registration be granted to either party in respect of Samci Restaurant.

Court Order / Findings of the Division Bench

The Division Bench noted that the record disclosed a dual-faceted dispute involving unpartitioned property and the business concern. However, the Court expressly refrained from entering into those private disputes and restricted its examination to the legality of the impugned Writ Court judgment.

The Court observed that the appellant’s licence under the Food Safety and Standards Act had been valid up to 29 January 2018, whereas the licence of respondent No. 5 had been valid until 14 May 2021.

Accordingly, during the pendency of the writ petition, neither the appellant nor respondent No. 5 had a subsisting licence to run the business in question. The matter was therefore open to fresh consideration by the competent authority.

Regarding GST registration, the Court noted that the appellant’s registration stood cancelled with effect from 16 April 2021, while the business unit was, at that stage, registered in the name of respondent No. 5.

The Division Bench held that the proper course was to leave the concerned authority free to determine which of the two parties fulfilled the criteria for holding a licence.

The Court found that the Writ Court had erred by placing a restraint upon the powers of the competent authority to grant a licence in favour of a party satisfying the criteria under the relevant provisions of law.

Accordingly, the Division Bench:

  • set aside paragraphs 27 and 28 of the impugned Writ Court judgment;
  • granted liberty to both the appellant and respondent No. 5 to approach the concerned authority for issuance or renewal of the licence;
  • directed the competent authority, upon being approached, to consider their individual claims under the relevant provisions of law;
  • directed that such claims be decided within one month from receipt of the request;
  • directed the authority not to be influenced by observations made either by the Writ Court or by the Division Bench;
  • directed consideration and disposal of the appellant’s pending application before the Deputy Commissioner (Appeals), Sales Tax Department, Kashmir Division, Srinagar;
  • required that respondent No. 5 be afforded an opportunity of hearing in those proceedings; and
  • directed that Samci Restaurant should not be operated by either party until a licence was granted in favour of the rightful party by the competent authority.

The writ petition and the Letters Patent Appeal were disposed of on those terms.

Important Clarification

The Division Bench did not determine whether the appellant or respondent No. 5 was the lawful owner, sole proprietor or person exclusively entitled to operate Samci Restaurant.

The Court also did not finally determine the private dispute relating to the unpartitioned property or ownership of the business concern.

The judgment is important because it distinguishes between:

a private dispute between competing claimants, and
the independent statutory power of a competent authority to determine eligibility for a licence under applicable law.

The Court held, in effect, that the competent authority should not be prevented from examining individual claims merely because a dispute existed between the parties. The authority was required to assess the claims under the relevant statutory criteria.

Regarding GST registration, the Court did not itself restore the appellant’s cancelled registration. Instead, it directed that the appellant’s pending revocation application be considered and decided by the competent authority after providing an opportunity of hearing to respondent No. 5.

Sections / Legal Provisions Involved

Food Safety and Standards Act, 2006

The dispute involved issuance and renewal of a licence by the Designated Officer/State Licensing Authority under the Food Safety and Standards Act, 2006.

GST Law / GST Registration Provisions

The matter also concerned:

  • cancellation of the appellant’s GST registration;
  • a registration standing in favour of respondent No. 5; and
  • the appellant’s pending application seeking revocation of the cancellation order.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783334571_1180compressed.pdf

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