Calcutta High Court
Government Medical Stores Depot vs State Of West Bengal And Ors. on 4 February, 2003
Equivalent citations: (2003)2CALLT114(HC)
JUDGMENT M.H.S. Ansari, J.
1. Petitioner, in the instant case, is a Government Medical Store and has questioned the power and authority of the State of West Bengal to levy or collect sales tax or making any assessments in relation thereto,
2. In the instant writ application we are concerned with the levy of the Central Sales Tax. Petitioner has raised the question of the legality of assessments under the W.B. Sales Tax Act before the sale tax tribunal. We are, in the instant proceedings, therefore concerned with the levy under the Central Sales Tax Act (CST).
3. Learned counsel for the petitioner has raised two fold contentions in support of the reliefs prayed for.
4. Firstly, it is contended that the Government Medical Stores Depot (petitioner herein) is a service department of the Government of India created for the purpose to sub-serve the Government policies and schemes to combat severe epidemic, natural calamities, leprosy, tuber culosis, Malaria, AIDS, including pulse Polio and different immunization programme, Mother and Child Reproductive programme and other Government programmes at the cost of the Government of India. The GMSD procures medicine and Hospital equipments and distributes those items to different central Government departments. The entire cost is borne by the Government of India from its budgetary fund. GMSD is a expenditure department for rendering social service to the nation accordingly operates the expenditure Head of Accounts and does not receive anything for which "NO" Receipts, Head of Accounts are operated vide Statements of Accounts issued by the Pay & Accounts Office, Government of India. The GMSD purchase stores on behalf of the other indenting Department of the Government of India and settlements are made in accordance with Article 115 of the Constitution of India. The petitioner never supplies medicine/equipment to any business organisation. The petitioner supplies and distributes to the Indentors like;
LIST OF REGULAR INDENTORS
1. Post and telegraph
2. Central Government Health Scheme
3. Border Security Force
4. Central Industrial Security Force
5. Central Reserve Police Force
6. S.S.B. (Special Security Bureau)
7. S.I.B. (Special Intelligence Bureau)
8. Sister Depots
9. Other Central Government Organisation.
Andaman and Nicover Islands (Port Blair), and all State Government including W.B. Goveernment free of costs as and when demands are placed to meet the natural calamities, epidemic, earthquake etc.
5. It is thus contended that petitioner is not a dealer and cannot, therefore, be subjected to the provisions of the Central Sales Tax Act nor can be taxed under the Act.
6. The second contention is that the medicines/equipments so procured by the petitioner are Government property and protected from levy of any taxes by the State of West Bengal under Article 285 of the Constitution of India.
7. On behalf of the State, Ms. Seba Roy contended that the aforesaid contentions had been raised by the petitioner in the earlier proceedings before the West Bengal Taxation Tribunal being R.N. Case Nos. 107-109 and R.N. Case Nos. 316-318 of 1990 and by its order (annexure P-3) dated April 19, 1991, Tribunal rejected the said contentions and held that petitioner is a dealer under the said Act. Special Leave Petition filed against the said order was dismissed.
8. However, a perusal of the said order passed by the Supreme Court would show that SLP (annexure P-4) was dismissed on the ground of belated filing and the Supreme Court clarified that "the questions raised in the petition will be regarded as open at the stage of the Supreme Court". Thus, in my view, it cannot be said that either the order of Tribunal has been affirmed by the Supreme Court, or that the matter is no longer res integra. In my view, therefore, there is no bar for considering the said contentions on merits in the instant writ application.
9. Mr. Roy, learned counsel for the State respondents contended that the petitioner applied for registration under the Central Sales Tax Act and was granted such registration which is annexure R-1 at page 10 of the affidavit-in-opposition. It was further submitted that petitioner filed its returns under the Central Act upto 8.12.97 as unregistered dealer and thereafter upto 4 Q.E. 31.3.2000 return has been filed as registered dealers and assessment has been made upto the said period i.e. 4 Q.E. March 31, 2000. Learned counsel relied upon the definition of 'dealer' in Section 2(b) of the C.S.T. Act, 1956 to contend that petitioner is a dealer within the meaning of the said Section 2(b).
10. Next, Mr. Roy relying upon the definition of 'sale' in Section 2(g) of the C.S.T. Act contended that the transactions constitute sale exigible to tax under the Central Act. It was further submitted that petitioner has in the present proceedings challenged the assessment order for the period 4 Q.E. 31.3.1996 and assessment order of 4 Q.E. 31.3.2000. Only demand notices have been placed before Court and not the assessment orders for these respective periods. There is statutory forum provided under the Act for questioning the assessments and, therefore, petitioner ought to have availed the said remedy before invoking the jurisdiction of this Court under Article 226, it was urged.
11. As regards the contention relating to Article 285(1) of the Constitution it is contended by Ms. Roy, relying upon the Judgment of the Supreme Court that the tax in the case on hand is levied with reference to the transaction of sale. In other words, it is the taxable event and not the goods of the Central Government. Distinction is drawn between direct tax like tax on property and income which is not the case on hand and, therefore, it is contended relying upon AIR 1963 SC 1760 that contention of the petitioner based upon Article 285(1) is to be rejected.
12. Let us first take up the above contention founded upon Article 285(1) for consideration.
13. Article 285(1) of the Constitution envisages that the property of the Union shall be exempt from all taxes imposed by a State or by any authority within a State. The exemption of property of the Union from State taxation as envisaged under Article 285(1), for the Union, is extended to the property and income of a State under Article 289(1).
14. Answering a reference under Article 143 of the Constitution, the Supreme Court delivered its majority opinion in these words in re: see Customs Act, AIR 1963 SC 1763:
"it is important to notice that while extending the exemption from Union Taxation to a State it is not only the property but income of the State is also included in the exemption under Article 289(1). Article 285 does not mention income. It mentions only property."
15. That part of the opinion which, in my view, is relevant for the matter on hand and is a complete answer to the contention raised on behalf of the petitioner reads as under:
"This will show that the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. We may in this connection contrast sales-tax which is also imposed with reference to goods sold, where the taxable event is the act of sale. Therefore, though both excise duty and sales-tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other it is on the act of sale. In neither case therefore can it be said that the excise duty or sales tax is a tax directly on the goods for in that event they will become the same tax. It would thus appear that duties of excise partake of the nature of indirect taxes as known to standard works on economics and are to be distinguished from direct taxes like taxes on property and income."
16. Learned counsel for the petitioner, however, drew attention to a judgment of the Supreme Court in the case of State of Punjab v. Union of India, which has taken the view that the Union of India as the owner of the Modern Railway Departmental Catering was the owner of the Goods which were sold and sale of such goods was immune from taxation under the State law in view of the constitutional immunity from the taxation contained in Article 285(1) of the Constitution.
17. I am respectfully of the view that the majority view of the Supreme Court in reference under Article 143(1) being a judgment of a Larger Bench requires to be followed. The same is binding on all Courts other than Supreme Court even though it is given under advisory jurisdiction. Suffice it here to extract a relevant passage from the judgment of the Supreme Court in re: Special Court Bill, 1978 . It was held as under:
"......... We are inclined to the view that though it is always open to this Court to re-examine the question already decided by it an to overrule, if necessary, the view earlier taken by it, in so far as all other Courts in the territory of India are concerned they ought to be bound by the view expressed by this Court even in the exercise of its advisory jurisdiction under Article 143(1) of the Constitution. We would also like to draw attention to the observations made by Ray C.J., in St. Xaviers College that even if the opinion given in the exercise of advisory jurisdiction may not be binding, it is entitled to great weight. It would be strange that a decision given by this Court on a question of law in a dispute between two private parties should be binding, on all Courts in this Country but the advisory opinion should bind no one at all, even if, as in the instant case, it is given after issuing notice to all interested parties, after hearing everyone concerned who desired to be heard, and after a full consideration of the questions raised in the reference. Almost everything that could possibly be urged in favour of and against the Bill was urged before us and to think that our opinion is an exercise in futility is deeply frustrating. While saying this, we are no unmindful of the view expressed by an eminent writer that although the advisory opinion given by the Supreme Court has high persuasive authority, it is not law declared by it within the meaning of Article 141 (see Constitutional Law of India by H.M. Seervai, 2nd Edition, Vol II, page 1415, para 25.28)."
18. In the light of the above, the contention of the petitioner founded on Article 285(1) is to be rejected.
19. As regards the question whether the petitioner depot is a dealer, I am inclined to uphold the submissions made on behalf of the respondent by Ms. Roy that petitioner is a dealer within the meaning of the definition "dealer" in Section 2(b) of the C.S.T. Act, 1956. Petitioner has been filing returns as registered dealer and assessments have been made upto the period i.e. 4 Q.E. ending March 31, 2000. It would be appropriate here to extract the relevant provision 2(b) which defines "dealer":
2.(b) "dealer" means any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for case, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes:-
(i) 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;
(ii) 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, whose carries on the business of buying, selling, supplying or distributing, goods belonging to any principal whether disclosed or not; and
(iii) an auction who carries 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 the principal or a nominee of the principal:
Explanation 1.- Every person who acts an agent, in any State, of a dealer residing outside that State and buys, sells, supplies, or distributes, goods in the State or acts on behalf of such dealer as-
(i) a mercantile agent as defined in the ale of Goods Act, 1930 (3 of 1930), or
(ii) an agent for handling of goods or documents of title relating to goods, or
(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment, and every local branch or office in a State of a firm registered outside that State or a company or other body corporate, the principal office or headquarters whereof is outside that State shall be deemed to be a dealer for the purposes of this Act.
Explanation 2.- A Government which, whether or not in the course of business buys, sells, supplies or distributes, goods, directly or otherwise, for case or for deferred payment or for commission, remuneration or other valuable consideration shall, except in relation to any sale supply or distribution of surplus, unserviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act."
20. The matter, in my view, is concluded by the judgment of the Supreme Court in Vrajlal Manilal & Co. and Anr. v. State of Madhya Pradesh and Anr., . Supreme Court in that case dealt with similar definition of 'dealer' and Explanation thereto as in the case on hand. It was held therein as under:
"The next contention was that neither the State Government nor any of its departments including the Forest Department or its offices were a dealer within the meaning of that terms as defined in Clause (d) of Section 2 as none of them carried on the business of buying, selling, supplying or distributing goods and that Explanation II which was inserted in the said Clause (d) did not have the effect of enlarging the concept of a dealer as defined in that clause. In support of this contention reliance was placed upon a decision of the Madhya Pradesh High Court in Orient Paper Mills Ltd. v. State of Madhya Pradesh, (1971)28 STC 532 : (1971) Tax LR 1249) in which it was held that the State Government or the Forest Department could not, merely by selling the forest produce grown on their land, be regarded as carrying on any business of buying, selling, supplying or distributing goods and, therefore, in respect of mere sales of forest produce, neither the State Government nor the Forest Department was a dealer within the meaning of the definition of that term contained in Clause (d) of Section 2. As the statement of objects and reasons to the Legislative Bill which, enacted became the 1971 Act, expressly states is was in view of the judgments of the Madhya Pradesh High Court on various provisions of the Madhya Pradesh Sales Tax Act whereby the State stood to lose a considerable amount of revenue by way of tax and penalty, that it was proposed to amend the Madhya Pradesh Act suitably in the light of the said Judgments in order to safeguard the revenue of the State and to validate the imposition of penalty and that amongst the amendments which were being made was that the definition of "dealer" was proposed to be amended in the light of the judgment in the case of Orient Paper Mills Ltd. v. State of Madhya Pradesh so as "to include the Central Government or a State Government selling goods not during the course of business". In this context, it is pertinent to note that for a person to be a dealer within the meaning of Clause (d), he must be one who carries on the business of buying, selling, supplying or distributing goods and the definition as originally enacted included within its scope the Central Government or a State Government or any of their departments which carried on such business. This definition was retrospectively amended by the 1971 Act, and the reference to the "Central Government or a State Government or any of their departments" in Sub-clause (1) of Clause (d) was omitted from that sub-clause and Explanation II was added which expressly provided that "the Central Government or a State Government or any of their departments or offices which, whether or not in the course of business buy, sell, supply or distribute goods, directly or otherwise, for case........or for other valuable consideration shall be deemed to be a dealer for the purposes of this Act". Merely because a particular provision in a statute is labeled as an Explanation, it does not mean that it is inserted merely with a view to explain the meaning of words contained in the section of which it forms a part. The true scope and effect of an Explanation can only be judged by its express language and not merely by the label given to it. The language of Explanation II shows that its purpose is to create a legal fiction, and that while under the main clause, for a person to be a dealer, he must carry on the business of buying, selling, supplying or distributing goods, even if the Central Government or a State Government or any of their departments or offices does not carry on such business, if it buys, sells, supplies or distributes goods, it is to be deemed to be a dealer for the purposes of the Madhya Pradesh Sales Tax Act, that is, for the purposes of the levy and collection of tax under the Madhya Pradesh Sales Tax Act. After the amendment of Clause (d) by the 1971 Act, it is irrelevant for the purposes of the levy of tax under the Madhya Pradesh Sales Tax Act whether the Central Government or a State Government or any of their departments or offices have bought or sold goods in the course of business. There is, therefore, no substance in the above contention and it must accordingly by rejected."
21. Thus the constitutional validity of the explanations in that case was upheld and it was construed that for a person to be a dealer, he must carry on the business of buying, selling, supplying or distributing goods even if the Central Government or a State Government or any of their departments or offices does not carry on such business if it buys, sells, supplies or distributes goods, it would be regarded as a dealer for the purpose of levy and collection of tax. It being irrelevant whether such transaction by a Government was in the course of business.
22. Lastly, it was feebly suggested that Article 131 is attracted. The contention deserves to be rejected on the authority of the Constitution Bench decision in Union of India v. State of Mysore, reported in AIR 1977 SC 127. Therein it was held that for the purposes of Article 131 of the Constitution the dispute between or amongst the States and the Union of India has to be in their constitutional capacity and not as a trader or manufacturer of goods.
23. In my view, therefore, the dispute in the case on hand is clearly outside the scope of Article 131 of the Constitution.
24. In the circumstances writ application is liable to be and is accordingly dismissed, however, without any order as to costs.
25. Let urgent xeroy certified copy of this judgment and order be furnished to the appearing parties, if applied for, on priority basis.