1976 (10) TMI 145 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Government Medical Store Depot (the depot) is a "dealer" under section 2(d) of the Punjab General Sales Tax Act, 1948.
2. Whether the property of the Central Government can be taxed under a State law as per Article 285 of the Constitution.
3. Legality of the imposition of penalties on the depot.
4. Claim for exemptions for sales made to institutions outside Haryana.

Detailed Analysis:

1. Whether the Government Medical Store Depot (the depot) is a "dealer" under section 2(d) of the Punjab General Sales Tax Act, 1948:
The primary issue is whether the depot qualifies as a "dealer" under the Act. The depot, functioning under the Assistant Director General (Stores) and supplying medical stores and equipment to government hospitals and institutions, argued that it operated on a "no-profit-no-loss" basis and thus should not be considered a dealer. However, the court referred to the definition of "dealer" in section 2(d) of the Act, which includes any person or government department that sells or purchases goods in the normal course of trade, regardless of profit motive. The court also cited the Supreme Court's ruling in Enfield India Ltd. Co-operative Canteen Ltd. case, which held that supplying goods for a price constitutes a sale. The court concluded that the depot's activities, including adding a 10% service charge, fit the definition of a dealer as they involved systematic and regular transactions akin to trading activities.

2. Whether the property of the Central Government can be taxed under a State law as per Article 285 of the Constitution:
The depot contended that as per Article 285 of the Constitution, the property of the Union of India is exempt from state taxes. However, the court clarified that sales tax laws tax the transaction of sale or purchase, not the property itself. The court referred to the Supreme Court's judgment in In re Sea Customs Act (1878), section 20(2), which established that the incidence of sales tax is on the transaction, not the property. Thus, the depot's argument was dismissed.

3. Legality of the imposition of penalties on the depot:
The depot argued that the imposition of penalties was illegal, as the question of whether it was a dealer was not straightforward and had been a matter of legal interpretation. The court acknowledged that penalties are typically imposed for contumacious disregard of the law. Given the depot's reliance on legal advice and the complexity of the issue, the court suggested that the appellate authority should consider these factors when reviewing the imposition of penalties.

4. Claim for exemptions for sales made to institutions outside Haryana:
The depot sought to claim exemptions for sales made to institutions outside Haryana, arguing that it had not filed the required D forms due to a bona fide belief that it was not a dealer. The court noted that the depot had filed appeals before the appellate authority, which has the power to consider these claims. The court expressed confidence that the appellate authority would give due weight to the depot's arguments regarding exemptions and the imposition of penalties.

Conclusion:
The court held that the depot was a "dealer" under section 2(d) of the Act and dismissed the petitions, leaving the matters of penalties and exemptions to be addressed by the appellate authority. The petitions were dismissed with no order as to costs.