1981 (9) TMI 266 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of sections 4(1) and 5(1) of the General Insurance Business (Nationalisation) Act of 1972.
- Exemption from sales tax under article 285 of the Constitution of India.
- Challenge to the constitutional validity of clauses (c), (e), and (g) of section 2 of the Delhi Sales Tax Act, 1975.
- Jurisdiction of the Sales Tax Officer in issuing show cause notices.
- Ownership of assets by the Central Government post-nationalisation.
- Disposal of salvage matter in the business of general insurance.

Analysis:
The main issue in this case was whether the petitioner's assets and properties, post-nationalisation under the General Insurance Business (Nationalisation) Act of 1972, could be considered as belonging to the Central Government and thus exempt from sales tax under article 285 of the Constitution of India. The petitioner, engaged in general insurance, argued that its properties were now owned by the Central Government due to nationalisation. However, the Court held that even if the Central Government owned all shares of a government company, the company itself had a separate legal identity and its assets could not be automatically deemed as owned by the Central Government. The Court emphasized that interpreting a taxing statute did not permit lifting the corporate veil, and the company could not be equated with its shareholders.

Another issue raised was the challenge to the constitutional validity of certain clauses of the Delhi Sales Tax Act, 1975. The petitioner contended that these clauses were violative of article 285 of the Constitution. However, the Court held that the petitioner, as a government company, was not the Central Government within the meaning of article 285, and therefore, was not entitled to challenge the Act on these grounds. The Court dismissed the petition challenging the constitutional validity of the clauses.

Furthermore, the jurisdiction of the Sales Tax Officer in issuing show cause notices and conducting assessments was contested. The petitioner argued that the disposal of salvage was not subject to sales tax under the repealed Act due to lack of a definition of 'business.' The Court held that questions of fact regarding the disposal of salvage being part of the appellant's business of general insurance should be determined by the authorities under the Act. It was deemed premature to decide on the merits without factual findings.

In conclusion, the Court dismissed the appeal, stating that the appellant's assets could not be considered as properties of the Central Government post-nationalisation. The Court emphasized that the disposal of salvage matter and the determination of whether it was part of the appellant's business were factual issues to be decided by the authorities under the Act. The parties were left to bear their own costs, and the appeal was dismissed.