1994 (1) TMI 252 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of Article 285(1) of the Constitution of India to the levy of sales tax on the sale of property belonging to the Government of India.
2. Tax liability of auctioneers conducting auctions of Government of India property.
3. Classification of advance deposit under section 7(2A) of the Rajasthan Sales Tax Act as 'tax' and the applicability of interest under section 11B for delayed payment.

Detailed Analysis:

Issue 1: Applicability of Article 285(1) of the Constitution of India
The first issue addressed whether sales tax could be levied on the sale of property belonging to the Government of India, considering the prohibition under Article 285(1) of the Constitution of India. Article 285(1) states that Union property is exempt from all taxes imposed by a State unless Parliament provides otherwise. The court referred to the case "In re, Sea Customs Act, 1878, AIR 1963 SC 1760," which clarified that excise duty is a tax on production or manufacture, not on property. Similarly, sales tax is imposed on the act of sale, not directly on the property. The court concluded that the sales tax in question was levied on the transaction of sale, not on the property of the Union of India. Therefore, Article 285(1) did not apply, and the first question was answered in favor of the Commercial Taxes Officer and against the assessee.

Issue 2: Tax Liability of Auctioneers
The second issue questioned whether the tax liability should fall on the auctioneers conducting the sales of Government of India property. The court examined the definition of "dealer" under section 2(f) of the Rajasthan Sales Tax Act, which includes those carrying on business. The court referenced the case "Director of Supplies and Disposals, Calcutta v. Member, Board of Revenue, West Bengal [1967] 20 STC 398 (SC)," which defined "business" as an occupation or profession with a profit motive, involving a systematic course of activity. The court noted that the amended definition of "dealer" under the Rajasthan Sales Tax Act, including government departments, meant that the Director-General of Supplies and Disposals could be considered a dealer. The court also cited "District Controller of Stores v. Assistant Commercial Taxation Officer [1976] 37 STC 423," where the Railway was deemed a dealer for selling unserviceable material. Consequently, the court ruled that the Board of Revenue was justified in concluding that the assessee (Director-General of Supplies and Disposals) was a dealer, and the tax liability did not fall on the auctioneers.

Issue 3: Classification of Advance Deposit and Applicability of Interest
The third issue involved whether the advance deposit required under section 7(2A) of the Rajasthan Sales Tax Act was considered 'tax' and whether interest could be levied for delayed payment under section 11B. The court examined the definition of "tax" under section 2(r) of the Act, which includes any tax leviable under the Act. The court reasoned that advance tax is part of the tax payment process and assumes the character of tax. The court dismissed the argument that advance tax should not be considered tax and ruled that non-payment of advance tax under section 7(2A) was subject to interest under section 11B. The court found no merit in the assessee's contention regarding the calculation of interest and dismissed the revision.

Conclusion
The petition was dismissed, with the court ruling in favor of the Commercial Taxes Officer on all issues. The sales tax was applicable to the sale transactions involving Government of India property, the Director-General of Supplies and Disposals was deemed a dealer, and advance deposits were classified as tax, subject to interest for delayed payment.

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