2003 (2) TMI 441 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of assessments under the Central Sales Tax Act, 1956 (CST).
2. Whether the Government Medical Stores Depot (GMSD) qualifies as a "dealer" under the CST Act.
3. Applicability of Article 285(1) of the Constitution of India regarding tax exemption on Union property.
4. Jurisdiction of the High Court under Article 226 of the Constitution in the context of available statutory remedies.
5. Applicability of Article 131 of the Constitution of India.

Detailed Analysis:

1. Legality of Assessments under the CST Act, 1956:
The petitioner questioned the authority of the State of West Bengal to levy or collect sales tax under the CST Act, 1956. The court noted that the petitioner had previously raised similar contentions before the West Bengal Taxation Tribunal, which were rejected. The Supreme Court dismissed the special leave petition on grounds of belated filing but clarified that the questions raised remained open for consideration. Thus, the court proceeded to examine the contentions on their merits.

2. Whether GMSD Qualifies as a "Dealer" under the CST Act:
The petitioner argued that GMSD is a service department of the Government of India and does not engage in business activities, thus should not be classified as a "dealer" under the CST Act. The court referred to Section 2(b) of the CST Act, which defines "dealer" as any person engaged in the business of buying, selling, supplying, or distributing goods. The court found that GMSD, by procuring and distributing medicines and equipment, fits this definition. The court also cited a Supreme Court judgment (Vrajlal Manilal & Co. v. State of Madhya Pradesh) which upheld a similar definition, stating that even if the government does not carry on business, it can still be deemed a dealer for tax purposes.

3. Applicability of Article 285(1) of the Constitution:
The petitioner contended that the medicines and equipment procured are government property and should be exempt from state taxes under Article 285(1) of the Constitution. The court referred to the Supreme Court's interpretation in the Sea Customs Act case, which distinguished between direct taxes on property and income and indirect taxes like sales tax, which are levied on transactions. The court concluded that Article 285(1) does not exempt transactions of sale from taxation, thus rejecting the petitioner's contention.

4. Jurisdiction of the High Court under Article 226:
The State argued that the petitioner should have utilized the statutory forum provided under the CST Act to challenge the assessments instead of invoking the jurisdiction of the High Court under Article 226. The court acknowledged this argument but chose to address the merits of the case due to the importance of the constitutional questions raised.

5. Applicability of Article 131 of the Constitution:
The petitioner suggested that Article 131, which pertains to disputes between states and the Union, might be applicable. The court rejected this contention, referencing the Constitution Bench decision in Union of India v. State of Mysore, which clarified that Article 131 applies to disputes in the constitutional capacity of the states and the Union, not as traders or manufacturers.

Conclusion:
The court dismissed the writ application, holding that GMSD qualifies as a "dealer" under the CST Act, and the transactions in question are subject to sales tax. The court also rejected the applicability of Article 285(1) for tax exemption and found no merit in invoking Article 131. The petitioner was advised to seek remedies through the statutory forum provided under the CST Act. The writ application was dismissed without any order as to costs.

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