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TMI Blog1993 (3) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment. It is these goods which are confiscated, and goods which come into the possession of the Collector but remain unclaimed or uncleared, that are sold by him from time to time and it is in respect of these sales that the Kerala State seeks to make the petitioner liable for tax under the KGST Act. 3. According to the petitioner, no sales tax is exigible in respect of these sales effected by the Customs Department of the Government of India, because the sales are effected only in the discharge of the statutory functions imposed by the Customs Act, of preventing smuggling activities and/or attempt at evasion of payment of Customs duties. The Government of India or its officers are not carrying on any business in discharging these functions statutorily imposed on them. The sales are not incidental or ancillary to any business carried on by the Collector of Customs and therefore are not exigible to sales tax. It is also contended that Article 285(1) of the Constitution exempts the sale of the goods in question, which have become Government property under Section 126 of the Customs Act, from the levy of tax by the State. 4. The respondents, namely the authorities of the State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State." ' ''- The definition of "dealer" as enacted originally did not contain Explanation 2, which was added by the amending Act 3 of 1968. 6. I may also refer to some other provisions of the KGST Act for purposes of completeness. Section 13 provides for registration of dealers, but sub-section (4) thereof renders the section inapplicable to any State Government, Central Government or any local authority, so that it is unnecessary for any of these authorities to get themselves under the Act. Registration under the Act is important as that alone enables a dealer to collect the tax payable on a sale from the purchaser. Section 22 thus enables a registered, dealer to collect the tax payable by him on the sale of any goods from the purchaser, and obliges him to pay over the same to the Government. Sub-section (3) of the section in turn prohibits a person other than a registered dealer from collecting any amount by way of tax under the Act but the Central Government, the Government of Kerala or the Government of any other State in India or any local author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried on by the Railways, and therefore exigible to sales tax. But the same cannot be said of an activity like that undertaken by the Collector of Customs whose primary duty as a statutory functionary is the prevention of smuggling activities and/or evasion of payment of customs duties. I am unable to agree for more than one reason. Explanation 2 to the definition of "dealer" in Section 2(viii) of the KGST Act creates a fiction that the Central and State Governments which buy, sell, supply or distribute goods directly or otherwise and whether or not in the course of business shall be deemed to be dealers for the purposes of the Act. Section 5 imposes the charge on such a dealer to pay tax on the sales effected by him. This fiction has to be given its full effect and we cannot impose limitations or conditions which are not found therein. The fiction has dispensed, with the business element in the activity of buying, selling, supplying or distribution of goods indulged in by the Central and State Governments, to make them statutorily dealers under the Act. All that is required is a sale by the Central or a State Government either for cash or for deferred payment or for commission, rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madhya Pradesh (1971) 28 STC 532. The question was whether the State Government selling forest produce could be regarded as carrying on business to make it a dealer under the Madhya Pradesh General Sales - Tax Act. The Madhya Pradesh High Court answered the question in the negative and the matter was taken to the Supreme Court. But subsequent to the decision of the High Court, the definition of dealer in the Act was amended with retrospective effect deeming the Government as a dealer. The Supreme Court had no doubt in the matter because of the amendment, an evident from paragraph 13 of the judgment, that the fictional definition by itself was sufficient to make Government a dealer. The same view was expressed by the High Court of Madhya Pradesh itself in the subsequent decision in State of Madhya Pradesh v. Bengal Paper Mills Co. Ltd. (1979) 44 STC 347 at page 351. 10. An incidental contention was raised that the Collector of Customs may have to pay the surcharge and turnover tax, which cannot be passed on to the purchaser from out of the funds of the Central Government. No demand has yet been made for these amounts; but this possibility cannot, by itself be a ground for holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows. The Union of India owning the Railways was running departmental catering establishments, purchasing provisions and goods and selling foodstuffs at the canteens. Liability for sales tax on these sales was resisted with the plea that no tax could be levied in view of Article 285(1) of the Constitution. There were also another plea, which it is not relevant to refer. The High Court of Punjab and Haryana upheld the claim of the Union observing that the goods were purchased by the Railway and were sold by it; the tax was imposed on the sale of goods; at the time of the sale, the goods belonged to the Railway and the tax had to be paid by the Railway, and therefore in view of the provisions of Article 285(1), the sales by the Government were immune from taxation under the State law. 13. This case went up to the Supreme Court in appeal and was dealt with by the two member Bench. The judgment which is very brief dealt with this question in the following words: "On the second question, there remains little for consideration. There is no dispute that the Union of India is the owner of the Northern Railway Departmental Catering, Railway Station, Pathankot. The goods were purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 really 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." Rajagopala Ayyangar, J. concurred with the above view in his separate judgment. The other four judges differed. The view of the majority was thus that only direct taxes on income or property were hit by the prohibitions under Articles 285(1) or 289(1) and not indirect taxes like excise duties and sales tax, the incidence of the latter being on the occasion of sale. This feature of sales tax as an indirect tax imposed at the time of sale of goods, was recognised in. In re : the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, AIR 1939 F.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but cases not strictly within it which can properly be held to have been decided per incuriam, must in our judgment, consistently with the stare decisis rule which is an essential part of our law, be of the rarest occurrence." State of Punjab has been decided without much of a discussion. The relevant decision - perhaps the most vital - on the scope of Article 285(1) vis-a-vis sales tax, namely the Sea Customs Act case was not brought to the notice of the court. According to Salmond (on Jurisprudence 12th Edition, page 152) whenever a relevant prior decision is not cited before the court or mentioned in, the judgment, it must be assumed that the court acts in ignorance or forgetfulness of it. Sea Customs Act was a decision rendered by a Constitution Bench, while State of Punjab v. U.O.I. (1990) 79 STC 437 is by a two member Bench. The former has therefore to be preferred as per the dictum in Mathulal v. Radhalal, AIR 1974, SC 1596. Moreover, the decision in Sea Customs Act accords with the consistent view taken by the Federal Court and the Supreme Court about the nature of sales tax, as I have already noted earlier. The fact that the decision in Sea Customs Act was an advisory op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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