UNION OF INDIA Vs. STATE OF U P

JUDGEMENT

(1.) RAVI S. DHAVAN, J. These large number of the writ petitions raise issues in public law. The issue has been precipitated by the State of U. P. in taxing the Union of India and, thus, giving rise to the main question whether the property of Union of India is exempt from State taxation ? The State of U. P. does not accept the proposition in the affirmative. In fact, it has taken a stand that it can tax the Union of India. In the circumstances, when the case began a preliminary issue was raised that this Court cannot adjudicate upon the matter and that the Union of India should be relegated to the alternative remedies under the State enactment. The State enactment is the U. P. Trade Tax Act, 1948 before amendments in 1994, it was known as the U. P. Sales Tax Act, 1948. The reference hereinafter to this enactment will be as "the Act".

(2.) THE facts are simple. THE Government of India, its Department of Telecommunication, has been assumed to be in trade and business by the Trade Tax Department, and the gross revenues of the Telecommunication Department collected from subscribers, using the telephone facility, have been subjected to trade tax by the State of U. P. Prior to the Constitution being enacted, the Sales Tax Department did not tax the Government of India on the revenues collected for providing telephone services. On these facts, there is no issue. About the year 1988, the Department of Trade Tax, the Ministry of Institutional Finance, Uttar Pradesh, came to the conclusion that the Union of India, the Department of Telecommunication, on its gross turnover had not filed a return which it should have. It was presumed that, in this context, the Union of India is a "dealer" in business, and as a dealer liable to pay the trade tax. THE District Manager (Telecommunication), of the districts concerned, was held as liable to pay tax with an obligation to file return under section 7 of the Act. But, as no return had been filed by the Union of India, its Department of Telecommunication, the assessing authority took recourse to the provisions of this section under sub-clause (3), that as no return was submitted by the "dealer" within the prescribed period, then, on the principle of best judgment tax was determined. THE Union of India, on the assumption that it was a dealer who had not filed return was assessed to pay trade tax. THE assessments were ex parte (Writ Petitions Nos. 347, 975, 1186 and 1680 of 1993, 601, 738 and 1081 of 1994, 115 and 116 of 1995 and 262, 263 and 264 of 1998) and, in one case, the Union of India filed an appeal against the ex parte order. THE appeal was dismissed (Writ Petition No. 1982 of 1994 ).

(3.) AS the facts are as brief as have been narrated, the contention of the State of U. P. as a justification for taxing the Union of India needs to be reiterated. It is contended that the Government of India is a "dealer" within the meaning of the Act and, thus, it was obliged to file a return which it did not do. Consequently, it was taxed on the gross revenues earned in each telecommunication district. It is further contended that imposition of tax has been based on the newly amended section, permitting the State of U. P. to tax the right to use any goods for any purpose for cash, deferred payment or other valuable consideration or transfer of property. This is followed by a submission that in so far as the expression "dealer" is concerned, the Act clearly mentions that it includes "a Government" which, in the course of its business or otherwise, in effect, sells, supplies or distributes goods directly for cash, deferred payment, remuneration or other valuable consideration. This is the basis of the argument on which the Government of India has been subjected to tax. This is justified by the fact that the State of U. P. is permitted to "tax on the sale and purchase of goods" and that this is to be understood with its various meanings and cognate expressions as under clause (29a) of article 366 of the Constitution of India, the Act has been amended with the insertion of section 3-F.