UNION OF INDIA Vs. STATE OF BIHAR

JUDGEMENT

(1.) The Union of India though the Chief Commercial Manager, (Catering), East Central Railway, has filed the present writ application for quashing the demand notices issued under the provisions of the Bihar Finance Act, 1981 (hereinafter referred to as the Act) for the assessment years 1999-2000, 2000-2001 and 2001-2002 by the Commercial Taxes Officer, Patliputra Anchal, Patna to the Chief Commercial Superintendent (Catering), Patna, annexed as Annexure-1 series to the writ application, and the demand notices issued by the Commercial Taxes Officer, Lakhisarai to the Railway Catering Service, Kiul, Lakhisarai for the assessment years 1998-1999, 2002-2003 and 2003-2004 annexed as Annexure 2 series in pursuance of the assessment orders passed under Section 17 of the Act imposing sale tax in respect of sale of foodstuff by the Railway Catering Service to its employees and passengers; as well as restraining the respondent authorities from making recovery of the amount by taking recourse to the Special Mode of recovery as provided under Section 27 of the Act as a result of which part of the amount demand has been debited by the Reserve Bank of India from the petitioner's bank account to the respondent-authorities. It is also prayed that the Reserve Bank of India be restrained from debiting further amount at the instance of the respondent-sales authorities of the State of Bihar and the respondent-sales tax authorities of the State be also restrained from taking steps in pursuance of the demand notices.

(2.) The petitioner's case is that the Railways in general and the East Central Railway in particular are the properties of the Union of India. The Eastern Railway had catering department. Later on the East Central Railway has been created with effect from 1.10.2002 consisting of Danapur, Dhanbad, Mughalsarai, Sonepur and Sarnastipur divisions and it has acquired the assets and liability of the erstwhile Eastern Railway and North Eastern Railway with regard those divisions. The catering department supplies foodstuffs to its employees and passengers as passenger amenity service at different stations which includes its catering service at Patna Junction and Kiul Junction of the State of Bihar as well as other parts of the country. The goods are supplied to the railway employees and passengers on passengers amenity ground. It is not carried for the purpose of earning property. The same is done with a view to ensure basic travelling comfort/amenities to the railway users/passengers. Thus, East Central Railway is not a dealer within the meaning of Section 2(e) of the Act. This apart, the goods sold by the Railway are the property of the Union of India and as such it is exempted from all taxes imposed by the State or by any other authority within the State under Article 285(1) of the Constitution of India. Thus, on the aforesaid two grounds, no tax can be levied on sale of goods by the Catering Department of the Railway to its employees and passengers.

(3.) The stand of the State on the other hand is that the Railway Catering Services of the Railway supplies foodstuffs to its employees and passengers after receiving price of the same and thus it is a dealer within the meaning of Section 2(e) of the Act. it is further stated that the Catering Department of the Railway is registered under the Act and has also filed return. For some years, the assessment had been made and when the payments were not made, demand notices were issued. For other years, when the admitted taxes were not paid by the Railway, steps were taken for recovery of the same. Article 285(1) is not attracted in the present case as the tax under the Act is not levied on the property of the Union of India but the tax is imposed on the sale of goods which is not covered by Article 285(1) of the Constitution of India.