UNION OF INDIA Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) ALL these three writ petitions, though relating to different assessment years, raise common questions of law. They are, therefore, being disposed of by a common order. The petitioner, Union of India, is running railway, which is completely owned by the Government of India, Ministry of Railways, New Delhi. Non-petitioner No. 2 issued a notice dated 5th December, 1981, under section 10 of the Rajasthan Sales Tax Act (hereinafter referred to as "the Act") requiring petitioner No. 2 to appear before him and file returns. In compliance with that quarterly returns, after registration, were filed. On 21st May, 1982, the petitioner submitted a preliminary objection dated 17th May, 1982, to the assessing authority, contending that the railway could not be termed to be a dealer of scrap material. In fact the auction is an occasional feature which takes place thrice or four times in a year and as the petitioner is not a dealer of scrap material under the Act, it is not liable to pay tax. The petitioner further contended that scrap material sold by the petitioner No. 2 was the property of the Union of India and was exempt from all taxes under article 285 of the Constitution of India. The jurisdiction to pass assessment order of the Commercial Taxes Officer, Circle 'a', in respect of sale made by petitioner No. 2 was also challenged because the turnover in the previous year relevant to the assessment year was more than one crore and only the Commercial Taxes Officer, Special Circle, had jurisdiction in the matter. It was then urged that the order of transfer of cases made, vide order dated 17th November, 1981, to the Commercial Taxes Officer, 'a' Circle, was illegal and without jurisdiction.

(2.) NON-petitioner No. 2, vide his order dated 17th August, 1982, rejected the preliminary objection filed by the petitioner an directed the petitioner to appear before the assessing authority for assessment on 1st November, 1982. It was also held that the transaction of sale of scrap material was a "business" within the meaning of section 2 (cc) of the Act and the transfer of case was also in accordance with law.

(3.) BEARING the scheme of our Constitution in mind, let us now turn to the words of article 285. The contention on behalf of the Union Government is that article 285 provides for exemption of the property from all taxes imposed by the State or by any authority within a State save in so far as Parliament may by law otherwise provide. In other words, its contention is that the exemption provided in article 285 relates to all such taxes which are in any way related to the property of the Union. Prima facie the use of the words "all taxes" in clause (I) would suggest that the property of the Union would be exempt from all taxes of whatsoever nature, which a State can impose. But if we look to clause (2) of article 285 the nature of taxes from which the property of the Union would be exempted is clearly indicative as a tax on property and not taxes which may indirectly affect income or property. Vide In re, Sea Customs Act, 1878, Sec. 20 (2) AIR 1963 SC 1760. Sales tax cannot be said to be a tax imposed directly on the property. It would thus appear thus sales tax partakes of the nature of indirect tax, which is to be distinguished from direct taxes like property tax and income-tax. The immunity granted in favour of the Union of India has to be restricted to the taxes levied directly on the property and income. Sales Tax has reference to goods and commodities. It is not a tax on property directly and thus it does not fall within the exemption of article 285. Language of article 285 is almost similar to the language of section 154 of the Government of India Act, 1935, section 114 of the Common Wealth of Australia Constitution and section 125 of the Canadian Constitution. The question of the interpretation of section 114 of the Australian Constitution came before the High Court of Australia in the case of Attorney General of New South Wales v. Collector of Customs for new South Wales (1908) 5 CLR 818. In this case an action was brought by the State of New South Wales to recover the customs duties realised by the Collector of Customs in respect of certain steel rails imported by the plaintiff from England for use in the constitution of railways of the State. The State claimed that these rails were not liable to customs duties on the ground that they were the property of the Government and as such exempt from customs duties by virtue of section 114 of the Constitution. Section 114 reads as under : " A State shall not, without the consent of the Parliament of the Commonwealth, raise or maintain any naval or military force, or impose any tax on property of any kind belonging to the Commonwealth nor shall the Commonwealth impose any tax on property of any kind belonging to a State. "