GARRISON ENGINEER PROJECT-I Vs. STATE

JUDGEMENT

(1.) IN this group of writ petitions under Article 226 of the Constitution of INdia, the Union of INdia through its two different departments viz; Military Engineering Services and Tele Communications Department, has challenged the constitutional validity of Explanation-II added to Section 2 (14) and Section 2 (38) (ii) of the Rajasthan Sales Tax Act, 1994, hereinafter referred-to as "the Act", being hit by Article 285 of the Constitution of INdia. The petitioners have also challenged the order of assessment as well as the appellate order passed by the authorities under the Act.

(2.) THE first set of group of petitions are filed in the name of Garrison Engineers. It is averred that the Military Engineering Services is the department, which is owned and controlled by the Ministry of Defence, Government of India. One of its department is Garrison Engineers. THE said department is responsible for the construction and maintenance of building and services in the Defence Areas. In order to maintain the quality in the construction work, the material required in construction of the execution work of Defence Areas is normally purchased and supplied by the department to the Contractor. Thus, as per the terms and conditions of the contract, cement and steel for the purpose of construction of building and its maintenance are supplied by the department for carrying out the construction and that for the said purpose and the value of material so supplied, is set off or deducted from the final bill. After completion of the work, the contractor is required to return un-used material.

(3.) ON the other hand, it is submitted by the learned Advocate General that the State legislature has levied tax on transaction of `sale' and not on the property of Union of India, as such, Article 285 is not attracted. Elaborating the contention, it is submitted that the activities and functioning of the petitioner departments in supplying the goods on price consideration so as to make it deductible ultimately from the final bills, amounts to sale transactions and, therefore, the department falls within the definition of `dealer'. It is also submitted that what is exempted under Article 285 of the Constitution of India is the direct tax on the property of the Union of India and not an indirect tax. The learned Advocate General has heavily placed reliance on a decision of the Apex Court in In re Sea Customs Case reported in AIR 1963 SC 1760 (1), advice tendered by nine Hon'ble Judges on a reference made under Article 143 of the Constitution of India, wherein it is held that indirect tax is not barred by Article 285 of the Constitution of India. The said view has been followed by a nine judges bench of the Hon'ble Supreme Court in New Delhi Municipal Council vs. State of Punjab The learned Advocate General has also invited our attention to a decision of the learned Single Judge of this Court in Karyapalak Engineers vs. Rajasthan Tax Board (3), wherein same controversy on same facts has been decided against the Union of India. It is held therein that in a case of rate contract including the cost of material where material supplied by the contractor the cost of material is adjusted in the final bill against the amount payable to the contractor, the transaction constitutes "sale" and is chargeable under the Rajasthan Sales Tax Act. It is not hit by Article 285 as the immunity of the Union of India from State tax does not extend to impost of indirect tax like sales tax. It is further held therein that the immunity is restricted to tax imposed on the property directly. In rejoinder, it is submitted by Mr. J. P. Joshi that the decision of the Hon'ble Supreme Court in Re Sea Customs Case has been rendered in the context of Article 289 and not 285 of the Constitution of India and, as such, the said decision does not provide clue to controversy pertaining to Article 285. It is further submitted that the decision of the Apex Court in the subsequent case i. e. In the case of Delhi Municipal Council has clearly held that Article 289 does not grant an absolute immunity like the one envisaged in Article 285 of the Constitution. He has submitted that as per the terms of the contract, even on passing- on the material to the Contractor, the ownership remains with the Government, as such, there is no sale. Learned counsel has heavily placed reliance on a decision in State of Punjab vs. Union of India