1963 (5) TMI 57 - SC - Customs

Whether when Art. 289 provides for the exemption of State property from Union taxation, it only provides for exemption from that kind of Union taxation which is a tax directly on property?

Whether the proposed extension of customs and excise duties to all goods belonging to the State Governments, imported or exported in the one case and manufactured or produced in the other, would not offend Art. 289?

If the expression 'taxes' in relation to the exemption of property from tax were confined to direct taxes on property the exemption would be unmeaning, as such taxes could not be imposed by the Union?

Held that:- It would not be proper to read the scope of the saving in favour of the Union in clause (2) as reflecting on the scope of Art. 289(1). A tax on the use of property or on the property itself which is occupied for the purpose of trade would obviously be a direct tax on property which ex-concessis the Central legislature under the Government of India Act and Parliament under the Constitution are incompetent to impose. It is not the contention of the States that the center has such a power to levy a tax on occupation or use of property where it is in connection with a trade or business. This would at least show that it is not justifiable to imply from clause (2) to the construction of clause (1) of Art. 289 that but for that provision Parliament would be entitled to impose such a tax. The other points urged have been dealt with in the opinion of my Lord the Chief Justice and I do not propose to cover the same ground.

The questions referred to this Court for its opinion should be answered as they have been by the Chief Justice i.e. in the negative.