TMI Blog2003 (3) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... truction 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 area 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 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 unused material. 3.. The second set of group of petitions has been filed in the name of Bharat Sanchar Nigam Limited, which is a Government of India Enterprise, controlled by the Ministry of Telecommunications, Government of India. It provides telecommunication facilities to the public at large as statutory obligation provided under the Indian Telegraph Act, 1885. The department is also responsible for maintaining the communication system by providing telephone connections and other modes of communication to its subscribers. It is averr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 285 of the Constitution of India completely prohibits the levy of a tax by the State on the property of the Union. Thus, the State Legislature is not competent to enact provision in violation of the provisions of article 285. 7.. On the other hand, it is submitted by the learned AdvocateGeneral 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 Act, 1878 case reported in AIR 1963 SC 1760, advice tendered by nine honourable Judges on a reference made under article 143 of the Constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .-In this Act, unless the subject or context otherwise requires,- ............. (14) 'dealer' means any person, who carries on business in any capacity, of buying, selling, supplying or distributing goods directly or otherwise, or making purchases or sales as defined in clause (38) for himself or others, whether for cash or deferred payment, or for commission, remuneration or other valuable consideration; Explanation I.-Every person who conducts any business activity, of buying, selling, supplying or distributing goods, as an agent of a non-resident dealer shall be deemed to be a dealer for the purpose of this Act; Explanation II.-The Central or any State Government or any of their departments or offices which, whether or not in the course of business, buy, sell, supply or distribute goods directly or otherwise, whether for cash or deferred payment, or for commission, remuneration or other valuable consideration shall be deemed to be a dealer for the purpose of this Act; Explanation III.-A person, who sells agricultural or horticultural produce, grown by himself or grown on any land in which he has an interest as owner or tenant as defined in the Rajasthan Tenancy Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Union is immune from taxation. The Government of India enjoys immunity from taxation. The use of the word "property" is significant, as it provides clue as to whether it also includes levy of indirect tax. 14.. In so far as the States within the Union are concerned, i.e., the State Government, the liability to tax the property of the State by the Union is referred to in article 289 of the Constitution, which runs as under; "289(1) The property and income of the State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. (3) Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by law declare to be incidental to the ordinary functions of Government." 15.. It is evident that articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn that the immunity under article 285 of the Constitution is in regard to direct tax on property held by the Union of India. It does not impose any bar on State Legislature from levying a tax on the transactions or the activities relating to the property of the goods, i.e., on movement of the goods or the transaction. However, it is submitted by Mr. J.P. Joshi, learned counsel for the petitioners, that in Sea Customs case AIR 1963 SC 1760 the apex Court only rendered opinion under article 143 and it cannot be considered as law declared by the Supreme Court. In this context, we may simply refer to another decision of the apex Court rendered by a Bench of nine honourable Judges in New Delhi Municipal Committee v. State of Punjab reported in (1997) 7 SCC 339. In para 153, the court found the decision in Sea Customs case AIR 1963 SC 1760 as a binding section as follows: "The decision In re Sea Customs Act, AIR 1963 SC 1760, has been rendered by a Bench of nine learned Judges. The decision of the majority is binding upon us and we see no reason to take a different view". 17.. In Delhi Municipal Committee's case (1997) 7 SCC 339 the apex Court has analysed the expression "property" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f works contract, should not be included in the "contractual transfer price". According to the learned counsel, in such a case, there was no transfer of property in the goods inasmuch as the property remained with the contractee. The apex Court relying on its earlier decision in N.M. Goel Co.'s case [1989] 72 STC 368, held that such supplies fall within the definition of "sale". 20.. Recently, the Supreme Court has taken the same view in Rashtriya Ispat Nigam Ltd. v. State of Andhra Pradesh reported in [1998] 109 STC 425. In that case, R.I. Nigam, a Government undertaking was entrusted the work relating to the construction of its administrative building and erection plant. One of the conditions of the contract with the contractor was that the appellant-company would supply cement, steel and A.C. sheets from its stores and deduct the price thereof from the bills of the contract on actual cost basis. The apex Court found the case squarely covered by its earlier decision in N.M. Goel's case [1989] 72 STC 368. 21.. In Collector of Customs v. State of West Bengal reported in [1999] 113 STC 167, the apex Court held that the Collector of Customs is a "dealer" within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.. The decision in the Sea Customs Act case [1964] 3 SCR 787 was considered by another 9-Judge Bench in the case of New Delhi Municipal Committee v. State of Punjab (1997) 7 SCC 339 and was affirmed." 22.. From a reading of the judgment, it emergest that- (i) In Sea Customs case AIR 1963 SC 1760, 9-Judge Bench has opined that article 285 envisages immunity from direct tax and not from indirect tax such as sales tax; (ii) The decision in the Sea Customs case AIR 1963 SC 1760 was considered by another 9-Judge Bench in the case of New Delhi Municipal Committee v. State of Punjab (1997) 7 SCC 339 and was affirmed. The court did not approve the judgment of the two learned Judges in State of Punjab v. Union of India [1990] 79 STC 437, as the decision of the Sea Customs case AIR 1963 SC 1760 was not pointed out. 23.. Learned counsel has further placed reliance on a decision of the Apex Court in Union of India v. Purna Municipal Council reported in (1992) 1 SCC 100. The said case was decided in the light of the special provisions made under section 135 of the Indian Railways Act providing for the contingency under which railways shall be subjected to local tax imposed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." 26.. Thus, it is clear that the tax can be levied on transfer of goods involved in the works contract. 27.. The controversy involved in the instant case pertains to imposition of tax on the transaction by passing on goods from the petitioner, may it be the Military Engineering Services or the Bharat Sanchar Nigam to the contractors on the value consideration deducted ultimately from the final bills, which amounts to "sale" within the meaning of the RST Act, 1994. Undisputedly, the goods are supplied by the department and the price is deducted later on from the final bills. The same amounts to "sale" attracting imposition of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X
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