Joint Director of Food, Visakhapatnam
Vs. The State of Andhra Pradesh  INSC 159 (27 July 1976)
KHANNA, HANS RAJ UNTWALIA, N.L.
CITATION: 1976 AIR 2322 1977 SCR (1) 59 1976
SCC (3) 598
CITATOR INFO :
F 1985 SC1748 (7)
Central Sales Tax Act, 1956--Sec. 2(b),
9--Andhra Pradesh General Sales Tax .Act 1957--central Government selling food
grains and fertilizer, whether a dealer Profit motive, if relevant--Whether
State carries on business.
The Joint Director of Food stationed in the
Port of Visakhapatnam sold food grains and fertilizers to the Andhra Pradesh
State and other States at the price fixed by the Central Government. The Sales
Tax Officer of the Andhra Pradesh imposed the tax under the Andhra Pradesh
General Sales Tax Act, 1957, on the intra State sales and imposed tax under Central
Sales Tax Act 1956 on the inter State sales. The Joint Director of Food claimed
immunity from the tax on the ground that the element of profit motive was
absent. Under the Andhra Pradesh Act, the profit motive is irrelevant. The High
Court of Andhra Pradesh, therefore, dismissed the appeals filed by the Central
Government as far as they related to the tax under the Andhra Pradesh Act. The
High Court, however, remanded the three appeals which pertained to the tax
under the Central Sales Tax Act for determining the presence of profit motive
in the Central Government while undertaking the dealings in question.
In appeals by Special Leave the appellant
1. Since the sales were by the Central Government,
the Joint Director could not be the assessee.
2. Section 2(b) of the Central Act read with
s. 9 excludes the Central Government as an exigible entity.
3. An undertaking to distribute essential commodities
by the State in implementation of its governmental obligations cannot be
described as trading activity or carrying on of business without doing violence
to the concepts of governmental functions and business operations.
Dismissing the appeal,
HELD: (1) Since the Joint Director
represented the Central Government in the sales he can legitimately be dealt with
for sales tax proceedings as representing the Union Government. [61 C] (2)
Section 2(b). of the Central Act in terms states that a dealer means any person
who carries on the business of buying and selling goods and includes a
Government which carries on such business. [61 F] (3) Section 9(3) of the
Central Act provides that the tax and penalty collected shall be assigned to
the State which recovers the tax. Therefore, the real beneficiary of the
Central Act i.s the State concerned. In any event there is no flaw in the
reasoning of the High Court that the Central Government way tax itself. [62
A-B] (4) The State has the power to carry on the trade or business as is
manifest from Art. 19(6)(ii) and other provisions. Systematic activity of
buying food grains and fertilizers and selling them by the State although in fulfillment
of the beneficiant national policy is never them. less trade or business.
Necessarily Government may become a dealer which carries on business within the
meaning of the different definitions in one Central Act and the State Act.
[62 B-E] (5) The question of profit motive is
relevant for the purpose of Central Act. Since the question has not been
investigated by the fact finding authorities, the-High court has rightly
directed the authorities below to go into the said question. So far as the
Andhra Act is concerned since the profit motive is 60 irrelevant because of the
special definition in the Act the State Sales Tax Officer is entitled to
collect sales tax from appellant in regard to intra State sales even assuming
that there is no profit motive. [62 E-H] (6) The Court observed that it is
conscious of the social implications of the Sales Tax being leviable on the
essential commodities like foodgrains and fertilizers. Any tax on food and
fertilizers is bound to cause an extra burden on the poor who are the ultimate
consumers but the court has to interpret the law and apply it. Necessary
objective can be achieved by appropriate notifications or if need be, necessary
legislative directions. [63 A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1393-1398 of 1975.
(Appeals by Special Leave Petitions from the
Judgment and Order dated 31-1G,-1975, of the Andhra Pradesh High Court in
Revision Case No. 3 to 8 of 1974).
V.P. Raman, Addl. Solicitor General of India,
G.L. Sanghi, and Girish Chandra, for the appellant.
A. K. Sen and P.P. Rao, for the respondent.
The Judgment of the Court was delivered by
KRISHNA IYER, J. This batch of cases between a State Government (Andhra
Pradesh) and the Union Government suggests the need for litigative discipline
for our governments and a periodical post auditing in that behalf. And now we
make good this inaugural observation by narrating briefly the necessary facts
and examining closely the few points tersely presented by the Additional
Solicitor General appearing for the common appellant in all these cases.
Our Constitution mandates on the State
welfare activism and contemplates its undertaking distribution of commodities
essential to the life of the community at large through trade and business
directly organised or in other suitable ways. Food grains and fertilisers are
strategic items and the Union of India has, in fulfilment of high governmental
functions, been procuring these vital goods and selling them lo the States or
their nominees so as to ensure equitable supplies and price discipline.
Pursuant to this commendable programme the Central Government constructed an
infra-structure and, pertinent to our purpose, appointed, inter alia, a Joint
Director of Food stationed in the port town of Visakhapatnam. This Officer
sold, for the price fixed by his Government, food' grains and fertilisers to
the Andhra Pradesh State and other States. These transactions, in the language
of sales tax law, fell within the twin categories of intra-State and
inter-State sales. A vigilant State Sales Tax Officer directed the filing of
returns by the appellant under the Andhra Pradesh General Sales Tax Act, 1957
(Act VI of 1957) (for short the State Act) and the Central Sales Tax Act, 1956
(for short the Central Act).
This was complied with in six returns for the
span of three years but was coupled with a plea of immunity from tax on grounds
which will be presently discussed. The adverse fate of those contentions at the
hands of the Sales Tax Officer and the appellate officer eventuated in further
appeals to the Tax Tribunal. The three appeals covered by the Central Act were
remanded for the narrow purpose of determining the presence of profit motive in
the Central Government while undertaking these dealings as that element 61 is
decisive of the appellant being a dealer doing business and therefore liable to
tax under the Central Act. The other three appeals were duly dismissed and
these successive defeats notwithstanding, the Central Government's Joint
Director moved the High Court in all the. six cases. Undaunted by discomfiture
there, the appellant has arrived here, discretion not being the better part of
valour even where public money is involved.
The learned Additional Solicitor General has
rightly discarded some of the rhetorical but lifeless contentions urged before
the: High Courtbased on Part IV of the Constitution. The surviving points
pressed before us may now be set out and discussed.
A hyper-technical point half-heartedly urged
may be mentioned first, it being easy of rejection Argued counsel that since,
in any view. the sales were by the Central Government, the Joint Director could
not be the assessee.
Obviously this official represented his
Government in the sales and therefore could legitimately be dealt with for
sales tax. proceedings as representing the Union Government. The less said
about such obstructive contention on behalf of a public functionary the better.
Devoid of presentability we decline to spend more space on this plea.
Next in order was the argument that the
defination of 'dealer' in s. 2(b) of the Central Act read in implicit harmony
with s.9 excludes the Central Government as an exigible entity. The thrust of
the argument, if we may say so, is that the Central Government being the taxing
authority may not, without being guilty of grotesqueness, tax itself. Counsel
was cautious to concede that legally it was not impossible for the Central
Government as a statutorily empowered agency to collect tax that falls due from
it is as an assessee. Indeed, if the statute deafly states that government is
liable to pay tax qua dealer, it is not a legal plea to say that government is
also the taxing authority. We have therefore to examine whether' there is any
necessary exclusion from exigibility or other provision of immunisation which
can be spelt out of s. 2 or s. 9. Section 2(b) Of the. Central Act reads:
"2. (b) In this Act, unless the context
otherwise requires, 'dealer' means any person who carries on the business of
buying or selling goods, and includes a Government which carries on such
Quite plain is the conclusion from a bare
reading of this provision that a government (ergo any government) is by express
inclusive definition made a dealer. The Central Government being a government
is squarely covered by the definition. Nor does s. 9 rescue the appellant. True
it is that the tax shall be levied by the Government of India. But it does so
for the benefit of the other State Governments and indeed through the machinery
of the State tax agency. Section 9(3)reads:
"The proceeds in any financial year of
any tax, including any penalty, levied and collected under this Act in any
State (other than a Union Territory) on behalf of the Government of India shall
be assigned to that State and shall be retained by it: and the proceeds
attributable to Union territories shall form part of the Consolidated Fund of
India." 62 Again, Art. 269(g) of the Constitution speaks in the same strain,
viz., that the real beneficiary of Central sales tax is the State designated in
the above provisions, the Union Government being empowered to levy behalf of
and thereafter to assign to the respective States eventually entitled to the
tax. We see no flaw in the reasoning of the High Court that the Central
Government may tax itself, if it comes to that.
A subsidiary contention calculated to
insulate the Central Government from liability was set up by the learned
Additional Solicitor-General to the effect that an undertaking to distribute
essential commodities by the State in implementation of its governmental
obligations cannot be described as 'trading' activity or carrying on of business'without
doing violence to the concepts of governmental functions and business
operations. Indubitably the State has the power to carry on trade or business
as is manifest from Art 19(6)(ii) and other provisions. In dubitably the State,
distributes essential commoditise in a fair and..
equitable way for the survival of the
community under its protection. It does 'not follow that we cannot harmonize
the tow functions.It is well on the agenda of State activity that it carries on
trade or business in essential commodities because it has the power to do
carries on trade or business it obligated to ensure even distribution of vital
goods and because sections of the people We see no difficulty in inferring that
the style martic activity of buying food grains and fetrilisers and selling
them by the State although in fulfillment of a benificant national policy is
never the less trade or business. Necessarily Government becomes a 'dealer' by
definition and carries on 'business, within the meaning of the central. Act and
the State Act (omitting for a moment the distiction in the two definitions
based upon the motive to make gain or profit). The conclusion therefore is
inacvitable that the appellant, representing the Central Government is rightly
held to be the assessee We may hasten to mention that the ordinary concept of business
has the element: of gain or profit whose absence negatives the character of the
activity as business in s.
2(b) of the Central Act. A person becomes a
dealer only if he carries on business and the Central Government can be
designated as 'dealer' only if there. is profit motive.
This question not having been investigated by
the fact finding authorities has been directed to be gone into by the Tax
Tribunal in the three. case revolving round the Central Act. So far as the
State Act is concerned, this question does not arise for the straight forward
reason that the definition in s. 2(1)(bbb) of that Act expressly includes
within the concept of 'business' any trade or any adventure or concern in the
nature of trade or commerce carried on or undertaken whether or not 'with a
motive to make gain or profit whether or not profit accrues therefrom'. Profit
making in the State Act, it was conceded by counsel for the Union, was
irrelevant in contrast to its pertinence in the Central Act. If this be the
correct position in law, it follows that the State Sales Tax Officer is
entitled 10 collect sales tax from the appellant in regard to intraState sales
even assuming that there is no profit motive or profit accrual. The reverse is
the case so far as Central sales tax is concerned.
In the result the orders passed by the Sales
Tax Appellate Tribunal in all the six appeals, affirmed as it were by the High
Court are correct and these appeals deserve to be dismissed.
63 We are conscious of the social
implications of sales-tax being leviable on essential commodities like food
grains and fertilisers. Both these items are vital to the common man and his
fragile budget. Any tax, especially on food, casts an extra burden on the poor
who are the ultimate consumers of the article and victims of the impost. But
this socially desirable objective can .surely be achieved by appropriate
notifications and, if need be, by necessary legislative direction. The Court
has to interpret the law and apply it.
The State, through its agencies. makes the
law for socially beneficial ends. It is not for the former to salvage the
latter from the legal coils which are its own. handiwork. We make these
observations lest it should be felt that judicial constructions has contributed
to extra food tax. The blame, if any, must belong to the authors of the law.
The appeals are dismissed with costs-one set.
P.H.P. Appeals dismissed.