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PETITIONER: JOINT DIRECTOR OF FOOD, VISAKAPATNAM

       Vs.

RESPONDENT: THE STATE OF ANDHRA PRADESH

DATE OF JUDGMENT27/07/1976

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. KHANNA, HANS RAJ UNTWALIA, N.L.

CITATION:  1976 AIR 2322            1977 SCR  (1)  59  1976 SCC  (3) 598  CITATOR INFO :  F          1985 SC1748  (7)

ACT:             Central  Sales Tax Act, 1956--Sec. 2(b), 9--Andhra  Pra-         desh General Sales Tax .Act 1957--central Government selling         foodgrains and fertilizer, whether a dealer  Profit  motive,         if relevant--Whether State carries on business.

HEADNOTE:             The  Joint  Director of Food stationed in  the  Port  of         Visakapatnam 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  per-         tained to the tax under the Central Sales Tax Act for deter-         mining the presence of profit motive in the Central  Govern-         ment while undertaking the dealings in question.                  In appeals by Special Leave the appellant  contend-                  ed:                     1.  Since the sales were by the Central  Govern-                  ment, 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  com-                  modities  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

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       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 provi-         sions.  Systematic activity of buying foodgrains and  ferti-         lizers and selling them by the State although in  fulfilment         of the beneficiant national policy is never the. 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]

JUDGMENT:             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  sug-         gests the need for litigative discipline for our governments         and a  periodical  postauditing 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  ap-         pearing for the common appellant in all these cases.             Our Constitution mandates on the State welfare  activism         and contemplates its undertaking distribution of commodities

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       essential  to  the life of the community  at  large  through         trade   and  business  directly organised or in other  suit-         able ways.  Foodgrains and fertilisers  are strategic  items         and the Union of India has, in fulfilment of high governmen-         tal functions, been procuring these vital goods and  selling         them lo the States or their nominees so as to ensure equita-         ble  supplies and price discipline.  Pursuant to this   com-         mendable  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  Visakapatnam.  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.  Un-         daunted  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  Consti-         tution.   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   Govern-         ment.    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 authori-         ty  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 author-         ity.   We  have therefore to examine whether’ there  is  any

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       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                  business".                  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  govern-                  ment   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  re-                  tained  by  it:  and the proceeds  attributable  to                  Union  territories shall form part of the  Consoli-                  dated 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 undertak-         ing  to  distribute essential commodities by  the  State  in         implementation  of its governmental obligations  cannot   be         described  as  ’trading’ activity or carrying  on  of  busi-         ness’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  commodi-         ties  because  it has the power to do carries  on  trade  or         business  it  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 fulfilment of a benificant national policy         is  never theless trade or business. Necessarily  Government         becomes  a ’dealer’    by definition and carries  on  ’busi-         ness,  within the meaning of the central. Act and the  State         Act (omitting for a moment the distiction in the  two  defi-         nitions  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

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       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  intra-         State 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  Appel-         late 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.         64