(1.)THE question for consideration in this case is whether the petitioner, the Collector of Customs, Kochi is liable to pay sales lax under the Kerala General Sales-tax Act, 1963 (the KGST Act in respect of the sales of confiscated and unclaimed goods. THE Government of Kerala informed the petitioner of his liability by the letter Ext. P1 dated May 12, 1988 and that led to this writ petition.
(2.)PETITIONER is the Collector of Customs, Kochi who is discharging statutory duties and functions under the Customs Act, 1962. In the course of those duties and functions, he comes into possession of goods which are either confiscated ones or those Collector of Customs v. State of Kerala (Viswanatha iyer, J.) 1993 (1) remaining unclaimed. The provisions for confiscation of goods are contained in Chapter XIV of the Customs Act, and S. 126 provides that when any goods are confiscated under the said Act, such goods shall thereupon vest in the Central Government. It is these goods which are confiscated, and goods which come into the possession of the Collector but remain unclaimed or uncleared, that are sold by him from time to time and it is in respect of these sales that the Kerala State seeks to make the petitioner liable to tax under the KGST Act.
According to the petitioner, no sales tax is exigible in respect of these sales effected by the Customs Department of the Government of India, because the sales are effected only in the discharge of the statutory functions imposed by the Customs Act, of preventing smuggling activities and/or attempt at evasion of payment of Customs duties. The Government of India or its officers are not carrying on any business in discharging these functions stalutorily imposed on them. The sales are not incidental or ancillary to any business carried on by the Collector of Customs and therefore are not exigible to sales tax. It is also contended that Art. 285 (1) of the Constitution exempts the sale of the goods in question, which have become government property under s. 126 of the Customs Act, from the levy of tax by the State.
The respondents, namely the authorities of the State of kerala, on the other hand contend that after the addition of Explanation 2 to the definition of dealer in S. 2 (viii) of the KGST Act, by the amending Act 3 of 1968, the Central Government and the State Government are deemed to be dealers for the purpose of the Act, irrespective of whether they effected sales in the course of business or not. The Collector is therefore liable to pay sales tax even though he is performing statutory functions under the Customs act. They also contend that Art. 285 (1) has no application to sales tax which is an indirect tax levied on the occasion of the sale of goods and not a direct tax on the property of the Union of India. What is exempted by Ail. 285 (1) is only a tax levied on the property as such and not a tax which is related to an event like a sale. The demand for tax is accordingly justified.
(3.)IT will be advantageous at this stage to extract the relevant clauses of the definition of the expressions "business" and "dealer" in the KGST Act, as also Art. 285 (1 ). "2 (vi) "business" includes: - a) Any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture adventure or concern; and b) Any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern; XX XX XX 2 (viii) "dealer" means any person who carries on the business of buying, selling, supplying or distributing goods, executing works contract, transferring the right to use any goods or supplying by way of or as part of any service, any goods directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and includes: - XX XX XX Explanation: - (2) The Central Government or a statcgovcrnment, which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purpose of this Act. " "article 285.- Exemption of property of the Union from State taxation.- (1) The property of the Union shall, save in so far as parliament may by law otherwise provide, be exempt from all taxes imposed by a state or by any authority within a Stale. ". The definition of "dcdaler" as enacted originally did not contain Explanation 2, which was added by the amending Act 3 of 1968.
I may also refer to some other provisions of the KGST act for purposes of completeness. S. 13 provides for registration of dealers, but sub-section (4) thereof renders the section inapplicable to any State government, Central Government or any local authority, so that it is unnecessary for any of these authorities to get themselves registered under the act. Registration under the Act is important as that alone enables a dealer to collect the tax payable on-a sale from the purchaser. S. 22 thus enable a registered dealer to collect the tax payable by him on the sale of any goods from the purchaser, and obliges him to pay over the same to the Government. Sub-section (3) of the section in turn prohibits a person other than a registered dealer from collecting any amount by way of tax under the Act but the Central Government, the Government of Kerala or the Government of any other state in India or any local authority shall in respect of any sale effected by them be entitled to collect by way of tax the amount which a registered dealer effecting such sale would have been entitled to collect by way of tax. It is in the background of these sections that the question has to be decided whether the Collector of Customs acting for the Central Government is a dealer liable to pay tax in respect of the sales effected by him of confiscated/ unclaimed articles.