- (1.) RAVI S. DHAVAN, J. These large number of the writ petitions raise issues in public law. The issue has been precipitated by the State of U. P. in taxing the Union of India and, thus, giving rise to the main question whether the property of Union of India is exempt from State taxation ? The State of U. P. does not accept the proposition in the affirmative. In fact, it has taken a stand that it can tax the Union of India. In the circumstances, when the case began a preliminary issue was raised that this Court cannot adjudicate upon the matter and that the Union of India should be relegated to the alternative remedies under the State enactment. The State enactment is the U. P. Trade Tax Act, 1948 before amendments in 1994, it was known as the U. P. Sales Tax Act, 1948. The reference hereinafter to this enactment will be as "the Act".
(2.) THE facts are simple. THE Government of India, its Department of Telecommunication, has been assumed to be in trade and business by the Trade Tax Department, and the gross revenues of the Telecommunication Department collected from subscribers, using the telephone facility, have been subjected to trade tax by the State of U. P. Prior to the Constitution being enacted, the Sales Tax Department did not tax the Government of India on the revenues collected for providing telephone services. On these facts, there is no issue. About the year 1988, the Department of Trade Tax, the Ministry of Institutional Finance, Uttar Pradesh, came to the conclusion that the Union of India, the Department of Telecommunication, on its gross turnover had not filed a return which it should have. It was presumed that, in this context, the Union of India is a "dealer" in business, and as a dealer liable to pay the trade tax. THE District Manager (Telecommunication), of the districts concerned, was held as liable to pay tax with an obligation to file return under section 7 of the Act. But, as no return had been filed by the Union of India, its Department of Telecommunication, the assessing authority took recourse to the provisions of this section under sub-clause (3), that as no return was submitted by the "dealer" within the prescribed period, then, on the principle of best judgment tax was determined. THE Union of India, on the assumption that it was a dealer who had not filed return was assessed to pay trade tax. THE assessments were ex parte (Writ Petitions Nos. 347, 975, 1186 and 1680 of 1993, 601, 738 and 1081 of 1994, 115 and 116 of 1995 and 262, 263 and 264 of 1998) and, in one case, the Union of India filed an appeal against the ex parte order. THE appeal was dismissed (Writ Petition No. 1982 of 1994 ). At the time of hearing a preliminary objection was raised by learned Standing Counsel, U. P. , to the effect, that all these petitions ought to be dismissed on the ground of an alternate remedy so provided under the Act. It was also contended that in one matter (Writ Petition No. 802 of 1995 : Sub-Divisional Officer, Telegraph, Basti v. State of Uttar Pradesh decided on July 10, 1995), a writ petition was filed by the Union of India but it was dismissed in limine on the ground that against the assessment order, the Union of India on the trade tax determined may take recourse to an appeal under the Act. It is accepted by the Standing Counsel that no notice was issued on that writ petitions nor pleadings were exchanged, unlike the present cases. The circumstances were, thus, different. In the present cases, which have remained pending for quite sometime, parties, that is to say, the Union of India and the State of U. P. have exchanged pleadings and the record of the cases are ready for hearing. At this stage, it would be appropriate for the court to refer to a very recent judgment of the Supreme Court (Paradip Port Trust v. Sales Tax Officer [1999] 114 STC 178; (1998) 4 JT 483), where on issues raised between the competence of a State to impose sales tax and on the High Court dismissing the writ petitions in limine on the ground of alternate remedy, the Supreme Court, in no uncertain terms, observed : "we are of the view that the High Court should have entertained the writ petitions and should have considered the said question instead of requiring the appellant to avail the remedy of appeal under the Sales Tax Act". After allowing the appeal and setting aside the judgment of the High Court, the matters were remitted to the High Court for consideration. In the circumstances, any petition which may have been dismissed in limine without issue of notice, is on a very different footing as there is no exchange of pleadings and the circumstances are not such which can be said that the petition has been considered, heard, pleadings exchanged and decided to enter judgment. With pleadings exchanged, it would only be appropriate that such issue of conflict between the Federal and the State Government ought to be decided on merits without delay. In similar circumstances, a decision of the Supreme Court required it so. At the outset when the hearing began, the court has asked learned Standing Counsel for the State of U. P. to take instructions for a statement whether, at any time prior to coming of the Constitution, such tax, i. e. , sales tax or trade tax as it is called today, was levied on the telephone department assessing turnovers or the revenues or fee collected in providing telephone facilities to subscribers. The answer, upon instructions, was in the negative. This is the first time since the Republic that the sales or trade tax is being imposed by a Provincial Government, i. e. , the State of U. P. on the Government of India. The simple question is, does the Constitution of India permit this ?
(3.) AS the facts are as brief as have been narrated, the contention of the State of U. P. as a justification for taxing the Union of India needs to be reiterated. It is contended that the Government of India is a "dealer" within the meaning of the Act and, thus, it was obliged to file a return which it did not do. Consequently, it was taxed on the gross revenues earned in each telecommunication district. It is further contended that imposition of tax has been based on the newly amended section, permitting the State of U. P. to tax the right to use any goods for any purpose for cash, deferred payment or other valuable consideration or transfer of property. This is followed by a submission that in so far as the expression "dealer" is concerned, the Act clearly mentions that it includes "a Government" which, in the course of its business or otherwise, in effect, sells, supplies or distributes goods directly for cash, deferred payment, remuneration or other valuable consideration. This is the basis of the argument on which the Government of India has been subjected to tax. This is justified by the fact that the State of U. P. is permitted to "tax on the sale and purchase of goods" and that this is to be understood with its various meanings and cognate expressions as under clause (29a) of article 366 of the Constitution of India, the Act has been amended with the insertion of section 3-F. These, thus, are the short facts and submissions on which the State of U. P. , recently, resorted to tax the Government of India, its Department of Telecommunication. If each telecommunication district under the administrative charge of the District Manager (Telecommunication) had been assessed to and levied similar tax, as has been done in some of the cases, the sovereign functions of the Union in providing public utility services, under an Act of Parliament, would be subject to tax. It is on record that the exercise to tax the Government of India was not taken to its logical conclusion as would have been done in the case of an ordinary trader who is obliged to file a trade tax return and consequently, pay a tax which if not paid would be realised by distress and attachment of the properties or the estate of the Union; in the present case, the Trader Tax Department of the State made an assessment on the Union of India and then fell short of the exercise not realising the tax by execution proceedings. No answer could be given to the court why this exercise of realising the trade tax by attachment and coercive process was not taken to its logical conclusion. The hesitation of putting the Union under distress is the answer to the issues.;