MATHUR, J. - (1.) IN this group of writ petitions under Article 226 of the Constitution of INdia, the Union of INdia through its two different departments viz; Military Engineering Services and Tele Communications Department, has challenged the constitutional validity of Explanation-II added to Section 2 (14) and Section 2 (38) (ii) of the Rajasthan Sales Tax Act, 1994, hereinafter referred-to as "the Act", being hit by Article 285 of the Constitution of INdia. The petitioners have also challenged the order of assessment as well as the appellate order passed by the authorities under the Act.
(2.) THE first set of group of petitions are filed in the name of Garrison Engineers. It is averred that the Military Engineering Services is the department, which is owned and controlled by the Ministry of Defence, Government of India. One of its department is Garrison Engineers. THE said department is responsible for the construction 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 Areas 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 and 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 un-used material. 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 Tele Communications, Government of India. It provides tele communication 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 averred that for the purpose of providing tele communication system and telephone connections, petitioner is required to set up infrastructure such as telephone building, telephone exchanges etc. at different places in various districts. In order to maintain the quality in the construction work, the material required in execution of the construction work for Tele Communication purpose, is normally purchased and supplied by the department to the contractors. As per the terms and conditions of the contract, the cement and steel for the purpose of construction of telephone exchanges and its maintenance are supplied by the petitioners. As per the terms and conditions of the Notice Inviting Tender, the cement/steel remains in the custody of Junior Engineer/site Incharge of the petitioner, who gives the same to the contractor for the purposes of using it and further for the said purpose, a register is maintained at the site and in the said register, the representative of the contractor shows the receipt and issue of the cement/steel as and when the same is delivered and used by him after every transaction. Thus, according to the petitioners, the material supplied to the contractor is a property belonging to the Union of India and it is immune from levy of tax at the hands of the State Government in view of Article 285 of the Constitution of India. The State Government has sought to explain the definition of `dealer' under Section 2 (14) of the Act by adding the Explanation which provides inclusion of the Central Government. Thus, by adding the Explanation-II by a legal fiction, the Central Government and its departments have been treated as a `dealer' for the purpose of the Act. Similarly, the expanded meaning of `sale' under Section 2 (38) (ii) has been given to include the transfer of property in goods involved in execution of the work contract. We have heard Mr. J. P. Joshi, Mr. J. L. Purohit and Mr. Vineet Mathur Additional Central Government Standing counsel appearing for the petitioners and M. Sagar Mal Mehta, learned Advocate General assisted by Mr. Sanjeev Johari. It is submitted that the ownership of the goods supplied by the petitioner departments of the Central Government for execution of its own work, is not transferred to the contractors. Thus, the incidence of `sale' never takes place and the property remains the property of the Union. Article 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.
(3.) ON the other hand, it is submitted by the learned Advocate General 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 Case reported in AIR 1963 SC 1760 (1), advice tendered by nine Hon'ble Judges on a reference made under Article 143 of the Constitution of India, wherein it is held that indirect tax is not barred by Article 285 of the Constitution of India. The said view has been followed by a nine judges bench of the Hon'ble Supreme Court in New Delhi Municipal Council vs. State of Punjab The learned Advocate General has also invited our attention to a decision of the learned Single Judge of this Court in Karyapalak Engineers vs. Rajasthan Tax Board (3), wherein same controversy on same facts has been decided against the Union of India. It is held therein that in a case of rate contract including the cost of material where material supplied by the contractor the cost of material is adjusted in the final bill against the amount payable to the contractor, the transaction constitutes "sale" and is chargeable under the Rajasthan Sales Tax Act. It is not hit by Article 285 as the immunity of the Union of India from State tax does not extend to impost of indirect tax like sales tax. It is further held therein that the immunity is restricted to tax imposed on the property directly. In rejoinder, it is submitted by Mr. J. P. Joshi that the decision of the Hon'ble Supreme Court in Re Sea Customs Case has been rendered in the context of Article 289 and not 285 of the Constitution of India and, as such, the said decision does not provide clue to controversy pertaining to Article 285. It is further submitted that the decision of the Apex Court in the subsequent case i. e. In the case of Delhi Municipal Council has clearly held that Article 289 does not grant an absolute immunity like the one envisaged in Article 285 of the Constitution. He has submitted that as per the terms of the contract, even on passing- on the material to the Contractor, the ownership remains with the Government, as such, there is no sale. Learned counsel has heavily placed reliance on a decision in State of Punjab vs. Union of India Thus, the crucial question which arises for consideration is as to whether the Union of India can be subjected to sales tax under the Act of 1994. It appears that with a view to treat the Government of India as a "dealer", the meaning of the word "person" in Section 2 (14) of the Act of 1994 has been explained by adding Explanation-II which reads as follows : " 2. Definitions.- 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) of 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 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, 1955 (State Act 3 of 1955) shall not be deemed to be a dealer within the meaning of this clause. " The Explanation-II creates a legal fiction and enlarges the concept of dealer as defined in main clause (14) of Section 2. On a plain reading of Explanation-II added to Section 2 (14), it emerges that every sale or purchase of goods as defined in the Act by a department of the Government whether in the cause of business or not, shall attract a tax under the Act. ;