Joint Director Of Food, Visakapatnam vs The State Of Andhra Pradesh on 27 July, 1976 Equivalent citations: 1976 AIR 2322, 1977 SCR (1) 59, AIR 1976 SUPREME COURT 2322, 1976 3 SCC 598, 1976 TAX. L. R. 2080, 1976 SCC (TAX) 373, 1975 UJ (SC) 927, 1977 (1) SCR 59, 1976 38 STC 329, 1976 2 SCC 876, 1976 8 STA 28, 1976 UPTC 655, 1972 2 SCWR 166, (1976) 2 S C W R 166, 1976 UJ (SC) 698, 38 S T C 329 Author: V.R. Krishnaiyer Bench: V.R. Krishnaiyer, Hans Raj Khanna, N.L. Untwalia 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 Joint Director Of Food, Visakapatnam vs The State Of Andhra Pradesh on 27 July, 1976  1 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 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 Joint Director Of Food, Visakapatnam vs The State Of Andhra Pradesh on 27 July, 1976  2 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 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 Joint Director Of Food, Visakapatnam vs The State Of Andhra Pradesh on 27 July, 1976  3 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 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 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 Joint Director Of Food, Visakapatnam vs The State Of Andhra Pradesh on 27 July, 1976  4 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." 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 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. Joint Director Of Food, Visakapatnam vs The State Of Andhra Pradesh on 27 July, 1976  5 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. Joint Director Of Food, Visakapatnam vs The State Of Andhra Pradesh on 27 July, 1976  6