Government supply depot treated as a dealer; sales tax applies to sales transactions despite Union ownership of goods.

A Government department that systematically buys and supplies medicines and equipment in a regular commercial arrangement was treated as carrying on trade, even though it operated on service charges and not for actual profit. On that basis, it fell within the statutory meaning of "dealer" under the sales tax laws. The constitutional objection based on Article 285 also failed because sales tax is levied on the sale transaction, not on Union property as such, so Union ownership of the goods did not bar the levy on sales made by the department. The challenge to the assessment was therefore unsuccessful.

---

---

Issues: (i) whether the Government Medical Store Depot was a dealer within the meaning of the sales tax laws; (ii) whether Article 285 of the Constitution barred levy of sales tax on the Depot's transactions.

Issue (i): whether the Government Medical Store Depot was a dealer within the meaning of the sales tax laws.

Analysis: The statutory definition covered a department of Government carrying on sales in the normal course of trade. The Depot bought and supplied medicines and equipment systematically to hospitals and institutions, charging 10 per cent over cost as service charges. The Court treated this organised and regular activity as trading activity and held that profit need not actually be earned for the transaction to amount to business or trade. The reasoning in decisions involving members' clubs or agency arrangements was distinguished because the Depot was transferring its own goods and not merely acting on behalf of the recipients.

Conclusion: The Depot was a dealer under the relevant sales tax enactments.

Issue (ii): whether Article 285 of the Constitution barred levy of sales tax on the Depot's transactions.

Analysis: The Court held that sales tax attaches to the transaction of sale or purchase and not to property as such. Therefore, exemption of Union property from State taxation did not prevent levy of sales tax on sales effected by a Central Government department. The constitutional objection was treated as concluded against the petitioner by binding precedent.

Conclusion: Article 285 did not bar the sales tax levy.

Final Conclusion: The Depot's challenge to the assessment failed, and the writ petitions were dismissed.

Ratio Decidendi: A Government department that systematically buys and sells goods in a regular commercial arrangement, even on a no-profit-no-loss basis and for service charges, carries on trade and is a dealer; sales tax is imposed on the sale transaction and is not barred merely because the goods belong to the Union.

---