Article 131 jurisdiction and Union property exemption did not bar sales tax on confiscated goods sales.

Article 131 confers the Supreme Court's exclusive original jurisdiction only on disputes arising from the constitutional relationship between the Union and the States; an ordinary fiscal controversy over whether the Union is treated as a dealer for sales tax purposes does not attract that bar, so the writ was maintainable. Article 285(1) protects Union property from direct State taxation, but not from a tax on the act of sale. The amended A.P. General Sales Tax Act provisions were read as valid deeming provisions covering sales of confiscated goods by customs authorities, and the sales tax levy on such sales was therefore upheld.

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Issues: (i) Whether the writ petition by the Union of India against the State of Andhra Pradesh was barred by Article 131 of the Constitution of India. (ii) Whether the amended definitions and explanations in the A.P. General Sales Tax Act, 1957 validly subjected sales of confiscated goods by customs authorities to sales tax and whether such levy was barred by Article 285(1) of the Constitution of India.

Issue (i): Whether the writ petition by the Union of India against the State of Andhra Pradesh was barred by Article 131 of the Constitution of India.

Analysis: Article 131 confers exclusive original jurisdiction on the Supreme Court only in disputes between the Union and States that arise in the constitutional relationship between them and involve legal rights of that constitutional character. A dispute where the Union is sought to be taxed as a dealer on the sale of goods is an ordinary fiscal controversy and not a dispute in the constitutional capacity contemplated by Article 131. The existence of a tax claim against Union property or sales transactions does not by itself attract the bar of Article 131.

Conclusion: The writ petition was maintainable before the High Court and was not barred by Article 131.

Issue (ii): Whether the amended definitions and explanations in the A.P. General Sales Tax Act, 1957 validly subjected sales of confiscated goods by customs authorities to sales tax and whether such levy was barred by Article 285(1) of the Constitution of India.

Analysis: Article 285(1) exempts the property of the Union from State taxation, but the exemption has to be read as confined to taxes directly on property and not extended to every tax that may incidentally affect Union property or transactions. The amended statutory definitions treated the Central Government and State Governments as dealers in respect of sales made whether or not in the course of business, and the legal fiction created by the explanations was upheld by the Supreme Court precedent relied upon. Sales tax is a tax on the act of sale and not a direct tax on the goods themselves, and the sale of confiscated goods by customs authorities falls within the statutory deeming provisions.

Conclusion: The amended provisions were valid and the sales tax levy on the proceeds of sale of confiscated goods was not unconstitutional.

Final Conclusion: The challenge to the levy failed in its entirety, and the statutory deeming provisions bringing such sales within the sales tax net were sustained.

Ratio Decidendi: A dispute is outside Article 131 unless it arises from the constitutional relationship between the Union and the States, and Article 285(1) does not exempt Union transactions from a State levy that is imposed on the act of sale rather than directly on Union property.

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