Union property immune from State tax demand; constitutional protection prevails over statutory definition and jurisdictional objection fails

Article 285(1) bars State taxation of Union property, and a statutory definition of "dealer" cannot override that constitutional protection. A demand raised by a State taxing authority against Union property was therefore beyond jurisdiction and contrary to Article 285(1). The presence of the Union and the State as parties did not, by itself, make the dispute one that falls exclusively under Article 131, because the challenge was to a quasi-judicial demand notice under State law. The preliminary jurisdictional objection failed, and the notice was quashed.

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Issues: Whether the demand notice issued under the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994 was valid in view of Article 285(1) of the Constitution of India, and whether the High Court lacked jurisdiction because the dispute allegedly attracted Article 131 of the Constitution of India.

Analysis: The challenge was directed against a demand raised by a quasi-judicial authority under the State enactment, not against a direct dispute between the Union and the State Governments. The existence of Union and State as parties did not convert the matter into one falling exclusively within Article 131. On merits, properties belonging to the Union are protected from State taxation by Article 285(1). Even if the Union authorities could fall within the statutory definition of dealer under the State Act, that definition could not override the constitutional bar. A tax demand on Union property was therefore beyond the authority of the State taxing officer.

Conclusion: The preliminary objection to jurisdiction failed, and the demand notice was held to be without jurisdiction and contrary to Article 285(1). The petition was allowed and the notice was quashed.

Ratio Decidendi: A State taxing authority cannot levy or enforce tax on Union property in the face of Article 285(1) of the Constitution of India, and the presence of the Union and the State as parties does not by itself oust the High Court's jurisdiction under Article 227 where the challenge is to a quasi-judicial demand.

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