Sales tax on confiscated goods upheld where the Customs Department sells them as a dealer, despite no profit motive.

Sales tax is attracted to the act of sale, not to the goods themselves, so a Customs Department sale of confiscated or unclaimed goods falls within the Kerala General Sales Tax Act, 1963. The absence of a profit motive does not remove the transaction from the charging provision where the department effects the sale and answers the definition of dealer for that purpose. The constitutional objection based on Article 285 was also rejected because the levy operated on the sale transaction and not as a direct tax on Union property. The sales tax levy was therefore upheld in its application to such sales.

---

---

Issues: (i) Whether the Customs Department was liable to pay sales tax under the Kerala General Sales Tax Act, 1963 on the sale of confiscated or unclaimed goods. (ii) Whether the relevant provisions of the Kerala General Sales Tax Act, 1963 were ultra vires Article 285 of the Constitution of India in their application to the Customs Department.

Issue (i): Whether the Customs Department was liable to pay sales tax under the Kerala General Sales Tax Act, 1963 on the sale of confiscated or unclaimed goods.

Analysis: The liability turned on the nature of the taxable event under sales tax law. Sales tax is levied on the act of sale, not directly on the goods themselves. The reasoning adopted from the earlier apex court decision treated the person selling confiscated goods under the Customs Act as answering the definition of dealer under the sales tax enactment. The absence of a profit motive did not take the transaction outside the charging provision when the department effected sale of confiscated or unclaimed goods.

Conclusion: The Customs Department was liable to pay sales tax on the sale of confiscated or unclaimed goods.

Issue (ii): Whether the relevant provisions of the Kerala General Sales Tax Act, 1963 were ultra vires Article 285 of the Constitution of India in their application to the Customs Department.

Analysis: The objection based on Article 285 was rejected in view of the controlling principle that sales tax and excise duty are distinct imposts, each attached to a different taxable event. Since the levy operated on the act of sale and not as a direct tax on the goods or on Union property as such, the constitutional challenge did not succeed. The Court followed the binding apex court approach and accepted that the State enactment could validly apply to the department in respect of such sales.

Conclusion: The challenge based on Article 285 and ultra vires was rejected.

Final Conclusion: The sales tax levy was upheld in its application to the sale of confiscated or unclaimed goods by the Customs Department, and the appeal failed.

Ratio Decidendi: Sales tax attaches to the act of sale, and a department selling confiscated or unclaimed goods can be treated as a dealer for that purpose; such levy is not barred merely because the goods belong to the Union or the sale is without profit motive.

---