Sales tax turns on transfer of property between distinct legal persons; internal Central Government supplies are not sales.

Sales tax applies only where there is a transfer of property in goods between distinct legal persons, so internal supplies of medicines and stores by the petitioner to departments of the Central Government were not sales and were not taxable. Supplies to other State Governments, statutory organisations and other separate recipients were treated as sales within the 1954 Act, while free distribution of aid goods fell outside the charging provision. The Article 285(1) objection was rejected because the taxable event is the sale, not ownership of the goods. The existing assessment and demand were not sustained in their present form and the matter was remitted for fresh determination of taxable turnover.

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Issues: (i) Whether supplies of medicines and stores by the petitioner to departments of the Central Government constituted a sale so as to make the petitioner a dealer under the West Bengal Sales Tax Act, 1954. (ii) Whether supplies to other State Governments, statutory organisations and other recipients, and the plea of exemption under Article 285(1) of the Constitution of India, affected the petitioner's tax liability under the 1954 Act.

Issue (i): Whether supplies of medicines and stores by the petitioner to departments of the Central Government constituted a sale so as to make the petitioner a dealer under the West Bengal Sales Tax Act, 1954.

Analysis: The definition of dealer in section 2(b) of the 1954 Act covers a person who sells notified commodities brought into West Bengal for the purpose of sale. Sale must bear the meaning assigned by the Sale of Goods Act, 1930, and requires transfer of property between distinct legal persons. Where the Central Government owned the goods and the petitioner merely supplied them to another department of the Central Government, the transaction amounted only to an internal transfer of possession, not a transfer of property to another legal entity.

Conclusion: Such supplies to departments of the Central Government were not sales and were not exigible to sales tax; the petitioner was not a dealer in respect of those transactions.

Issue (ii): Whether supplies to other State Governments, statutory organisations and other recipients, and the plea of exemption under Article 285(1) of the Constitution of India, affected the petitioner's tax liability under the 1954 Act.

Analysis: Supplies made to other State Governments, statutory organisations or institutions outside the Central Government were transfers of property to separate persons or bodies and therefore amounted to sales within the meaning of the 1954 Act. Free distribution of goods received as aid was outside the taxing provision. The plea based on Article 285(1) was rejected, as the taxable event in sales tax is the act of sale and not ownership of the goods, and the constitutional point stood settled against the petitioner. The matter required factual reassessment to segregate taxable sales from non-taxable free aid and intra-Central-Government transfers.

Conclusion: Those supplies remained liable to tax if they were sales, while the Article 285(1) challenge failed; the assessing authority was directed to reassess the liability accordingly.

Final Conclusion: The assessment and demand were not sustained in their existing form, but the matter was sent back for fresh determination of the taxable turnover after excluding non-taxable supplies and intra-Central-Government transfers, with fresh demands to follow, if warranted.

Ratio Decidendi: Sales tax is attracted only where there is a transfer of property in goods between distinct legal persons, and internal transfers within the same legal entity do not amount to a sale.

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