Deeming fiction for government dealers upheld, and Article 285 does not exempt sales of confiscated goods from sales tax.

A sales tax statute that deems the Central Government and State Government to be dealers applies fully to sales of confiscated and unclaimed goods, so the Collector of Customs was liable as a dealer and the sales were exigible to tax. Article 285(1) protects Union property from direct taxation, but it does not exempt the taxable event of sale; sales tax is an indirect levy on the act of sale, not a tax on property. The State's competence under Entry 54 of List II was therefore upheld, and the demand for sales tax on the impugned sales was sustained.

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Issues: (i) Whether the Collector of Customs, acting for the Central Government, was a dealer liable to pay sales tax under the Kerala General Sales Tax Act, 1963 on sales of confiscated and unclaimed goods; (ii) Whether Article 285(1) of the Constitution of India exempted such sales from State sales tax, and whether the levy was beyond legislative competence.

Issue (i): Whether the Collector of Customs, acting for the Central Government, was a dealer liable to pay sales tax under the Kerala General Sales Tax Act, 1963 on sales of confiscated and unclaimed goods.

Analysis: The statutory definition of dealer had been expanded by the deeming provision inserted by the amending Act of 1968, under which the Central Government and State Government are treated as dealers whether or not the sales are made in the course of business. The related provisions on registration and collection of tax also showed that the fiction was intended to apply fully to governmental sales. The argument that sales made in discharge of customs functions lacked a business element was held irrelevant once the legislature had expressly dispensed with that requirement for the Governments.

Conclusion: The Collector of Customs was liable as a dealer under the Act, and the sales of confiscated and unclaimed goods were exigible to sales tax.

Issue (ii): Whether Article 285(1) of the Constitution of India exempted such sales from State sales tax, and whether the levy was beyond legislative competence.

Analysis: Article 285(1) was held to protect Union property from direct taxation on property, not taxes on the taxable event of sale. The nature of sales tax was treated as an indirect tax imposed on the act of sale, not a direct tax on Union property. The larger Constitution Bench view in the Sea Customs Act reference was preferred over the later short order in State of Punjab, which was treated as rendered per incuriam because the earlier binding authority on the scope of Article 285(1) had not been considered. Since the levy attached to the sale transaction, legislative competence under Entry 54 of List II was upheld.

Conclusion: Article 285(1) did not confer immunity, and the State had competence to levy sales tax on the sales in question.

Final Conclusion: The writ petition failed in entirety, and the demand of sales tax on sales of confiscated and unclaimed goods was sustained.

Ratio Decidendi: Where a sales tax statute creates a deeming fiction treating the Central Government as a dealer for sales made by it, the fiction must be given full effect; Article 285(1) does not exempt Union sales from sales tax because such tax is imposed on the act of sale and not directly on Union property.

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