M.R Sharma, J.:— Whether Government Medical Store Depot Karnal (hereinafter referred to as the Depot) is a dealer within the meaning of section 2(d) of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the Act) or not is the short point involved in Civil Writ which are all being disposed of by this judgment.

2. It is alleged that the Depot is functioning under the Assistant Director General (Stores) who is incharge of Medical Stores Organisation in the whole of India under the Directorate General of Health Services, Government of India, Ministry of Health, New Delhi. It is a department of the Central Government and supplies medicines and hospital equipment manufactured in India and imported from abroad to Government hospitals, Government institutions Health centres, dispensaries and primary health units located in northern India, some of which are run by self-governing bodies like Panchayats, Panchayat Samitis, Zila Parishads and Municipalities. It does not deal with private hospitals and individuals. It is further averred that the organisation is working as a public utility service on ‘no profit no loss’ basis. The medical stores and the hospital equipment is purchased by the Depot and supplied to the hospitals and medical institutions mentioned above after adding service charges of 10 percent on the cost of intended stores. In the year 1956–1957, question arose whether the activities of the Depot had brought it within the mischief of the term ‘dealer’ as defined in section 2(d) of the Punjab General Sales Tax Act, 1948, or not. After a great deal of scrutiny and discussion, it was ultimately ruled by the Excise and Taxation authorities of the erstwhile State of Punjab that the Depot was not a ‘dealer’ in the ordinary course of business sale and purchase which necessarily implies a profit motive. It was, therefore, ruled that the Depot need not be registered under the said Act. The communication dated July 15, 1957, addressed by the then Excise and Taxation Commissioner, Punjab attached as Annexure ‘C’ to the petition.

3. On August 21, 1968, the Excise and Taxation Officer, Karnal, respondent No. 2, relying upon a judgment of the Supreme Court in Deputy Commercial Tax Officer, Saidapet, Madras v. Enfield Ltd. Co-operative Canteen,1 required the petitioner-depot to produce its account-books for the years 1965–1966, 1966–1967 and 1967–1968 on August 26, 1968 for assessing and levying sale-tax on the medical stores and equipment supplied by the Depot. It was also directed to get itself registered as a dealer under the Act.

4. The petitioner-depot instead of complying with the direction issued by respondent No. 2, wrote back on August 24, 1968, that the term ‘dealer’ “did not cover the activities of the Depot”. On September 20, 1968, another communication on the same lines was addressed to the Excise and Taxation Commissioner, Haryana at Chandigarh. The Government of India (Ministry of Health) also intervened in the matter and some other letters were exchanged between the parties. The respondents, however, did not budge from the position that the petitioner-depot was a ‘dealer’ within the meaning of the Act.

5. On October 30, 1968, respondent No. 2 issued formal notice in form S.T XIV requiring the petitioner-depot to produce accounts from April 11, 1965 to March 31, 1968, along with complete books of account. In response to the notice the Accounts Officer of Depot appeared before respondent No. 2 on November 18, 1968, and gave the figures of sales made by the Depot, while still insisting that the Depot was not a ‘dealer’ within the meaning of the Act.

6. On March 9, 1970, another set of notices was issued by respondent No. 2 in form S.T XIV calling upon it:—

“(a) Under Central Salas Tax Act to produce the account books for the period commencing from 1st April, 1964 to 31st March, 1969, i.e, for the years 1964–1965 to 1968–1969; and

(b) under the Punjab General Sales Tax Act to produce the account books for 1964–1965.”

7. The Accounts Officer and the dealing clerk of the petitioner appeared before respondent No. 2 and reiterated the stand taken on behalf of the petitioner. Respondent No. 2, however, did not agree with the points raised and proceeded to pass assessment orders on March 25, 1970, for the years 1964–1965 and 1965–1966 both under the Punjab General Sales Tax Act as well as under the Central Sales Tax Act. The tax liability, including the penalties imposed for the two years; are as under:—

1964–1965 Issued under Punjab General Sales Tax Act. Issued under Central Sales Tax Act. Rs. Rs. A. Taxable turnover determined. 94,20,000 62,20,000 B. (i) Tax assessed 5,65,200 6,28,000 (ii) Penalty imposed 1,00,000 Total of 9(i) & B(ii) 6,65,200 6,28,000 Less amount paid already — — Net amount due: 6,65,200 6,28,000 1965–1966 A. Taxable turnover determined. 94,01,626-80 62,67,750,51 B. (i) Tax assessed 5,64,097-62 6,26,775-06 (ii) Penalty imposed 1,00,000-00 — Total of B(i) & B(ii) 6,64,097-62 6,26,775-06 Less amount paid already — — Net amount due: 6,64,097-62 6,26,775-06

8. These orders are being challenged in Civil Writ No. 1183 of 1970 on the grounds that the petitioner was not a dealer, the property of the Central Government could not to be taxed under a State law as laid down in Article 285 of the Constitution, the imposition of penalty was illegal, and the petitioner should be allowed to claim exemptions in respect of sales made to institutions lying outside the territories of Haryana. The assessment orders passed and the penalties imposed on the petitioner depot in respect of subsquent years are being challenged in Civil Writ Petitions Nos. 1184, 1795, 1796 and 1797 of 1970.

9. In the return filed on behalf of respondent No. 2 it has been stated that admittedly the petitioner was charging 10 percent over and above the price of the medicines and stores purchased by them. This margin of 10 per cent the petitioner chose to call as service charges, but it did not produce any evidence or account including the profit and loss account, balance-sheet, etc., in support of its contention. With reference to the claim of the petitioner regarding free distribution of medical stores made available by foreign donors. It was stated that it was not the main business of the petitioner.

10. Before adverting to the arguments raised at the bar, it would be useful to have a look at section 2(d) of the Punjab General Sales Tax Act, 1948:—

“2. In this Act, unless there is anything repugnant in the subject or context,—

(a) ‘Dealer’ means any person including a Department of Government who in the normal course of trade sells or purchases any goods that are actually delivered for the purpose of consumption in the State of Punjab, irrespective of the fact that the main place of business of such person is outside the said State and where the main place of business of any such person is not in the said State, ‘dealer’ includes the local manager or agent of such person in Punjab in respect of such business.

Explanation.—(1) A co-operative society or a club or any association which sells or supplies goods to its members purchase goods specified in Schedule C is a dealer within the meaning of this clause.

(2) A factor, a broker, a commission agent; a dealer's agent, an auctioneer or any other mercantile agent by whatever name called, and whether of the same description as hereinbefore mentioned or not, who carries on the business of selling, supplying or purchasing goods and who has in the customary course of business, authority to sell goods belonging to principals or to purchase goods on their behalf is a dealer.

(3) For the purpose of this clause, ‘Government’ will include the Central Government or the Government or any other State.”

This definition has been modified with effect from September 7, 1955, in following terms;—

“2. In this Act unless there is anything repugnant in the subject or context.—

(c) ‘dealer’ means any person including a department of Government who in the normal course of trade, whether with or without a profit motive, directly or otherwise, whether for cash, deferred payment, commission, remuneration or other valuable consideration purchases, sells, supplies or distributes any goods in the States, or imports into or exports out of the State, any goads, irrespective of the fact that the main place of business of such person is outside the State and where the main place of business of such person is not in the State including the local manager or agent of such person in the State in respect of such business.

(iv) ‘trade’ includes any transaction casual or otherwise, of purchasing selling supplying, distributing, importing, exporting or manufacturing any goods in connection with, or incidental or ancillary to, such trade;

………………….”

11. In Enfield India Ltd. Co-operative Canteen Ltd. case (supra), it was held by the Supreme Court that even when a co-operative society supplies refreshments to its members for a price paid or promised, it results in transfer of property in the refreshments.

12. It has been vehmently argued by Mr. Awasthy, the learned counsel for the petitioner, that before the Depot could be regarded as a ‘dealer’ within the meaning of the Act, it must be shown that it sold medical stores and equipment, “in the normal course of trade”. It was submitted that profit motive is a necessary adjunct of trading activity and since the petitioner was only collecting service charges for rendering service to Government institutions and hospitals, it should not be held to be carrying on any trade. The judgment rendered by the Supreme Court in Enfield India Ltd. Co-operative Canteen Ltd. case (supra) was sought to be distinguished on the point that words ‘dealer’ and ‘business’ were differently defined in Madras General Sales Tax Act, 1959. It was further submitted that the view taken in this case stood modified by the view taken by the Supreme Court of India in The Joint Commercial Tax Officer, Harbour Division II, Madras v. Young Men's India Association, Madras . 26 S.T.C 241., we, however, find that the facts of that case were quite different. A members' club was supplying refreshments and other articles to its members. The Court held that:

“If the club even though a distinct legal entity is only acting as an agent for its numbers in the matter of supply various preparations to them no sale would be completely absent. This position has been rightly accepted even in the previous decision of this Court.”

Shah, J., who wrote a separate judgment, observed as under:—

“It appears on the findings recorded by the High Court that the clubs or associations sought to be rendered liable in these appeals were not transferring property belonging to them but were merely acting as agents for and on behalf of the members. They were not selling goods but were rendering a service to their members.”

13. In the instant case, by no stretch of imagination it can be held that the various hospitals and institutions to whom the medical stores and equipment were being sold by the petitioner were the legal or beneficial owners of the stores.

14. The other two cases relied upon by Mr. Awasthy and reported as Commissioner of Sales Tax, Gujarat, Ahmedabad v. Anil Co-operative Credit Society . 24 S.T.C 180. and Sports Club of Gujarat Ltd. v. Commissioner of Sales tax, Gujarat, Ahmedabad . 36 S.T.C 511., are distinguishable on similar grounds.

15. On the other hand, in Government Medical Store Depot v. Superintendent of Taxes, Gauhati . 1974 T.L.R 1628. it was held by a Division Bench of Gauhati High Court with regard to this very Depot that it fell within the term of the word ‘dealer’ as defined in section 2(b) of the Central Sales Tax Act, 1956. Speaking for the Bench, P.K Goswami, C.J, observed as under:—

“When the Government of India has decided to establish a Government Depot for selling medicines, drugs and other medical stores, at cost price plus 10 per cent towards administrative expenses in order that there will be no profit but certainly that there is no loss, it can not be said that the petitioner is not carrying on a normal trading activity. Another test will be whether if another person has done the same thing in the same way, he would be held to be carrying on business or not. It is difficult to hold to the contrary. As the Supreme Court observed, the question is of intention to carry on business of selling the goods and ‘it is not intended that profit must in fact be earned’. It is difficult to hold that the Government of India in this case is absolutely regardless of the question of possibility of profit rather than loss. The very formula ‘No profit-No loss’ clearly points to earning of some profit and certainly not incurring of loss in the course of the transactions which are organised, systematic and regular. The very fact the Government keeps a watch and if required revises the formula of rate fixation and the levy of departmental charges would also go to show that the Government never intended not to earn minimum of profit in these transactions of sales.” Civil Appeals Nos. 1393-98 of 1975 (The Joint Director of Food, Visakhapatnam v. The State of Andhra Pradesh . C.A Nos. 1393-98 of 1975., decided by the Supreme Court of India on July 27, 1976, arose out of the following facts. The Central Government constructed an infrastructure and appointed, inter alia, a Joint Director of Food stationed in the port town of Visakhapatnam. This officer sold, for the price fixed by the Government, foodgrains and fertilisers to the Andhra Pradesh State and other States. The transactions of sale fell in the category of in intra State and inter State sales. A point was raised that the Central Government being the taxing authority could not possibly be expected to tax itself under the Central Sales Tax Act, 1956, Liability of the Central Government for payment of sales tax under the Andhra Pradesh General Sales Tax Act, 1957, was also challenged. The Supreme Court noticed the following definition of the word ‘dealer’ appearing in section 2(b) of the Central Sales Tax Act:—

“2(b) In this Act, unless the context otherwise requires, ‘dealer’ means any person who carries on the business of buying or selling goods, and includes a Government which carries on such business.”

After noticing the definition, it held that the Central Government being a Government was squarely covered by the definition. The argument that the distribution of essential commodities by the State in implementation of its Governmental obligations could not be described as a ‘trading’ activity was disposed of thus:—

“Indubitably the State has the power to carry on trade or business as is manifest from Article 19(6)(ii) and other provisions. Indubitably the State distributes essential commodities in a fair and equitable way for the survival of the community under its protection. It dose not follow that we cannot harmonise the two functions. It is well on the agenda of State activity that it carries on trade or business in essential commodities because it has the power to do so and because it is obligated to ensure even distribution of vital goods for the needy sections of the people. We see no difficulty in inferring that the systematics activity of buying foodgrains and fertilisers and selling them by the State although in fulfilment of a beneficent national policy is nevertheless trade or business. Necessarily government becomes a ‘dealer’ by definition and carries on ‘business’ within the meaning of the Central Act and the State Act (omitting for a moment the distinction in the two definitions based upon the motive to make gain or profit). The conclusion therefore is inevitable that the appellant, representing the Central Government is rightly held to be the assessee.”

16. The aforementioned observations apply with full vigour to the instant case and we have no hesitation in holding that the petitioner-depot was a ‘dealer’ within section 2(b) of the Central Sales Tax Act and also under section 2(d) of the Act.

17. It is no doubt true that Article 285 of the Constitution lays down that the property of the Union of India shall be exempt from all taxes imposed by a State or by any authority within a State, but under the sales-tax laws the incidence of taxation is the transaction of sale or purchase and property as such is not subjected to tax. The point raised is concluded by the Supreme Court in In re Sea Customs Act (1818), S. 20(2).

18. On the question of imposition of penalty, Mr. Awasthy has submitted that the question whether the petitioner could be regarded as a dealer or not was not free from difficulty. The Government of India, after being duly advised by the Ministry of Law, also entertained the same view. It is submitted that penalty can be imposed on an assessee who makes contumacious disregard of the provisions of law. It is urged that the conduct of the petitioner was not such as would entail the imposition of a penalty. On the question of claim for exemptions in respect of stores and equipment sold to institutions functioning outside the State of Haryana, it was submitted that the Depot did not file D-forms for claiming exemption under the bona fide belief that its case did not fall within the definition of the word ‘dealer’ and that it should now be allowed to file these forms before the Assessing Authority for claiming exemption.

19. It is, however, not disputed before us that the petitioner has also filed appeals before the appellate authority. We have no doubt in our mind that the said authority will give due weight to the arguments advanced with regard to these two points because while exercising appellate jurisdiction it possesses all the powers of the original tribunal. After having found, that the petitioner was a ‘dealer’ within the meaning of the Act and the Central Sales Tax Act, we do not think it proper to interfere in a petition under Article 226 of the Constitution, especially when the appellate authority is seized of the matter.

20. These petitions are, therefore, dismissed, with no order as to costs.

Petitions dismissed.