State Trading Corporation of India vs Commercial Tax Officer - Case Analysis

Introduction of State Trading Corporation of India vs Commercial Tax Officer

The State Trading Corporation of India vs Commercial Tax Officer case is an important decision of the Supreme Court. In this case the Court examined whether a corporation can be considered a citizen under the Constitution and able to invoke fundamental rights under Article 19. In this case the State Trading Corporation of India Ltd. (STC) filed a petition challenging excise duties imposed by state authorities. The decision in this case clarified the distinction between nationality and citizenship and held that corporations can claim nationality and they cannot be regarded as citizens entitled to fundamental rights reserved for individuals.

Historical Context and Facts of State Trading Corporation of India vs Commercial Tax Officer

The present revolves around the State Trading Corporation of India Ltd. (STC), petitioner, is a company registered under the Indian Companies Act, 1956 who claimed to be an Indian national. On the other hand, the respondent is the Business Tax Officer (STO) of Visakhapatnam, representing the state excise authority.

Nature of the Petition

The State Trading Corporation Ltd. filed a petition under Article 32 of the Constitution of India seeked for the enforcement of fundamental rights. The petition filed was regarding the Right to Property under Article 19(1)(f) (which was later repealed by the 44th Amendment) and the Right to Carry on Business under Article 19(1)(g) of the Constitution of India. The dispute arises from excise duties imposed by the state excise authorities, specifically in Andhra Pradesh, and other related state proceedings against the corporation.

Argument by the Petitioner

The State Trading Company claimed that it is a government company and qualifies as an Indian national for the purposes of seeking fundamental rights protection. It challenges the excise proceedings and notices issued by state authorities and seeks the quashing of these proceedings.

Preliminary Objection by the Respondents

The Business Tax Officer made objections regarding the citizenship status of the petitioner and the nature of its governmental status. It also questioned whether the State Trading Corporation as a corporation can invoke fundamental rights available only to individuals or citizens under the Constitution.

Issue addressed in State Trading Corporation of India vs Commercial Tax Officer

The main question which was addressed in this case-

• Whether the State Trading Corporation, a Company registered under the Indian Companies Act, 1956, is a citizen within the meaning of Article 19 of the Constitution and can ask for the enforcement of fundamental rights granted to citizens under the said Article ?
• Whether the State Trading Corporation is a department or organ of Government notwithstanding the formality of incorporation?

Legal Provisions involved in State Trading Corporation of India vs Commercial Tax Officer

Article 19(1)(f) of the Constitution of India

Article 19(1)(f) was omitted by 44th Amendment Act, 1978

Article 19(1)(g) of the Constitution of India

Article 19(1)(g) guarantees to practice any- 

• profession or 
• to carry on any occupation
• trade or 
• business

Judgment and Impact of State Trading Corporation of India vs Commercial Tax Officer

The Supreme Court in this case made a clear difference between nationality and citizenship. The Court held that while a corporation may claim nationality based on its place of incorporation, it cannot claim citizenship by mere incorporation in India. Nationality can be attributed to an organization but citizenship is reserved for individuals and rights specifically available to citizens cannot be extended to corporations.

The Court highlighted the separation between Part II which deals with Citizenship and Part III which deals with Fundamental Rights of the Constitution of India. The Court also stated that fundamental rights guaranteed under Article 19 such as the right to freedom of speech, right to assemble peacefully, right to move freely throughout India and right to reside and settle in any part of India are explicitly available only to citizens. The Court concluded that corporations cannot enjoy these rights as they are not citizens and these rights are inherently individual in nature.

The 9-judge bench of the Supreme Court in this case by majority rejected the possibility of treating corporations as citizens for the purposes of Article 19. The Court held that the fundamental rights under Article 19 are available exclusively to natural persons i.e., citizens and not legal persons i.e., corporations. The decision in this case established that corporations cannot be considered citizens for the purpose of invoking fundamental rights under Article 19.

Conclusion

The Supreme Court in State Trading Corporation of India vs Commercial Tax Officer served as a precedent by providing a clear distinction between nationality and citizenship. The Court also ruled that corporations such as the State Trading Corporation of India may claim nationality based on their place of incorporation but they cannot claim citizenship under the Constitution of India. The decision in this case continues to serve as a cornerstone in interpreting the rights and limitations of corporate entities in the constitutional framework of India.