State Trading Corporation of India Ltd. v. Commercial Tax Officer, Visakhapatnam and Ors, AIR 1963 SC 1811

State Trading Corporation of India Ltd. (STC), a private limited company incorporated under the Companies Act, 1956, was engaged in trading activities and was wholly owned by the Government of India.

The Commercial Tax Officers of Andhra Pradesh and Bihar assessed STC for sales tax liability under the respective State taxation laws.

STC challenged these assessments by filing petitions under Article 32 of the Constitution of India before the Supreme Court.

The corporation contended that the imposition of sales tax violated its fundamental rights under Article 19(1)(f) and Article 19(1)(g) of the Constitution, namely: The right to acquire, hold, and dispose of property; and The right to practice any profession or to carry on any occupation, trade, or business.

The respondents, namely the Commercial Tax Officers, raised preliminary objections regarding the maintainability of the petitions.

The respondents argued that: A company is not a “citizen” and therefore cannot claim protection under Article 19 of the Constitution. STC, being wholly owned by the Government of India, was an instrumentality of the State and could not assert fundamental rights against the State itself.

Citizenship Under the Constitution Applies Only to Natural Persons: The Supreme Court examined Part II of the Constitution dealing with citizenship, along with the provisions of the Citizenship Act, 1955. The Court held that citizenship under the Constitution is confined to natural persons and does not extend to juristic persons such as corporations or companies. A company, though recognized as a legal person for certain purposes, is merely a juristic entity created by law and cannot possess citizenship within the meaning of Article 19.

Distinction Between “Persons” and “Citizens”: The Court emphasized that the Constitution deliberately distinguishes between rights available to “persons” and rights available only to “citizens.” It observed that: Articles such as Article 14 and Article 21 use the term “person” and therefore extend protection to corporations as well. However, Article 19 expressly restricts its protection to “citizens” alone. Consequently, corporations cannot invoke the freedoms guaranteed under Article 19.

Nationality Is Different from Citizenship: The Court clarified the distinction between nationality and citizenship. It noted that a corporation may possess nationality for purposes of: International law, Diplomatic protection, and Taxation or treaty obligations. However, such nationality does not amount to citizenship under municipal or constitutional law. Therefore, even if a corporation is regarded as an Indian national, it cannot claim the constitutional status of a citizen under Article 19.

Government Ownership Does Not Confer Fundamental Rights: The Court also considered the argument that STC was wholly owned by the Government of India. It observed that an entity substantially owned and controlled by the Government functions as an instrumentality of the State. Such a body cannot ordinarily assert fundamental rights against the State itself. However, the principal basis for rejecting the petition remained that a corporation is not a citizen under Article 19.