1984 (8) TMI 310 - HC - VAT and Sales Tax

Issues Involved:

1. Whether sales tax could be levied on lottery tickets.
2. Whether lottery tickets are considered "goods" under section 2(d) of the Bengal Finance (Sales Tax) Act, 1941.
3. The legality and validity of the West Bengal Taxation Laws (Second Amendment) Act, 1984.
4. Impact of the 46th Amendment to the Constitution on the imposition of sales tax on lottery tickets.
5. Whether the imposition of sales tax on lottery tickets violates Article 19(1)(g) of the Constitution of India.
6. Whether the imposition of sales tax on lottery tickets is a colorable exercise of legislative power.
7. Whether the imposition of sales tax on lottery tickets violates Articles 301 and 304 of the Constitution of India.

Detailed Analysis:

1. Levy of Sales Tax on Lottery Tickets:

The primary issue was whether sales tax could be levied on lottery tickets and if they are considered "goods" under section 2(d) of the Bengal Finance (Sales Tax) Act, 1941. The petitioners contended that lottery tickets are not goods and thus should not be subject to sales tax. They argued that the sale of lottery tickets does not involve the transfer of any tangible property but merely provides a chance to participate in a draw, which is a wagering contract and not a sale of goods.

2. Definition of "Goods":

The court examined whether lottery tickets fall within the definition of "goods" under section 2(d) of the Act. The definition includes all kinds of movable property other than actionable claims, stocks, shares, or securities. The petitioners argued that lottery tickets are actionable claims and not goods. The respondents countered that lottery tickets are movable property and thus fall within the definition of goods.

3. Validity of the 1984 Amendment:

The petitioners challenged the legality and validity of the West Bengal Taxation Laws (Second Amendment) Act, 1984, which sought to levy a 20% sales tax on the sale of lottery tickets. They argued that the amendment was unconstitutional and beyond the legislative competence of the State Legislature. The respondents maintained that the amendment was within the legislative powers of the State under entry 54 of List II of the Seventh Schedule to the Constitution of India.

4. Impact of the 46th Amendment:

The petitioners contended that the imposition of sales tax on lottery tickets was not justified even after the 46th Amendment to the Constitution, which expanded the definition of "tax on the sale or purchase of goods" to include certain types of transfers and deliveries. They argued that lottery tickets do not fall within the expanded definition. The respondents argued that the amendment gave the State Legislature the power to levy sales tax on lottery tickets.

5. Violation of Article 19(1)(g):

The petitioners claimed that the imposition of sales tax on lottery tickets violated their fundamental right to carry on business under Article 19(1)(g) of the Constitution. They argued that the tax would make their business unviable as they could not pass on the tax burden to the consumers due to the fixed price of lottery tickets set by the State. The respondents countered that the tax was an indirect tax and its burden could be passed on to the consumers.

6. Colorable Exercise of Legislative Power:

The petitioners argued that the imposition of sales tax on lottery tickets was a colorable exercise of legislative power, as it sought to tax something that was not goods. The respondents maintained that the tax was within the legislative competence of the State and was not a colorable exercise of power.

7. Violation of Articles 301 and 304:

The petitioners contended that the imposition of sales tax on lottery tickets violated Articles 301 and 304 of the Constitution, which guarantee the freedom of trade, commerce, and intercourse throughout the territory of India. They argued that the tax would create an impediment to the free flow of trade and commerce. The respondents argued that the tax was a valid exercise of the State's power to levy sales tax and did not violate these constitutional provisions.

Judgment:

The court held that lottery tickets are goods within the meaning of section 2(d) of the Bengal Finance (Sales Tax) Act, 1941, and thus, sales tax could be levied on them. The court upheld the validity of the West Bengal Taxation Laws (Second Amendment) Act, 1984, stating that it was within the legislative competence of the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution of India. The court also held that the imposition of sales tax on lottery tickets did not violate Article 19(1)(g) of the Constitution, as the tax burden could be passed on to the consumers. The court found no merit in the argument that the imposition of sales tax on lottery tickets was a colorable exercise of legislative power or that it violated Articles 301 and 304 of the Constitution. Consequently, the rule was discharged, and the appeal was disposed of without costs. The court also refused the oral prayer for a certificate under Article 133 of the Constitution, stating that no substantial question of law as to the interpretation of the Constitution or any important point was involved in the case.

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