1992 (8) TMI 248 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of Sales Tax on Lottery Tickets
2. Discrimination in Tax Treatment between Tamil Nadu and Other States' Lottery Tickets
3. Validity of Government Orders and Notifications
4. Compliance with Supreme Court Judgment

Detailed Analysis:

1. Levy of Sales Tax on Lottery Tickets:
The appellants, dealers of raffle tickets, challenged the levy of sales tax on lottery tickets sold in Tamil Nadu. The Tamil Nadu Government, pursuant to a Presidential Order, organized a State lottery and imposed a 20% sales tax on the first sale of lottery tickets under the Tamil Nadu General Sales Tax Act, 1959. The Supreme Court in H. Anraj v. Government of Tamil Nadu upheld the State Government's competence to levy sales tax on lottery tickets, affirming that lottery tickets are "goods" under the Act.

2. Discrimination in Tax Treatment between Tamil Nadu and Other States' Lottery Tickets:
The appellants contended that the tax assessment method resulted in an exemption for Tamil Nadu raffle tickets while imposing tax on tickets from other States, violating Article 301 read with Article 304(a) of the Constitution. The Supreme Court had earlier struck down G.O. Ms. No. 219 for discriminatory treatment. The Division Bench of the High Court also invalidated G.O. Ms. Nos. 224 and 1017 for the same reason. The Government's method of assessment was alleged to still harbor discrimination by not passing the tax burden of Tamil Nadu raffle tickets to purchasers, unlike tickets from other States.

3. Validity of Government Orders and Notifications:
The Supreme Court struck down G.O. Ms. No. 219, and the High Court invalidated G.O. Ms. Nos. 224 and 1017, deeming them discriminatory. The appellants argued that these notifications should not independently stand once the Supreme Court struck down G.O. Ms. No. 219. The Division Bench held that these notifications had no legal effect and quashed them, emphasizing that the State could collect sales tax according to law.

4. Compliance with Supreme Court Judgment:
The High Court examined whether the Government's current tax assessment procedure complied with the Supreme Court's judgment in H. Anraj. The Government's affidavit and subsequent assessment orders demonstrated that the tax burden on Tamil Nadu raffle tickets was passed on to purchasers, ensuring no exemption and uniform tax treatment. The High Court found that the Government had rectified the discrimination pointed out by the Supreme Court, thereby alleviating the vice of discrimination.

Conclusion:
The High Court dismissed the writ appeals, upholding the validity of the sales tax levy on lottery tickets and confirming that the current assessment method did not discriminate between Tamil Nadu and other States' lottery tickets. The Court found no merit in the appellants' claims of continued discrimination and affirmed the correctness of the learned single Judge's orders. The appeals were dismissed with costs.