2010 (8) TMI 1143 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Obligation of authorities under the Tax Act to collect levy from Megha on behalf of the Bhutan Government.
2. Interpretation of the Central Act and Central Rules regarding the total number of lottery draws permissible.

Issue-wise Detailed Analysis:

Issue (A): Obligation of Authorities Under the Tax Act to Collect Levy from Megha on Behalf of the Bhutan Government

1. Background and Context: The writ petitioner, Megha Distributors, challenged the refusal of the appropriate authority under the Tax Act to collect the levy payable by Megha as the promoter of Bhutan Government lotteries. Megha sought a writ of mandamus, asserting its right to bring Bhutan lottery tickets into Kerala and engage in their trade per the International Treaty and applicable Indian laws, including the Central Act and Central Rules.

2. Legal Standpoint: The Bhutan Government, having appointed Megha as its promoter, supported Megha's stand. The State of Kerala contended that Megha could not be recognized as the promoter due to an exclusive agreement between the Bhutan Government and Monica Enterprises, which purportedly had the sole purchasing rights for Bhutan lottery tickets in India.

3. Court's Analysis: The court found that Megha was appointed by the Bhutan Government as its promoter, evidenced by Ext.P1(a) certificate issued in 2005. The Tax Act defines a promoter as any person appointed by a government (including foreign governments with bilateral agreements) to sell lottery tickets in Kerala. The court emphasized that the Bhutan Government's affidavit confirming Megha as its promoter was sufficient and binding, and the authorities under the Tax Act had no jurisdiction to question this appointment or refuse to collect the levy from Megha.

4. Conclusion: The court upheld the learned single Judge's decision, directing the authorities under the Tax Act to collect the levy from Megha as the promoter of the Bhutan Government. The State of Kerala's appeal on this issue was dismissed.

Issue (B): Interpretation of the Central Act and Central Rules Regarding the Total Number of Lottery Draws Permissible

1. Background and Context: The learned single Judge had interpreted the Central Act and Central Rules to mean that a State could conduct only one draw per week for all its lotteries combined, with six bumper draws per year. This interpretation was challenged by Megha, the Bhutan Government, and lottery ticket sellers.

2. Legal Standpoint: Megha and the Bhutan Government argued that the learned single Judge's interpretation was incorrect and that the Central Rules allowed for more than one draw per week for each lottery scheme. The State of Kerala supported the single Judge's interpretation, citing the social impact of excessive lottery draws.

3. Court's Analysis: The court analyzed the relevant provisions of the Central Act and Central Rules, noting that Section 4(h) of the Central Act, which states that no lottery shall have more than one draw in a week, applies on a lottery-to-lottery basis rather than cumulatively to all lotteries of a State. Rule 3(6) of the Central Rules, allowing up to twenty-four draws per day, was found not to contradict Section 4(h). The court emphasized that each lottery scheme could have one draw per week and six bumper draws per year, aligning with the Central Rules.

4. Conclusion: The court vacated the learned single Judge's direction limiting the number of draws to one per week for all lotteries combined. The interpretation allowing multiple draws per day per lottery scheme was upheld, and the appeals by Megha and the Bhutan Government were allowed to this extent.

Further Aspects:

1. Printing of Lottery Tickets: The court noted the importance of ensuring that Bhutan lottery tickets are printed in high-security presses as prescribed by Rule 3(5) of the Central Rules. The State Government's query regarding this issue was deemed significant, and the Central Government was urged to address it.

2. Regulation and Compliance: The court highlighted the need for strict regulation and compliance with the Central Act and Rules to prevent the exploitation of vulnerable sections of society through lotteries. The State Government was encouraged to bring any violations to the attention of the Central Government for appropriate action.

Final Orders:

1. The judgment of the learned single Judge directing the State of Kerala to receive payments from Megha as the promoter of Bhutan Government was affirmed.
2. The direction limiting the number of draws was vacated.
3. The appeals by Megha and the Bhutan Government were allowed to the extent of the interpretation of the Central Act and Rules.
4. The appeal by the State of Kerala was dismissed.
5. The tax due for October 2010 was to be received from Megha without any claim for interest, and the competent authority was directed to permit the transit of Bhutan lottery tickets into Kerala for sale.
6. Each party was to bear its own costs.