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1957 (4) TMI 55 - SC - VAT / Sales TaxCompetence of the State Legislature - collection of the tax - territorial nexus - Nature of Promotion of a lottery or a prize competition - Betting and gambling - Opposed to public policy - Violation of Fundamental Rights under Article 19(1)(g) - violation of the provisions of Art. 301 - HELD THAT - We find that the Board of Adjudicators pick up nine of the clues and -select only those competitors whose answers correspond with the official solution of those nine clues. Those nine clues may be from the top may be from the bottom or may be selected at random. It is said that they-are like nine compulsory questions in a school examination but then in a school examination the students are told which are the nine compulsory questions and they can take particular care with regard to those; but in this scheme there is no knowing which nine will be selected and those competitors whose answers do not accord with the official solution are debarred from being considered for the first prize. A competitor may have given correct answers to eight of the nine selected clues and may have given correct answers to the remaining eight so that he has sent in sixteen correct answers but he will nevertheless not be considered for the first prize because his answers to the nine selected questions did not agree with the official solutions of those nine clues. This is a chance element to start with. We have then seen that the competing words out of which one is to be selected are in some cases equally apt. We are not satisfied that the word selected by the Board is the more apt word in many. cases. The reasons given by them appear to us to be laboured and artificial and even arbitrary in some cases. On the whole we have come to the conclusion that the Court of Appeal was right in its conclusion that in point of fact the prize competitions run by the petitioners partake of a gambling nature and therefore fall within the definition and are to be governed by the regulatory and taxing provisions of the Act. Thus we have come to the conclusion that the impugned law is a law with respect to betting and gambling under Entry 34 and the impugned taxing section is a law with respect to tax on betting and gambling under Entry 62 and that it was within the legislative competence of the State Legislature to have enacted it. There is sufficient territorial nexus to entitle the State Legislature to collect the tax from the petitioners who carry on the prize competitions through the medium of a newspaper printed and published outside the State of Bombay. The prize competitions being of a gambling nature they cannot be regarded as trade or commerce and as such the petitioners cannot claim any fundamental right under Art. 19(1)(g) in respect of such competitions nor are they entitled to the protection of Art. 301. The result therefore is that this appeal must be allowed and the order of the lower court set aside and the petition dismissed and we do so with costs throughout. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legislative Competence The Court examined whether the impugned Act was a law with respect to a topic assigned to the State Legislature. The relevant entries in List II of the Seventh Schedule were considered, particularly Entries 34 (Betting and gambling) and 62 (Taxes on betting and gambling). The Court concluded that the impugned Act was a law with respect to betting and gambling under Entry 34 and the tax imposed was under Entry 62, thus within the legislative competence of the State Legislature. Issue 2: Nature of the Tax The Court analyzed whether the tax under the impugned Act was a tax on trade or on betting and gambling. It was determined that the tax was a percentage of the entry fees received from the State of Bombay, which was essentially a tax on gambling activities. The Court held that the tax was not on the trade of the promoters but was a tax on betting and gambling, thus falling under Entry 62. Issue 3: Extra-Territorial Operation and Territorial Nexus The Court considered whether the impugned Act had extra-territorial operation. It was argued that the Act affected activities outside the State, but the Court found sufficient territorial nexus, as the activities related to the prize competitions had a substantial connection with the State of Bombay. The Court upheld the validity of the law on the basis of this nexus. Issue 4: Violation of Fundamental Rights and Freedom of Trade The Court addressed whether the impugned Act violated the petitioners' rights under Article 19(1)(g) or Article 301. It was argued that gambling could not be considered "trade" or "business" within the meaning of these Articles. The Court held that gambling activities, being inherently pernicious, were not protected by these constitutional provisions. The Court found that the impugned Act, aimed at regulating gambling, did not infringe upon any fundamental rights or the freedom of trade, commerce, and intercourse. Issue 5: Nature of Prize Competitions The Court examined whether the prize competitions conducted by the petitioners were of a gambling nature. Upon reviewing the scheme and rules of the competitions, the Court concluded that they were indeed gambling activities. The competitions involved elements of chance, and the Court found them to be of a gambling nature, thus subject to the regulatory and taxing provisions of the impugned Act. 3. SIGNIFICANT HOLDINGS The Court established several core principles and made final determinations on each issue:
The appeal was allowed, and the order of the lower court was set aside, resulting in the dismissal of the petition with costs awarded to the appellant.
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