1957 (4) TMI 55 - SC - VAT and Sales Tax

Whether an illegitimate competition can be regarded A a trade at all and in one view of the matter the tax may have to be justified as a tax on betting and gambling under Entry 62? Whether our Constitution makers ever intended that gambling should be a fundamental right within the meaning of Art. 19(1)(g) or within the protected freedom declared by Art. 301? Held 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 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

Issues Involved:
1. Legislative Competence
2. Extra-Territorial Operation
3. Violation of Fundamental Rights under Article 19(1)(g)
4. Violation of Article 301
5. Nature of Prize Competitions as Gambling or Trade

Issue-Wise Detailed Analysis:

1. Legislative Competence:
The primary issue was whether the impugned Act fell within the legislative competence of the State Legislature. The State of Bombay argued that the Act was within its competence under Entries 34 (Betting and Gambling) and 62 (Taxes on Luxuries, including taxes on entertainments, amusements, betting, and gambling) of List II in the Seventh Schedule to the Constitution. The respondents contended that the Act was related to trade and commerce under Entry 26 and taxation on professions, trades, callings, and employments under Entry 60, and thus beyond the State's legislative competence.

The court held that the impugned Act, including Section 12A, was a law with respect to betting and gambling under Entry 34, and the tax imposed by Section 12A was a tax on betting and gambling under Entry 62. The court noted that the Act aimed to control and tax gambling activities, which were not considered legitimate trade or commerce.

2. Extra-Territorial Operation:
The respondents argued that the Act operated extra-territorially, affecting trade or business conducted outside the State of Bombay, and thus was beyond the competence of the State Legislature. The court examined whether there was a sufficient territorial nexus between the activities of the respondents and the State of Bombay.

The court found that the activities of the respondents, such as the circulation of the newspaper "Sporting Star" and the collection of entry forms and fees within the State of Bombay, constituted a sufficient territorial nexus. Therefore, the Act was not invalid on the ground of extra-territorial operation.

3. Violation of Fundamental Rights under Article 19(1)(g):
The respondents claimed that the Act violated their fundamental right to carry on trade or business under Article 19(1)(g) of the Constitution. The State contended that gambling was opposed to public policy and could not be considered a legitimate trade or business.

The court held that gambling activities, including prize competitions, were inherently pernicious and could not be considered trade or business within the meaning of Article 19(1)(g). The court emphasized that the Constitution did not intend to elevate gambling to the status of a fundamental right.

4. Violation of Article 301:
The respondents argued that the Act imposed restrictions on trade, commerce, and intercourse between the States, violating Article 301 of the Constitution. The court considered whether gambling could be regarded as trade, commerce, or intercourse within the meaning of Article 301.

The court concluded that gambling activities were not trade, commerce, or intercourse and thus were not protected by Article 301. The court noted that the purpose of Articles 19(1)(g) and 301 was to protect legitimate trade and commerce, not activities like gambling.

5. Nature of Prize Competitions as Gambling or Trade:
The respondents contended that their prize competitions were not lotteries or gambling but required skill, knowledge, and judgment. The court examined the nature of the prize competitions conducted by the respondents.

The court found that the prize competitions, including the R.M.D.C. Crosswords, involved significant elements of chance and were of a gambling nature. The court noted that the selection of winners based on predetermined solutions and the chance element in the competitions made them gambling activities.

Conclusion:
The court concluded that the impugned Act was within the legislative competence of the State Legislature under Entries 34 and 62 of List II. The Act did not operate extra-territorially as there was sufficient territorial nexus. Gambling activities were not trade or business within the meaning of Article 19(1)(g) and were not protected by Article 301. The prize competitions conducted by the respondents were of a gambling nature. Consequently, the appeal was allowed, and the order of the lower court was set aside.

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