9911796707
TMI Blog2001 (3) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... r whose sale or purchase turnover during the year ending 31st March exceeds a specified limit prescribed by the Act, shall be liable to pay sales tax under the Act on such turnover. According to the petitioners, lotteries were taxed initially at the rates prescribed in item 151A in Schedule II of the Bombay Sales Tax Act, 1959. That, prior to the impugned amendment, lottery tickets were charged to tax at the rate of 13 per cent by way of sales tax on the value of sales plus 10 per cent surcharge. According to the petitioner, till date, the State of Maharashtra was collecting tax on the lottery tickets unit-wise at the above rates excluding the actionable claim part of the ticket. On 14th November, 2000, the State of Maharashtra issued an Ordinance bearing No. XXVII of 2000 whereby section 8D came to be introduced. Since then, the Ordinance has been replaced by the amending Act which is impugned in this case. Under the impugned amending Act, lottery ticket is proposed to be taxed on the basis of the draw at a fixed rate per draw. For weekly draw, the rate of sales tax is fixed at Rs. 20,000; for fortnightly, the rate of sales tax is fixed at Rs. 60,000 and for monthly draw, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t include within it, either the element of sale or the element of goods. He further contended that sales tax cannot be collected on a draw which is held outside the State of Maharashtra. He further contended that sales tax cannot be collected in advance before the actual sale takes place. He further contended that sales tax cannot be assessed without reference to the turnover or the actual sale. That, collecting sales tax from several first dealers in respect of an entire draw amounts to multiple taxation. That, a draw encompasses all tickets in the scheme which are sold all over the country including Maharashtra and further imposing tax at a rate fixed per draw would amount to taxing tickets sold outside the State. Therefore, he contended that the amending Act was beyond the scope of the authority conferred by the Constitution on the State under entry 54, List II of the Constitution. He further contended that for the aforestated reasons, the impugned amending Act also violated articles 286(1) and article 301 of the Constitution. He submitted that the purpose of enacting the amending Act was to avoid legitimate competition of other State lotteries. Lastly, he urged that by impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry because even if a single ticket is sold by any dealer in the State, he would be responsible for paying the entire tax at the rate per draw. He invited our attention to a chart which finds place at page 368 of the paper book. The said chart refers to details of draw date-wise lottery sold during June 2000. For example, he points out that in April 2000, there were 150 draws. The net sale amount, as per the returns filed by the petitioner, was Rs. 130 lakhs which, in terms of the Supreme Court judgment, consists of two parts as stated above. The price component relating to the right to participate in a draw which alone could be taxed was Rs. 40 lakhs whereas, the price component relating to the right to claim a prize which could not be taxed was Rs. 126 lakhs. As per the said chart for the month of April, 2000, the actual collection made by the petitioner was Rs. 8,82,018 (i.e., receipt from sales minus expenses towards purchase). Therefore, the tax levied prior to the amendment, would be Rs. 5,31,782 whereas under the amendment, since there were 150 draws in April, the tax payable on actual collection of Rs. 5,31,782 would be Rs. 30 lakhs which is more than three times the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacted by the Parliament permits other States to sell their lottery tickets in the State of Maharashtra if the State is running its own lottery and, therefore, State of Maharashtra cannot impose a ban on sale of other State lotteries, but by the impugned Act, in order to stifle any competition, by a backdoor method, a ban on sale of other State lottery tickets is sought to be brought in. Therefore, the amending Act is passed to avoid competition. That, the impugned Act is in the nature of a restrain on inter-State trade and commerce within Union of India and, therefore, it is also violative of article 301 of the Constitution. Mr. Tulzapurkar further contended that under section 40 of the Act, 1959 an assessee is entitled to be assessed by way of regular assessment. That, under section 40, a composite tax could be levied in lieu of regular assessment provided the assessee opts for such composite tax in lieu of regular assessment. However, such composite tax cannot be levied by disregarding the regular assessment if the assessee does not opt for such composite tax. It was contended that the amending Act makes section 40 also redundant although section 40 still holds the field. Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. That, imposition of tax at a fixed rate would work to the benefit of the dealer inasmuch as, even if the dealer sells a higher number of tickets on which the tax on percentage basis would be higher, still the amount of tax to be paid would remain fixed and in that respect, the new scheme would work for the benefit of the dealer. It was contended that on a bare reading of the impugned Act, the tax is leviable on the sale of lottery tickets and the figures arrived at represents the sale price of the lottery tickets, less the amount distributable as prize money. That, although the impugned tax has been specified with reference to each draw, the tax levied is only on the taxable component, viz., the sale price of the lottery tickets in the State in each draw and, therefore, the legislation is valid. It was further contended that the method of collection of tax became necessary as mentioned in the impugned enactment for the aforestated reasons, viz., that the revenue received by the State was not commensurate with the turnover. That, under the proviso to the amending Act, if a dealer has paid tax under the amending law with regard to sale of lottery tickets of a particular name and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Tamil Nadu reported in [1986] 61 STC 165 (SC); AIR 1986 SC 63, it has been held that lottery tickets are goods and not actionable claims. That, a sale of lottery ticket confers on the purchaser two rights: a right to participate in the draw (hereinafter referred to, for the sake of brevity, as "CPD") and a right to claim the prize contingent upon the purchaser being successful in the draw (hereinafter referred to, for the sake of brevity, as "CPF"); that CPD is taxable whereas CPF is not taxable; that the State Legislature was competent to levy sales tax on sale of lottery tickets under entry 54, List II of the Seventh Schedule to the Constitution. Therefore, this Court has to proceed on the basis that lottery tickets are goods and therefore, at the very outset we reject the contention of the petitioner that lottery tickets are not goods. 7.. The Bombay Sales Tax Act is an Act to consolidate and amend the law relating to levy of tax on sale or purchase of goods in the State. Under section 2(28), the word "sale" is defined to mean a sale of goods made within the State for cash or deferred payment or for any other valuable consideration. Under section 2(29), the expression " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this section, as provided in the Table hereunder,- TABLE Serial Type of draw Rate per draw No. 1 2 3 1. Weekly draw Rupees twenty thousand (Rs. 20,000) 2. Fortnightly draw, including any draw Rupees sixty thouthe period of which is more than a sand (Rs. 60,000) week but less than a fortnight. 3. Monthly draw, including monthly Rupees one lakh bumper draw and any draw the period (Rs. 1,00,000) of which is more than a fortnight but less than a month. 4. Special bumper draw or festival Rupees four lakhs bumper draw including any other draw (Rs. 4,00,000) not covered by any other category and any draw the period of which is more than a month. Provided that, where a dealer has paid the tax under this subsection in respect of the sale of lottery tickets of a particular name and type of lottery ticket of a particular State and for a particular draw, no tax shall be payable in respect of the sale of such lottery tickets by any other dealer or any person in this State liable to pay tax under this Act. (2) Notwithstanding anything contained in any other provisions of this Act, tax payable under sub-section (1) shall be paid ten days prior to the draw." Reading of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he limits of the turnover. It is for this reason that the Act specifically defines the expression "sale turnover" to mean the aggregate of the amounts of sale price received and receivable by a dealer in respect of any sale of goods made during a given period. It is for this reason that under section 3(5) it is further laid down that for the purposes of calculating the limit of turnover for liability of tax, the turnover of all sales shall be taken into account, whether such sales are taxable or not. In other words, the liability of tax is based on the turnover. This concept is very important to decide the present matter. It shows that liability accrues only on sale of goods. Therefore, the event which attracts the liability to pay sales tax is sale of goods. In the present matter, the Legislature has shifted the incidence of tax from sale of the lottery tickets to a draw under a scheme. Therefore, such a change is clearly contrary to the basic principle of taxation under the Bombay Sales Tax Act. Even with regard to levy of value added sales tax on goods specified in Schedule C, it is laid down, inter alia, that such a sales tax shall be levied on the turnover of sale of goods men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the basis on which the rate or draw is arrived at. The only argument advanced before us on this point by the learned counsel for the State is the tax evasion. In this connection our attention is invited to the Statement of Objects and Reasons on the basis of which it was contended that the above amending Act was introduced because sales tax receipts from the lottery date within the State were not commensurate with the turnover of lottery. That, lottery ticket was prone to tax evasion and to overcome the said disability, in some States ad valorem tax levy on sale of lottery ticket has been replaced by specific tax levy with reference to each draw of the lottery and for effective collection of tax, the above mechanism has been introduced by deleting entry 151A from Schedule C of the principal Act. We do not find any merit in this argument of the State. Tax evasion is no ground to exclude the basic taxation principle on which the principal Act is based. The impugned amending Act introduces section 8D into Bombay Sales Tax Act, 1959 which is the principal Act. The principal Act speaks about the incidence on the occurrence of which, a dealer becomes liable for registration. Under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay Rs. 5.31 lakhs. Further, by shifting the incidence from "sale" to "draw", both the components, viz., CPF and CPD are made taxable which is contrary to the judgment of the Supreme Court in the aforestated case of H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165; AIR 1986 SC 63. Further, even on the unsold tickets, the provision for refund, which existed before the amending Act came into force is done away with. This also shows that the incidence of tax, in effect, is shifted from "sale" to "draw". We may also point out that we called for Tamil Nadu General Sales Tax Act, 1959 because we were told that a similar provision existed under that Act. It is not so. Section 7D of the Tamil Nadu General Sales Tax Act, 1959 is similar to section 40 of Bombay Sales Tax Act which refers to payment of sales tax at compounded rates. It appears that the respondents herein have bodily lifted the impugned provisions from the Tamil Nadu General Sales Tax Act, 1959. However, they have missed out one aspect, viz., that even Tamil Nadu General Sales Tax Act has proceeded at the relevant time by seeking to levy sales tax on the basis of draw, but that was in the context of a composite tax bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not constitute trade or commerce. In view of the said judgment of the Supreme Court, article 301 to article 304 has no application. Hence point C is answered in the negative, i.e., against the petitioner. Since we are concerned with sale of lottery tickets articles 301 to 304 of the Constitution has no application vis-a-vis the amending Act No. LII of 2000. Findings on point D: 10.. We have tried to save a portion of section 8D(1) of the amending Act because the first part of section 8D(1) expressly imposes liability to pay tax on sale. The inconsistency is brought about by the table which refers the rate per draw. If this table is struck down, the section becomes beleaguered. Section 8D(2) and section 8D(3) are consequential upon section 8D(1). Therefore, the entire amending Act by which section 8D is introduced is hereby struck down. We accordingly hereby strike down and/or quash the impugned amending Act No. LII of 2000 as arbitrary, inconsistent and contrary to the basic scheme of the principal Act, viz., the Bombay Sales Tax Act, 1959 and also as ultra vires and violative of the provisions of the Constitution of India. However, with section 8D being struck down, the ear ..... 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