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TMI Blog2007 (3) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... ased from outside the State and prizes were awarded to various customers in the State of Kerala, for which no tax under the Kerala Tax on Paper Lotteries Act, 2005 was remitted. The petitioner was informed that it had violated sections 7 (registration), 8 (filing of returns) and 10 (payment of tax in advance) of the said Act. It was informed that the petitioner is liable to be punished under sections 22 and 23 of the Act. The petitioner was also informed that they are proposing to impose a penalty of rupees one lakh under section 22 and rupees one thousand per day for the delay incurred in remitting the tax from April 1, 2005 till the amount is paid and 50 per cent of tax, i.e., Rs. 4,56,25,000 together with two per cent interest per month from April 1, 2005 till the date of payment. The petitioner was called upon to file its objection to the said notice with supporting records. The petitioner replied to the said notice vide exhibit P2 reply dated June 5, 2006 stating that the petitioner used to purchase tickets from the Lottery Department of Kerala as well as from the Karnataka State. The purchase of lottery tickets from Karnataka is done by the office of the petitioner functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Act and that the entire activities of the dealer has got the character of a promoter. Holding so, it was ordered that an amount of Rs. 27,37,50,000 is due from the petitioner. The petitioner was also served with another order dated October 25, 2006 imposing a penalty of Rs. 6,36,71,500 due to non-remittance of tax and filing of returns. The petitioner is aggrieved by those orders and has filed W.P. (C) No. 30558 of 2006. Apart from the challenging the legal validity of the above-mentioned orders the petitioner has also challenged the constitutional validity of the Kerala Tax on Paper Lotteries Act, 2005. The petitioner has also sought for a declaration that the State of Kerala has no power to impose tax on transaction taking place in the State of Karnataka. Learned single judge found no reason to entertain the writ petition and noticed that the petitioner has got an effective alternative remedy of filing an appeal against the orders impugned, consequently dismissed the writ petition, against which W.A. No. 2429 of 2006 has been preferred. The petitioner has also filed W.P. (C). No. 5154 of 2007 seeking a writ of certiorari to quash the revenue recovery notices issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that no sales tax can be imposed on sale or purchase of lottery tickets and that under section 6 of the Act levying and collection of tax are not on sale but on draw. Sri V.V. Asokan, learned Special Government Pleader (Taxes), submitted placing reliance on the counter-affidavit filed by the respondents that the petitioner conducts business of sale of lottery tickets of Karnataka State as well as Kerala State in the State of Kerala and hence bound to take registration. Karnataka State is not directly doing any lottery business in the State of Kerala nor has they appointed any person for selling their lottery tickets in the State of Kerala, but the petitioner has to be treated as a promoter of the lottery tickets of the Karnataka State in the Kerala State and therefore bound to take registration under the Kerala Act. Learned Government Pleader also referred to sections 19, 22, 23, 24, 25 and 29 and placed emphasis on the words or other person . Even if the petitioner does not fall within the definition clause, counsel submits that the petitioner would fall within the expression other person and therefore it is bound to take registration failing which, it is open to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Karnataka are concerned since the petitioner is getting commission from the State of Karnataka and that most of the members of the scheme are from the State of Kerala the petitioner has to be treated as promoter of the lottery tickets of the Karnataka State in the State of Kerala and hence it falls within the definition of section 2(l) of the Kerala Act, in the event of which, it is bound to take registration under section 7 of the Act. The Kerala Tax on Paper Lotteries Act, 2005 has been enacted to provide for the levy and collection of tax in the State of Kerala on the conduct of paper lotteries and for matters connected therewith or incidental thereto. The word promoter has been defined under section 2(l) which is extracted hereunder for easy reference: 2(l). 'Promoter' means the Government of India or Government of a State or a Union Territory or any country who had entered into a bilateral agreement or a treaty with the Government of India for organising, conducting or promoting a lottery and includes, any person appointed for selling lottery tickets by the Government in the State of Kerala on its behalf, where such Government is not directly selling lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other electronic media. Further, the tickets supplied to the main dealer are to be sold in the State of Karnataka only and shall not be sold outside the State especially in lottery-free zone. The facts in this case would clearly show that the petitioner has never been appointed by the State of Karnataka on its behalf for selling lottery tickets in the State of Kerala. Consequently, the petitioner would not fall within the definition clause of promoter under section 2(l) of the Act. Section 7 of the Act deals with registration of promoters. Every promoter selling lottery tickets shall get himself registered under the Act in such manner and on payment of such fees and security within such period as may be prescribed. Since the petitioner has not been appointed by the State of Karnataka in the State of Kerala for selling lottery tickets, it is not a promoter and therefore petitioner is not bound to take registration under section 7 of the Act. Only the promoter needs to submit returns under section 8 of the Act. So also only a promoter need pay tax in advance. Tax can be levied and collected under section 6 of the Act only from a promoter. The petitioner has taken a defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka to sell the lottery tickets in the State of Kerala. The apex court in Sunrise Associates case [2006] 3 VST 151; [2006] 145 STC 576; [2006] 5 SCC 603 has taken the view that sale of a lottery ticket also amounts to the transfer of an actionable claim and held as follows (paras 49, 56 and 60 of VST; paras 41, 48 and 52 of STC): A lottery ticket has no value in itself. It is a mere piece of paper. Its value lies in the fact that it represents a chance or a right to a conditional benefit of winning a prize of a greater value than the consideration paid for the transfer of that chance. It is nothing more than a token or evidence of this right. The court in H. Anraj [1986] 61 STC 165 (SC); [1986] 1 SCC 414, as we have seen, held that a lottery ticket is a slip of paper or memoranda evidencing the transfer of certain rights. We agree. . . . Even if the right to participate is assumed to be a separate right, there is no sale of goods within the meaning of sales tax statutes when that right is transferred. When H. Anraj [1986] 61 STC 165 (SC); [1986] 1 SCC 414 said that the right to participate was a beneficial interest in movable property, it did not define what that mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the expression promoter under the Act. In the counteraffidavit filed on behalf of the State of Kerala in the context of W.P. (C) No. 33980 of 2006 dealing with the lottery tickets of Arunachal Pradesh, the State Government has stated as follows: In order to obtain registration under the Kerala Tax on Paper Lotteries Act, 2005, the applicants must satisfy that they have been appointed as a promoter by the other State. Without such proof, no one can claim registration under the Act as of right. The definition clause 'promoter' covers only Government and the persons directly appointed by such Governments. The petitioner herein not being a direct appointee by the Government of Arunachal Pradesh, he cannot style himself as a 'promoter' and should obtain registration under the provisions contained in the Kerala Act. Any amount of mere assertion by anyone much less the Government of Arunachal Pradesh will not serve any purpose to the petitioner to obtain registration under the Kerala Act unless he is directly appointed by the State of Arunachal Pradesh to conduct the lottery organised by the State of Arunachal Pradesh in the State of Kerala. The above stand o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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