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TMI Blog2018 (11) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ry tickets in State of Maharashtra. The said Writ Petition came to be admitted on 27th June 2007 and an interim direction was issued to the effect that the State shall not levy or collect any taxes from the petitioner and it shall not obstruct the petitioner as long as it is carrying on lawful business. The Division Bench of this Court was pleased to dispose of the Writ Petition by an order dated 29th November 2016 in view of the fact that the challenge in the writ petition was already covered by a judgment delivered by the Division Bench (D.K. Deshmukh and R.S. Mohite, JJ) in group of petitions in case of N.V. Marketing Pvt. Ltd Vs. State of Maharashtra and ors decided on 14th August 2009. The petitioner, however, filed a Review Petition (Civil) No.10 of 2017 along with an application for condonation of delay. This Court, on 23rd March 2017, condoned the delay and was also pleased to restore the Writ Petition to its file. This order came to be passed when it was noted that a Division Bench in the High Court of Karnataka at Bangalore had delivered a judgment in WA No.2251 of 2007 and connected matters filed in the High Court of Karnataka at Bangalore and one of the learned Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought into force which is nothing but an attempt to restrict/prohibit the sale of lottery tickets of other States in the State of Maharashtra. The petition assails the legislative competence of the State Legislature to enact the impugned legislation. It is attempted to canvass before us by the learned senior counsel that lottery is the subject included in the union list and the power to legislate in respect of lotteries is exclusively rests with the Parliament. In exercise of its power, the Parliament has already enacted the Lottery Regulation Act, 1998 to regularize the conduct of lottery business in respect of the State Organized lotteries and with a view to offer security to the purchaser of lottery tickets. Our attention is invited to Section 5 of the said Act which empowers the State Government to prohibit sale of lotteries of other States within its territory and Section 6 which empowers the Union Government to take measures against any lottery which violates the provisions of Lottery Regulation Act. It is also pointed out that the vires of the said enactment has already been upheld by the Hon'ble Supreme Court in case of B.R. Enterprises Vs. State of Uttar Prades ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the charging event, particularly since the charging event as well as the measure of tax has no nexus or relation with the tax and its utilization as there is no expenditure incurred by the respondent Government in either the conduct of the lotteries by other States or in the act of holding of the scheme of other State lotteries and as such, there is nothing to be compensated to the State. The submission of the learned senior counsel Mr.Raman is that it is thus an arbitrary exaction of huge amount which only worked as prohibitory means against other States from selling their lotteries in the State of Maharashtra and hence, the impugned legislation is a piece of colorable legislation, so as to overcome the restraint of Section 5 of the Central Act and it also violates Section 301 of the Constitution of India and deserves to be set aside on the said ground. 5. Another submission of the learned Senior counsel is that the impugned tax is discriminatory since it is being imposed on other State's lotteries by the State of Maharashtra, but the State itself has its own lottery scheme in place and, therefore, the said legislation is violative of Article 14. He also submits that in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the constitution bench of the Hon'ble Apex Court in State of West Bengal vs. Kesoram Industries Limited & ors and specifically paragraph nos.75 and 76 does not apply to the present case. According to Shri Raman, the point involved here is not whether regulatory power and taxation powers are the same, but the issue is whether the expression "betting and gambling" consciously applied by the framers of the Constitution in Entry 34 and Entry 62 of List II are to be assigned the same meaning or it is intended or meant to convey different meaning and having different scope and ambit. According to him, since the Division Bench of this Court had wrongly approached the said question, it had erroneously answered it in para 10 to the following effect "..... It is clear from the above quoted observations that if the power to tax in relation to a subject is clearly mentioned in List II of the Seventh Schedule of the Constitution, the same would not be available to be exercised by the Parliament based on the assumption of residuary power. Entry 62 of List II of the Seventh Schedule specifically empowers the State legislature to impose tax in relation to the lotteries because admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of India or the Government of a State has been made a subject within the exclusive legislative competence of a Parliament, and State has no legislative competence to make a law touching the lotteries organized by the Government of India or Government of a State and as regards Entry 62 in the State List though it refers to taxes on entertainment, amusement, betting and gambling, it does not specifically include lotteries organized by the Government of India or the Government of a State and rather Entry 97 of the Union List refers to any other matter not enumerated in List II or III including any tax not mentioned in either of those lists. In the backdrop of the aforesaid legal position, he submits that by virtue of Article 265 of the Constitution of India, no tax can be levied either by a State, save and except by authority of law, and therefore, the levy of tax by the State of Maharashtra under the Maharashtra Tax on Lotteries Act 2006 is without authority of law and is ultra vires of the Constitution of India. 8. Per Contra, learned Advocate General Shri Kumbhakoni representing the State of Maharashtra submits before us that the fields of legislation which are conferred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing observations of the Apex Court. "As revealed from Anraj caseI (supra), some of the States sought permission of the Union as a policy to raise its revenue through these lotteries, which was conferred by the Presidential Order under Article 258 (1), though it records, the State could have exercised their discretion as a policy to have their own lotteries without such permission in view of its extended executive power under Article 298. It further reveals, till the Parliament makes any law, decision to start its lottery or to close it is exclusive within the executive power of each State. This is because it is the policy decision of a State which has to decide as a principle whether it desires to collect in this form the revenue or not. The benefit of Article 298 is, it is extra territorial, applicable beyond its territory, it is for this State lotteries are placed in Entry 40 List I. So in a federal structure, Union has to play a role to coordinate between one State with the other. So by regulation, it has to subserve the objectives. Union cannot enforce a State to gamble if such a State does not want to gamble. To run its own lotteries or to close it is left on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le empowers the State legislature to impose tax in relation to the lotteries because admittedly, the lotteries are included within the ambit of the meaning of the term "betting". The learned Advocate General also makes a statement before us that the said judgment delivered by the Division Bench is assailed before the Hon'ble Apex Court in case of M/s. KENLOTT GAMING SOLUTIONS PVT.LTD & ANR VS. COMMISSIONER OF SMALL SAVINGS & LOTTERIES AND ORS in Special Leave to Appeal (Civil) No.2398523986 of 2009 and on 5th October 2009, and the Hon'ble Apex Court has granted leave and has refused the stay. Further, according to the learned Advocate General, the judgment delivered by the Karnataka High Court has also been taken up to higher Court in Special Leave to Appeal (Civil) 1920519215 of 2011 and by an order dated 2nd December 2011, leave has been granted by the Hon'ble Apex Court and the operation of the impugned judgment to the extent of direction with regard to refund of the amount already deposited has been stayed. In light of the pendency of the matter before the Apex Court, the learned Senior counsel Shri Raman made a request before us to defer the hearing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctionary, 6th Edn., at p. 947 : "A chance for a prize for a price, A scheme for the distribution of a prize or by lot or chance, the number and value of which is determined by the operator of lottery." So, we find three ingredients in the sale of lottery tickets, namely, (i) prize (ii) chance and (iii) consideration. The term "lottery" has been defined under the Lotteries (Regulation) Act 1998 to mean a scheme, in whatever form and by whatever name called for distribution of prize by lot or chance to those persons participating in the chance, of a prize by purchasing tickets. 11. With the aforesaid observations in mind, the Hon'ble Apex Court itself has examined the scheme of the Lottery Regulation Act 1998 which is the scheme to regulate State Lotteries and made following observations : In Section 2(b) lotteries are defined to be a scheme for distribution of prizes by a lot or chance. This definition itself recognizes that even in State lotteries the prizes are to be collected by chance without any skill, hence gambling in nature. Sections prohibits that no State lotteries can be organized without the condition stipulated under subsections (a) to (k) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admits the subject it is dealing is gambling in nature. As we have said, decision to collect or not to collect revenue through State lotteries is exclusively within the policy decision of the State and for this, neither the Union nor the Parliament interferes nor there is any indication under the Act. The three entries which are relevant for deciding the issue of legislative competency of the State Legislature found in the Seventh Schedule reads thus : List I - Entry 40 - Lotteries organized by State List II - Entry 62 - Taxes on luxuries included taxes on entertainment, amusement, betting and gambling List II - Entry 34 - Betting and Gambling 12. In H. Anraj Etc Vs. Government of Tamil Nadu (1986) 1 SCC 414, the issue involved was whether the Sales Tax can be levied by the States on sale of lottery tickets. The Bench of two Judges held that a lottery involved two elements i.e. (a) Right to participate in the lottery draw and (b) right to win the prize depending on chance. It was held that the second right was a chose in action and therefore, not goods for the purposes of levy of sales tax. The first was held to be a transfer of a beneficial interest in movable goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transfer of the chance to win assumes participation in the draw. The Supreme Court of Appeals of West Virginia, in West Virginia in State of West Virginia Vs. John Wassick 156 W.Va.128, 191 S.E.2d 283, held that "free plays" which could be won predominantly by chance for consideration by operating multiple coin pinball machines for cash payoffs was a prize and the pinball machine constituted the lottery. This indicates that a draw is merely a method of holding the lottery just as a pinball machine may be a method of holding the lottery and does not constitute a separate right. There is no value in the mere right to participate in the draw and the purchaser does not pay for the right to participate. The consideration is paid for the chance to win. There is therefore no distinction between the two rights. The right to participate being an inseparable part of the chance to win is therefore part of an actionable claim". 14. The petitioner before us is a proprietor of a marketing firm carrying on business of selling tickets of lotteries organized by Government of Andhra Pradesh and Nagaland in the State of Maharashtra. The sale of such tickets in State of Maharashtra was subjected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated therein. Section 5 of the said enactment authorized the State Government to prohibit the sale of tickets of a lottery organized, conducted or promote by every other State, meaning thereby that it empowered the State to forbid within its territorial limit, sale of lottery tickets of any other State. The said power under Section 5 of the Act resulted into several States prohibiting sale of tickets of other States and was subject matter of Writ Petitions in various High Courts. The said writ petitions ultimately were brought to the Hon'ble Apex Court wherein the Court was called upon to adjudicate the issue as to what is the character of "State lotteries"? And if such lotteries are gambling in nature, does it lose its character as such when it takes on the cloak of State lotteries and whether it sheds its character as res extra commercium. The Hon'ble Apex Court considered the whole gamut of sale of lottery tickets in India, both private and State and examined the issue in the backdrop of the accepted position that basically lotteries are gambling and its business is res extra commercium and to shed off this in the interest of State, Revenue has been finding avenue to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans lotteries of other States not to permit any gambling activity in the public interest as a policy but this very public interest is flouted by having lotteries of its own. It is true that unless this provision is read down to mean a State can only ban lotteries of other States when it bans as a policy its own lotteries it is bound to be subjected to the vagaries as pointed out and on deeper scrutiny it may not successfully stand. But by reading down the provision, which has to be read that it is only that State which decides lottery free zone within its State can prohibit lotteries of other State clearly provides the guidance for the exercise of such a power. It is inbuilt and inherent in the provision itself in view of the scheme of the Act and nature of subject in issue." In the wake of the said decision, the State of Maharashtra enacted Act No.53 of 2006 to provide for levy and collection of tax on the lotteries and the matter connected therewith or incidental thereto. The said enactment was brought in force to provide for levy and collection of tax on lotteries of the State as well as lotteries of other States, conducted as per provisions of the Lotteries (Regulation) Act 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lottery was being conducted outside the State of Maharashtra, the law had extra territorial application. 16. The Division Bench of this Court dealt with all the issues elaborately. Dealing with the competency of the State legislature to enact the said legislation, the Hon'ble Division Bench decided the arguments advanced by the parties assailing the said legislation which was to the effect that the subject lotteries organized by Government of India or Government of State, falls within Entry 40 of List I in the Seventh Schedule and it was only the Parliament which was empowered to enact the law relating to lotteries either by the Government of India or the Government of a State or any law relating to such tax on the lotteries. Reliance was placed before the Division Bench on the judgment in the case of H. Anraj vs. State of Maharashtra (supra) and H. Anraj Vs State of Tamil Nadu (supra), and the submission that the lotteries organized by the State are necessarily excluded from betting and gambling and covered by Entry 62 of List II of Seventh Schedule. The State of Maharashtra traces the existence of the Maharashtra Lotteries Act to Entry 62 of List II of Seventh Schedule and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature does not have power to legislate in relation to lotteries organized by the Government of India or Government of State under Entry 34 of List II of Seventh Schedule, but because of that, the said legislature is not denuded of its power under Entry 62 of List II of Seventh Schedule to impose tax in relation to lotteries organized by the Government of India or other States under Entry 62 of List II treating it as betting. The Division Bench again reiterated that there is no debate that lottery amounts to betting since it was an admitted position. As far as the power of taxing is concerned, the Division Bench dealt with the submission advanced before it that the Parliament will alone have the legislative competence to levy tax under Article 248 by taking recourse to Entry 97 of List I of Seventh Schedule. This submission also did not find favour with the Division Bench and it observed thus : In our opinion, this submission has also no force, because power to tax is not an incidental power and under the residuary power the Parliament will be entitled to impose tax only if that power is not specifically vested in the State legislature by any entry in List II of the Seventh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded that what is taxed is betting and gambling, in the backdrop of the power flowing from Entry 62 of List II and the Act does not levy tax on draws or sale of tickets but the levy of tax is on betting and gambling, which is offered within State of Maharashtra by organizing sale of tickets or participation in the lottery. 19. We have no reason to differ from the reasoning in the Division Bench judgment. Though a serious attempt is made by the learned Senior Counsel to convince or to take a view contrary to the Division Bench judgment and specifically by inviting our attention to the observations made by the Karnataka High Court while dealing with the challenge to a similar legislation, we are not impressed by the said arguments. We do not find any error in the observations of the Division Bench which is based on the foundation that since lottery is gambling, Entry 62 of List II gets attracted. We are in agreement with the learned Advocate General who had canvassed before us the submissions that the fields of legislation in the entries either in the Union List or in the State List are distinct when it provides for taxation and when it intends to confer a power of Regulation. Li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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