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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 ..... ent authorized the State Government to organize, conduct or promote the lottery subject to the conditions stipulated 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 in the case of SUNRISE ASSOCIATES VERSUS GOVT. OF NCT OF DELHI ORS. [2006 (4) TMI 118 - SUPREME COURT OF INDIA], considered the whole gamut of sale of lottery tickets in India, both private and Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lottery is gambling, Entry 62 of List II gets attracted. The intention of the Parliament in introducing Section 5 in the said enactment is very apparent It authorizes the State Government to prohibit the sale of tickets of a lottery organized, conducted or promoted by every other State. Resultantly, the State Government is empowered to prohibit or restrict within its State the sale of lottery tickets of any other State. The State has invoked Entry 62 of List II while enacting the impugned legislation. This entry specifically empowers the State to tax on betting and gambling. Though the learned Senior counsel made a serious attempt to submit before us that a presumption that lottery is betting and gambling, is erroneous but once the Division Bench of this Court had fallen back on Entry 62 of List II, we do not find any error in the said conclusion. There are no flaw in the observation of the Division Bench when it proceeds to hold that lottery falls within the purview of betting and therefore, Entry 62 List II is invoked by the State Legislature to enact a law imposing tax on betting and gambling. It is thus declared that the Maharashtra Tax on Lotteries Act 2006 is well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd Vs. State of Maharashtra . In view of the contrary opinion expressed by the two Division Benches and since one of the Hon'ble Judge was a party to the decision, the Writ Petition was restored. This is how the matter was listed before us for final hearing. 3. We have heard the learned Senior counsel, Shri P.S. Raman i/b B.B. Parekh for the petitioner and Advocate General Shri Ashutosh Kumbhakoni with Ms.Geeta Shastri for the State. We have perused the Writ Petition which poses a challenge to the Maharashtra Act No.53 of 2006 i.e. Maharashtra Tax on Lotteries Act, 2006. The precise ground on which the said Act has been assailed is an allegation that the said Enactment is passed with an object of doing indirectly what cannot be done directly i.e. restriction/prohibition of sale of lottery tickets in the State of Maharashtra of the lotteries organized by other State. The learned Senior counsel invited our attention to the backdrop of the events which culminated into enacting the said legislation. The case of the petitioner is that in respect of the sale of lottery tickets by the petitioner in the State prior to the said enactment when the Bombay Sales Tax Act was in forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel would submit that the constitution bench in case of Sunrise Associates Vs. Government of NCT of Delhi ors 2006(5) SCC 603 has already held that the sale of lottery tickets does not involve sale of goods and in view of this authoritative pronouncement, any attempt to impose any sales tax on the lottery was frowned upon. However, the State of Maharashtra enacted the Maharashtra Value Added Tax, 2002 in lieu of the Sales Tax by repealing the Bombay Sales Tax Act and excluded the lottery tickets from the provision of Maharashtra Value Added Tax 2002. However, it came up with the impugned enactment, which according to the learned senior counsel is beyond the legislative competence of the State legislature and therefore, it is liable to be struck down. It is attempted to canvass before us that the State Legislature has invoked Entry 62 of List II on the sale of lottery tickets which is not permissible as the Parliament alone has power to legislate on the subject lottery tickets or to propose any tax on lottery tickets. According to the learned senior counsel, the only power given to the State by virtue of Lotteries Regulations 1998 is to make provisions regulating lotteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance, as to a pre condition for conduct of lotteries, prohibits the conduct of the business of lotteries by other States. Thus, the impugned enactment, according to the learned senior counsel is clear contradiction of the Lotteries (Regulation) Act 1998. 6. When we confronted the learned senior counsel with the judgment delivered by the Division Bench of this Court, which forecloses the issue involved in the present writ petition, the submission of the learned senior counsel is that the said judgment proceeds on a premise that lottery is 'Betting' and hence, it has held that the State Legislature was perfectly within its jurisdiction by invoking entry 62 of List II to bring such an enactment. The submission of Shri Raman is that the Division Bench of High Court has sought to sustain the legislative competence of the State Legislature by relying upon an admission made before the Court that lottery comes within the expression betting and gambling as applied in Entry 34 and 62 of List II of Seventh Schedule of the Constitution. According to him, this is a legal issue, which cannot be resolved on admission by parties, more particularly, in light of the judgment of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry 97 in List I of the Seventh Schedule. Entry 34 of List II of the Seventh Schedule confers legislative competence on the State legislature to legislate regulating betting and gambling..... 8. The precise submission of the learned senior counsel is that the High Court is reading Entry 62 of List II as under : 62 Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling (including Lotteries organized by the Government of India or the Government of a State.... The submission is that the matters ..... Lotteries organized by the Government of India or the Government of a State . is not found in Entry 62 List II and the law is clear that the Entry will have to be read as it is and not by reading in it what the framers of the Constitution did not choose to put therein. This, according to him, is an error apparent on the face of the record and in fact amounts to illegal exercise of power without jurisdiction by the Respondent State in enacting the impugned Act. The learned senior counsel would also invite our attention to Article 246 of the Constitution and made an earnest request to appreciate the constitutional framework and accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gulation. The submission of the learned Advocate General is that in the entries which amount to regulation, incidental and ancillary aspects would be covered and his submission is that the taxing element is clearly distinct from an act of regulation and Regulation does not necessarily mean taxing and also vice versa. It is his submission that the Lotteries (Regulation) Act 1998 has been enacted by the Parliament to regulate the lotteries and to provide the matters connected therewith. However, according to him, this does not cover the element of taxation. According to him, the said enactment imposes a prohibition on a State Government organizing, conducting or promoting any lottery, except when it complied with the conditions stipulated in Section 4 of the said enactment. According to him, the said enactment, therefore, regulates the organization, conduct or promotion of lottery and wherever a lottery is organized, conducted or promoted, in contravention to the provisions of the Act, by any Department of the State Government, it invites penalty as stipulated in the said enactment. However, according to the learned Advocate General, this enactment does not deal with any power of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control of State lotteries running in the territory of other States is left on the Union. State cannot restrict sales of lotteries organized by other States even in its territory unless authorized by the Union. This difficulty was felt by the State which is indicated in the Anraj case I (supra). That seems to be the reason that the Parliament has delegated this power to the State under Section 5. In this background, we have to see, whether this delegation could be constituted to be such as amounting to delegation of its essential legislative power and that too unguided or unbridled. As we have said to interpret a provision, its pith and substance, its objects and reasons should be gathered, and it is that interpretation which sub serve the object of the Act should be accepted. The Preamble of the Act states : to regulate the lotteries and to provide for matters connected therewith and incidental thereto Thus, the object of this enactment is to regulate the State lotteries and other connected matters therewith . 9. The learned Advocate General would fall back on the judgment of the Division Bench of this Court in case of N.V. Marketing Pvt.Ltd vs. State of Maharash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the outset since the writ petition is pending since 2007. 10. With the assistance of the learned counsel for the parties, we have carefully gone through the writ petition as well as series of judgments which have been cited before us. The word lottery is defined as in Collin's dictionary as 'a type of gambling gone in which people buy numbered tickets. Several numbers are then chosen, and people who have those numbers on their tickets win a prize. Business dictionary defines Lottery as type of gambling in which winners are chosen by drawing of lots, from among those who have paid money to participate. In M/s. B.R. Enterprises Vs. State of Uttar Pradesh (supra) the Hon'ble Apex Court had proceeded to examine what is lottery and what are the ingredients in the sale of lottery tickets, it specifically observed as follows : In Words and Phrases (Permanent Edn.) Vol. 25A at 439 : A lottery' is a species of gambling. At Page 444 : The lottery statutes were enacted to suppress the widespread evil of gambling in lotteries and to allay and rub the gambling spirit of the public and thus prevent waste of money needed for more substantial purposes, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... silent. The only control is, in case it decides, then it must follow the conditions as laid down under Section 4. Next comes Section 4 which is subject matter of challenge, the delegation of power to the State to prohibit the sale of lottery tickets organized by every other State. If a State desires not to subject its people to the lottery gambling, it has no power to restrict lotteries organized by other States. It is to remove this mischief the power is conferred through delegation to the States to do it in terms of its own policy. By virtue of this, now the State Government can prohibit sale of lottery tickets of every other States within its territory. Next, Section 6 seeks strict compliance of Section 4. Under this the Central Government may prohibit and State lottery which is being conducted in contravention of the conditions as laid down under Sections 4 or 5. Section 7 shows the rigor of this Act by making it a penal offence as against all, who violate the provisions of this Act, may be the Head of the Department of the Government or the agent, promoter or trader, to be punishable with two years rigorous imprisonment. Section 8 makes such an offence cognizable and non baila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Apex Court in light of the decision of the High Court of Delhi in case of Haryana Lotteries Vs. Government of NCT 1998 (46) DRJ, which held that lottery tickets were goods and liable to Delhi Sales Tax, 1975. In an appeal preferred by by Sunrise Associates (supra), a reference order was made on the prima facie view that there was no reason to split a lottery into two separate rights and therefore, the judgment of H. Anraj, etc Vs. Government of Tamil Nadu (supra) requires consideration, since the decision in case of H. Anraj (supra) was already approved by a Three Judges Bench in case of Vikas Sales Corporation Vs. Commissioner of Commercial Taxes Anr 1996(2) SUPP.SCR 204, it was felt necessary that the matter be heard by Constitution Bench. 13. The Hon'ble Apex Court in M/s. Sunrise Associates Vs. Government of NCT, Delhi (supra) therefore, proceeded to decide the issue and held that H. Anraj Vs. State of Tamil Nadu has incorrectly held that the sale of lottery tickets involve sale of goods. It was held that there was no sale of goods within the meaning of Sales Tax Act of different States but at the highest it was the transfer of actionable cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax was derived from Entry 54 of Schedule II of the Constitution which related to tax on sale or purchase of goods other than newspapers. Since the lottery was treated as goods, the State of Maharashtra was empowered to levy and collect the tax on sale of lottery tickets in State of Maharashtra in respect of tickets of lotteries which were organized by other States. The lottery tickets, therefore, came to be included in Schedule C of Part A of Bombay Sales Tax Act under 151 A and the tax was charged @ 13% + surcharge. The State of Maharashtra amended the Sales Tax by inserting Section 40A which provides for lumpsum payment in lieu of tax on lottery tickets. It also provided for a fixed tax related to draw of lottery. The incidence of tax was thus shifted from sale of goods i.e. the tickets to a 'draw'. This amendment was a subject matter of challenge in Writ Petition No.129 of 2001 and the said amendment came to be struck down. Subsequent thereto, Maharashtra Act No.13 of 2004 purporting to amend the enactment by inserting Section 40 A 1 shifted the incidence of tax by introduction of the words turnover of sale of lottery tickets , per draw of a particular scheme, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible, the exploitation of people. On a detail analysis of the entire business of Lottery carried out by private or by State, the Hon'ble Apex Court by keeping in mind the illimpact of the lotteries of the public at large in the country as well across the globe, took note of the fact that some permitted and protected lottery transactions under the garb of benefit for charitable purposes or augmenting State Revenues has always found its foundation in the Indian scenario. However, as an answer to the question posed before it, the Hon'ble Apex Court observed thus : Thus, the question which remains is, if any State decides that it does not want any lotteries but if it feels helpless as having no jurisdiction over the lotteries organized by other States, what is the way out? This can only be done by Parliament or by entrusting this power on such State desiring so which has been done through Section 5. In this background, for the helplessness of a State as recorded in the Anraj case I (supra) remedy is provided by entrusting this power on the State under the impugned provision. This help such State to achieve its objective of lottery (gambling) free zone within its terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teries (Regulation) Act 1998. The term Promoter was intended to mean the Government of any State or an Union Territory or any country organizing, conducting or promoting a lottery and included any person appointed as first importer for marketing lottery tickets in the State of Maharashtra on behalf of such Government or country where such Government or country is not directly marketing or conducting lotteries schemes in the State. The said enactment authorizes the State to levy and collect the tax on the lottery scheme at the rates specified in Section 3. This covered a scheme of weekly, fortnightly, monthly lottery scheme and the bumper lottery scheme. The tax was levied on the promoter and it was made imperative for the promoter to submit to the tax authorities a statement relating to lottery scheme of which tickets are sold in the State and to pay in advance the amount of tax payable under the Act as per the scheme. The validity of the said enactment was subject matter of challenge in a group of petitions before the Division Bench of this Court and the lead petition being N.V. Marketing Pvt.Ltd Vs. State of Maharashtra (supra). The present petition was grouped with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so made an elaborate submission that the tax is not collected on the sale of lottery tickets, but the tax is collected in relation to lottery schemes, once tickets are imported in the State of Maharashtra. The Division Bench perused the scheme of the enactment. It also construed Entry 62 of List II of Seventh Schedule. The petitioner before the Division Bench did not dispute that lottery is betting. The argument of the petitioner before the Court was that State lacked competency in light of existence of Entry 40 in list I. The Division Bench of the Court held that the entire argument is misconstrued and observed thus : According to the petitioners, because the power to legislate in relation to lotteries organized by the Government of India or the Government of State is vested in Parliament, the State legislature cannot impose tax in exercise of its legislative power under Entry 62 in relation to the lotteries. It is submitted that Entry 34 of List II of the Seventh Schedule of the Constitution empowers the State Government to legislate in relation to betting and gambling, but because of Entry 40 in List I of the Seventh Schedule of the Constitution, lottery is excluded f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in paragraphs 100 to 107 of its judgment in the case of State of W.B. Vs. Kesoram Industries Ltd. And others referred to above, they read as under: 100. Article 265 mandates no tax shall be levied or collected except by authority of law. The scheme of the Seventh Schedule reveals an exhaustive enumeration of legislative subjects, considerably enlarged over the predecessor Government of India Act. Entry 97 in List I confers residuary powers on Parliament. Article 248 of the Constitution which speaks of residuary powers of legislation confers exclusive power on Parliament to make any law with respect to any matter not enumerated in the Concurrent List or the State List. At the same time, it provides that such residuary power shall include the power of making any law imposing a tax not mentioned in either of those lists. It is, thus, clear that if any power to tax is clearly mentioned in List II, the same would not be available to be exercised by Parliament based on the assumption of residuary power. The seven Judge Bench in Union of India V. Harbhajan Singh Dhillon ruled, by a majority of 4:3, that the power to legislate in respect of a matter does not carry wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of India or Government of a Sate necessarily do not cover a taxing element. As a result, perusal of the Lotteries (Regulation) Act 1988 only regulates the lotteries and the Regulation is in form of the stipulation of terms and conditions when the Government organizes, conduct or promotes a lottery. The intention of the Parliament in introducing Section 5 in the said enactment is very apparent It authorizes the State Government to prohibit the sale of tickets of a lottery organized, conducted or promoted by every other State. Resultantly, the State Government is empowered to prohibit or restrict within its State the sale of lottery tickets of any other State. The State has invoked Entry 62 of List II while enacting the impugned legislation. This entry specifically empowers the State to tax on betting and gambling. Though the learned Senior counsel made a serious attempt to submit before us that a presumption that lottery is betting and gambling, is erroneous but once the Division Bench of this Court had fallen back on Entry 62 of List II, we do not find any error in the said conclusion. 20. In such circumstances, we do not find any flaw in the observation of the Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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