Karnataka High Court
State Of Meghalaya vs State Of Karnataka Dept Of ... on 27 December, 2010
Bench: Manjula Chellur, V.Jagannathan
IN THE HIGH COURT OF' KARNATAKA AT BANGALORE
DATED THIS THE 2702 DAY OF DECEM13EE,x 20ij'0,.,
PRESENT 1' V' H"
HON' BLE MRS JUSTICE MANJULAVCHEITT V
HON' BLE MR. JUSTICE v,JAGTANNAT';éTAN,,,
WA Nos. 2251/2007A_..2131/2-001, 21.32/2'007<, 2220/2007,
2246/2007, 2221/200%?-,7 2248/2007, 749/
2008, 7/50'/2003" a.frTd_ s'9.5/2008
In WA NO_ if)
1. STATE OI4§M_EGHA,L}'sYA ~
D.?_RE.CTOR Of'. ,LOfI_*FE<FEIES
GOVERNM'ENT 0.FMEGHAITAYA.
SHILL~O1\I'G,, MEGHALAYA STATE,
; REP. BY"'D_IRECTOR.
2,' 1\/f;AT"\If}f~1ATHA AGENCY
._ PEP. BY' CGANESH
CHE1vTBu1.rNGAM No.36,
« GROUND' FLOOR,
14TH"€..ROSS, 9TH MAIN,
5TH SECTOR, HSR LAYOUT,
BANGALORE 34.
APPELLANTS
[0
(BY SR1. ANIL K. KHER, SR. ADV. & SR1 B.V. DESAI';-ADV.
FOR SR1 T RAJARAM, ADV) "
AND
1.
STATE OF KARNATAKA I
DEPT OF PARLIAMENTARY I
AFFAIRS AND LEOISIIATION; _ " - =
M.S.BUILDING,VIDHANASOUDHA, " *
BANGALORE 560 001, ' -
No.1, REP. BY ITS SECRETARY.
DIRECTORATE QF"~S1\/IALL.SAV_Ii\IGS AND LOTIERY
v.V.TOwERS,
PODIUM BLOCK, IST FLOOR
DR.AMBEI3KARvEED{II_ '
BANGALOR;E'1. =: _ RESPONDENTS
[BY SRID}/IJAY' ADVS}
THl2S' r'\j5P.F;ZXI'_I "FILED U/S 4 OF THE
KARNAT_AKA HIGH-..' CO'U.R'T" ACT PRAYING TO SET ASIDE
THE ORDER .DATEI)_ "05?/'10/2007
PASSED IN THE WRIT
PETITION NOL271v?>7/2004 [GM--LO'I'I'}.
1.3'
" .. In"¥fiAi.No 2.131 Oi«*"éoo7
~ V "
_ ' STATE':-OE NAGALAND
REP BY ITS DERECTOR
NAGALAN D STATE LO'I'I'ERIES
I KOHIMA, f~'Fl£"nRLHr\J'.D SSW-WTE
2*?"
ER.)
MAN UNATHA AGENCY
REP BY C GANESH
S/O CHEMBULINGAM N036
GROUND FLOOR
14TH CROSS 9TH MAIN
6TH SECTOR HSR LAYOUT, ._
BANGALORE 34 I
3. KANNAIAH AGENCIES _
NO.147-D 10TH MAIN ROAD
3RD BLOCK, I<ORAIvIANC;~AL;A
BANGALORE _ M I
BY ITS SECRETARX I
I 'I APPELLANFS
[BY SR1. ANIL ,SR1jB.V_ DESAI, AU/.
FOR SR1 T ADV} _, B
AND
STATE' OF» _'
DEPT OF PAR-LIAMEN"i'ARY
AFFAIRS A\ID~.I;EC;ISLAT1ON
M.S.B.U1LDIN.C 'VIDBANA SOUDHA
_ .BANCA'LORE*1 '-
. REP. BY ITS .S_E__C.RETARY
* ' ~. .. RESPONDENT
(BY"SARI';<..VIJ'A¥f ASSOCIATES, SR. ADV. For SRI.
C S..RATILf.;'_~»G.'A.)
" TIIISI' WRIT APPEAL FILED U/S 4 OF THE
,KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE
'f'E~§F_3 ORDER PASSED IN THE WRIT PETITION
';xIO.4';I566/2004 DATED 05/10/2007.
In WA NO 2132 OF 2007
BETVVE EN
1 .
_[\J
STATE OF' SIKKIM =
NOW REP. BY ITS ASSISTANT DIRECTOR' '
DIRECTORATE OF LOTTERIESI. " »
GOVERNMENT OF SIKKIM ,
BHALUWAKHANI I I '
GANGTOK SIKKIM *
KANNAIAH AGENCIES ' .
NO.147~D 10TH MAIN RQ_AD_
3RD BLOCK, "
KORAMANGALA, ..
BANGALORE -_ v_
NOW BY ITS--SEC;RETARY/ I
pROpRI?.ETOR.__. _ i ...APPELLAN'I'3
{BY SPJ."'ANII;;.. K; "SRI UDAYA HOLLA, SR.
AND
REP. 'BY ITS SECRETARY
ADV. i& FOR SRI T RAJARAM, ADV)
» STATE OF" KARNATAKA
OF PARLIAM ENTARY
* A. _ A.FFAi«RS.AND LEGISLATION
<N_I.'B:{,TI STQRIES BUILDING
' «vII3H_AN'A 'SOUBBA.
BANGALORE 550 001
RESPONDENT
'J:
{BY SR1. VIJAY SHANKAR ASSOCIATES, ]
THIS WRIT APPEAL FILED U/S 4 OF__ THE
KARNATAKA HIGH COURT ACT PRAYING TO SET{ASII)E
THE ORDER PASSED IN THE WRIT PETITION NO..€-.300'/'VO5
(GNLLOTT) DATED 2/1 1/07.
In WA NO 2220 OF 2007
BETWEEN
M/S SHAMADHAN TRADING P'LT'D_
MANISHAJ12/7,
BULL TEMPLE ROAD * '
BASAVANAGUDI,
BANGALORE, I
REP. BY MANAGER _ p
I ' " APPELLANT
(BY SR1. RAVRIARIEIA SR§f:;OIJN:SEL FOR SRI T
STATE OF KARNATAKA
_ DEPARTMENT' OF PARLIAM ENTARY
..«.gAFFA1RS AND LEGISLATION,
'M:B.BIIILDING';""'
VIBHANA SOUDHA,
I _ " BANGIXLQREMOI
" NO; BY ITS SECRETARY
" ~ ' RESPONDENT
~ (BY SRLVIJAY SHANKAR ASSOCIATES, SR. ADV.)
' , /2
.. REPRESENTED BY ITS SECRETARY
6
THIS WRIT APPEAL FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET"'ASIDE
THE ORDER PASSED IN THE WRIT PETITION NO,'1P..3463-;/06
DATED O5/I0/2007. ~
In WA NO 2246 OF 2007
BETWEEN
TASHIDELEK GAMING SOLUTIONS v_
[P] LIMITED
A COMPANY REGISTERED '
UNDER THE COMPANIES ' _
ACT, 1956 HAVING ITS REGISTERED. _
OFF'ICEATNO.135, A
CONTINENTAL BUILDING" . .,
DR.
WORLI, 'MU:;vIEAI.-4oo. 018, if; .
REPRESi3NTE'D_ I3Y-IIj;T_S"-
MR. RUDRA'I;.rAIaAYAN DAS
. APPELLANT
[BY SR1. MAHESH
ANIL3 "
V. ., S_TA'1'E'O.E' KARNATAKA
_ " ' DEPARTMENT OF PARLIAMENTARY
IAF'PIA3RS:;AND LEGISLATION
, ' l\/IUL'I'IS'i'ORIED BUILDING
VIDHANA SOUDHA
E3ANGALORE--56O 001
RESPONDENT
(BY SR1. VIJAY SHANKAR ASSOCIATES, SR. ADv.. I Q
THIS WRIT APPEAL FILED U/S
KARNATAKA HIGH COURT ACT PRAYINGfEQ'~--.SET"ASID'E
THE ORDER PASSED IN WRIT'PETI_'TIO-N '
NOI7425/2005 DATED 05/Io/20:07. "
In WA NO 2221 or 2007 4 1
I3ETwEEN'
1.. M/S THE SMART AGENCY, " j'
PROPRIETORSHIP; _ _
REPRESENTED BY ITS S OI;E PROPRIETOR
MRSAMPATH KUAIVEAR} _ W
HAVING. ITS'_ADD_RESS~:AT, _:
NO.41_6--.-B, §HUNl)RE3D_ FEET ROAD
[IST , " D.
KORMANGALA EXTENSION
EAN<;:ALOREA:-560.034. "
ANTONY AGENCY. AA-PROPRIETORSHIP
REI¥'RESEN'TEDA'£%Y' '
SOLE "RROPRI,ETOR I
;1viR.S. BALAJ'I, HAVING ITS ADDRESS
43 5-0, HUNDRED FEET ROAD
_ {GROUND FLOOR)
"I .. . K--ORAIvIAN_GALA EXTENSION
'BANGVAI§OF£--56O 034
EN.)
.. . APPELLANTS
{BY"SRj"..A1'\'?IL K. KHER, SR. ADV. & SR1 B.V. DESAI, ADV.
" EOR SR_I'K SHASHI KIRAN SIWIETTY, ADV.)
s......
STATE OF KARNATAKA "
DEPARTMENT OF PARLIAMENTARY AFFAIRS .. ~ ;_.
AND LEGISLATION, = V ' '
MULTI STORIES BUILDING
VTDHANA SOUDHA,
EANGALORE--5S0 0001
REP BY ITS SECRETARY
REPRESENTED EYA.N.RAO"» -
(GENERAL MANAGER COMEANTVSECRETAREII
M.S.I. L. HOUSE.'v.._ "S
No.36, CUNNINGHAM ROAD; '
BANGALORE-52
MYSORE SALES INTERNATIONAL LIMITED
THE STA.'.;IT:}OE .. U. V
DIRECT(i_)RAf1"'E_ OF STATE_ IIOTTERT AND
"
REPRi?,_SE{NTED"BY I
IIV,,RAGI'TIIr»A*I?I_sI.I, DIRECTOR.
\(.V.TOVv'EvRS,'POD'1EJ1\v/1 BLOCK,
IST FLOORVT-».I I ,
13.141. AB/IBEDKAR VEEDHI,
BAN(:ALOvRE_ A I' "
_ RESPONDENTS
v _A(ByiSRI.f«.IV1J,AY SH" 'ANKAR ASSOCIATES, ADVS.}
T APPEAL FILED U/S 4 OF THE
"I<{AR__I\£A'I'AKA. COURT ACT PRAYING TO SET ASIDE
THE' ORDER PASSED
IN THE WRIT PETITION
NOE}-0855/'2004 DATED 5/ 10/2007.
O *g*
;(.;
9
In WA NO 2225 OF 2007
BETWEEN
S R MARKETING
JAI PLAZA 11 NO 10
3 ELOOR, 90 FEET ROAD
KORAMANOAIA,
BANGALORE 3
REPRESENTED BY ITS PROPRIETOR
G I EKNANATH " "
{BY SR1. ANIL K. KHER, SR. ADV. <'3:i'._S}+3.I_zB.V. "DESAI.,
FOR SR1 K SHASHI KIRAN ADV.) V
AND E' % E V
1. STATE OF KARI\IATA:KA--_ .
DEPARTMENT OF PARLIAMENTARY, " .
AFFAIRS AND LEOIS,IATION.. " * 1,
MULTI STQRI-ED §:BUIL£}.:II\IG';~..E"--.._ ' '
vTDR.*A.N;.A SOEIJDHA
BANGAL0RE%H','- .
REP;I:3Y' ITS _ 'TAR_Y
THE "STATE OF 'I'§A'RNATAKA
; 'DIREC'I'@RA'TE OF STATE
' L.QTT.ERY AN.I)...SI»/IALLSAVINOS.
_ NOW REPRESENTED BY
I~I.,VRAG.H'I1I_>ATHI, DIRECTOR
"'J..'V'~.'I"(,\W}3vRS. PODIUM BLOCK
. IST FLOOR, BR. AMBEDKAR VEEDI
BAI*JG}"1LORE RESPONDENTS
Ix)
2; {BY SR_1f'vIJAY SHANKAR ASSOCIATES. ADVs..]
I«A;APPELLANT<h:
THIS WRI?' APPEAL FILED U/S 4 OF THE
KARNATAKA I~IIGI--I COURT ACT PRAYING TO SET ASIDE
THE ORDER PASSED IN THE WRIT PETITION
N052-46/2006 DATED 05/ 10/2007. 'I
In WA N0 2248 OF 2007
BE'I"WEEN
M/S KENLOTT GAMING SOLUTIONS -:
PRIVATE LIMITED A. _ .
A COMPANY REGIS'I'ERED UND.ER--.THE I ' " "
COMPANIES ACT. 1956;' _' ., " ' A
HAVING OFFICE AT NO.20éI;
II ELOOR, HM GENEVA HOD'-SE--.._»
CUNNINGHAM ROAD, " * '
BANGALORE560 0.5:;
REPRESENTED BY ITS
AUTHORISED SIGNAT FRY-A '-
MR. RUD.RA_N.ARY;ANIDAS-..V ' ...APPELLANT
{BY SIS; :cTS:"'CO;..;ADVS}]""
AND__
STATE} OF KA-RNATAKA
; DEPARTMEN'i' OF' PARLIAM ENTARY
'~"«:AEI«'AI,Ié:S AND ..I....EGISLATION
, MULTISTORIED BUILDING
A .VIDHANA SOUDHA.
B..:ANGAI§OP;E«56O 001
. "~REpRESEN'TED BY ITS
SECE,E'TARY
" . ...RESPONDENT
('S'Y'~.SRI: VIJAY SHANKAR ASSOCIATES, ADVS}
THIS WRIT APPEAL FILED U/S 4 OP: THE
KARNATAKA HIGH COURT ACT PRAYINO TO SET ASIDE
THE ORDER PASSED IN THE WRIT .«'PFJ_1TI'I.ON
NO.17426/2006 DATED 05/10/2007. P-
In WA NO 749 OF 2008
BETWEEN
SR1 LAKSHMI AGENCY I
No.94, OLD NO.101/I,"
6TH MAIN ROAD, "
MALLESHWARAM, -
BANGALORE 560' 003, * ' " "
BY ITS PROPRIETOR APPELLANT
{BY SRI. ANIL R,KHER,...SR;--V.ADV.u_& SRI"B-';V. DESAI, ADV.
FOR SR1 K SIIASIII IIIRAN
AND
'
I,)EPARTME_NTVOE,,IIAMENTARY,
AFFAIRS AND..,4LEO'ISLATiON,
MUL'I'ISTORIED-- B'U.I_I;D'INO,
VIDHANA SO.UD,_I~IA,_
_ -BANGALQRESEO 001
. REPRESENTED 'BY ITS SECRETARY
' V. .. "" " RESPONDENT
ASSOCIATES, ADVS.}
' 'WRIT APPEAL RILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT PRAYINO TO SET ASIDE
THE ORDER PASSED IN THE WRIT PETITION I\Io.45720/04
" V' DA.TED'"5/ 10/20011».
In WA NO 750 OF 2008
BETWEEN
SHREE LAKSHMI ENTERPRISES
N021, MARIYAPPANAPALYA,
PRAKASHNAGAR,
9TH MAIN ROAD.
BANGALORE 560 021. .. I
REPRESENTED BY ITS PROPRIETOR,
ANANDA VADIVELU.
{BY SR1. ANIL K. SR. 'SR1 Ev.' DESAI, ADV.
FOR SR1 K SHASHI KIRAII_SHE"1Y;IvIV
AND '
STATE OF {r§ARI'\{ATAKA "
DEPA-R1'M_ENvTi--uOP"-I§'ARl_.1AME_NTARY,
AFPAIRS--:fiA'ND L'EGvISI;A:I'ION,
MU.I.;IfI 's-ZTORIED 'BUILDING.
vIDHANAV.SOI;IDII.A,'-A.' _ _
BANISALIORE-~56Q 0a___1'".'-
REP. BY ITS SECRETARY.
" . Q 2 " . RESPONDENT
(BY. VIJAY ASSOCIATES, AD\/S.)
TImIIS1.4A"wRIT APPEAL FILED U/S 4 OF THE
ILzL_RI\IA'EAI<A%HI;3H COURT ACT PRAYING TO SET ASIDE
"THEIORD'_5;:R PASSED IN THE WRIT PETITION No.20449/05
DATED V5'/'1'Q,'200§~'.'.
.7.=. APPELLANT V
In WA NO 895 OF 2008
BETWEEN
M/S S G B DISTRIBUTORS
NO.14, 9TH CROSS,
H. SIDDIAH ROAD
BANGALORE, * ._
REPRESENTED BY ITS DIRECTOR.
SR1. M. KALEEL REHMAN ' ''
AGED 41 YEARS
[BY SR1. ANIL K. KHER, SR. AI)'v.",_;'SRIAA IIDAYAHOLLA, SR.
ADV. 3: SR1 B.V. DESAI;jsAD'-I/. FORSRI 'RSHASHI KIRAN
A...N.l_>
1. STA'IfE'C>F_ KAF§NA7I_A_I(2'%_.V ._
DEPARTMENT O'F._PA"RLIAI3/IENTARY
AREA:RS_ .LEQ1S.LATI'ON A
MULTI" E%'1'ORiED --BUILD_IN(}
V'TIDHA1'»1A'SC3-UDHAA.G._ I
BANGALORE--5f60"OQ'1<
REP': BY ITS SECRETARY
ix)
I DEPARTMENT OF SMALL SAVINGS & LOTTERIES
_ "M,--S.BUILDING'
V. ., D.R.AMB.EDKAR VEEDHI
~ _ BANGAL.O'If2E-560 001
;REPRES~EN'l'ED BY ITS SECRETARY
3. THE ASSISTANT COMMISSIONER
OEZCOMMERCIAL TAXES
V I 'ARRELIANTV
TRANSITION~43
CHAMRAJPET
BANGALORE--560 O 18
[BY SR1. VIJAY SHANKAR ASSOCIATES, ADVSu;']:'--
...
THIS WRIT APPEAL R1_I.ED__ U,!'S" DE' KARNATAKA HIGH COURT AcT;pRAY1N(::_ To .SE';r.__AS,1D'E THE ORDER PASSED IN ~' WRIT .RETnf_i0N No.2363/2007 DATED 05/1>o/2001;», THESE APPEALS BEEN":J'HEARD AND RESERVED, COMING..ON'..t-FORPRONOUNCE1\/IENT OF JUDGMENT TH1S'.__D--AY.--_ 3.'./[A1\IJULA_ CHELLUR J.. DELIVERED THE FOLDOV '.1, *3, . .
U1)GMEN¢r_ out of a common order dated
5.£0.20C5'7'<--.< learned Single Judge. The ap13i.;311:afit.S "}tef*ei.n ____ __3.re States of Meghalaya, Sikkim, ' ..}?fadeSh, Nagaland, Kingdom of Bhutan, Madhya . 'Pflra.deSVh ";¥iL'1f.=.c1VA'otV1f1've promoters of State organised lotteries. u .. Writ Petitions came to be filed challenging the 2 Atvaiigiityt and vires of the Karnataka Tax. on Lotteries, 2004 [for short hereinafter referred to as the "State Act') promulgated by the State of Karnataka imposing_.._t__aX on lotteries of the appellants/ States.
3. According to the writ petitione;«*:'s:; Government was not justified in i.rnposing.'_:ta2l:J4'thevsale7ofu ' f it lottery tickets in View of the the SUNRISE ASSOCUXTES 01:5 DELI-11 & OTHERS zooo {1oi...s;ec"4_2o..' As..,1ot£enes were taken out of the ambilt-olffbletting gambling', in View of H. ANARAJ v._e.3'I_'ATE-"()i~"-- (19861 I see 414, it"VWa-S'V.i.3j1¢($$:fECCt r"esr>o'ndent/ State to impose tax on lotteries of is nothing but implied tax impositionon.thleeslale liiotteries conducted by other States. State Act beingmezgtra-territorial was also one of the » 1C0nVtentioI1 ,o'fvt_he petitioners.
4...l'lfh-ellllcontention of the respondent/State before the learned 'single Judge was when the present enactment of the was not in contravention of any of the settled law and as a matter of fact. the View taken by the Apex Court in Anaraj's case that State organised lotteries were taken out from 'betting and gambling' entry was changed Court in the ease of B.R. ENTERPRISES v. i.:_"';p;*. (1999) 9 see me. According toythe.1,3a1'ned_lse.nior' eofunselll ' ; Mr. Vijay Shankar arguing for Parliament is empowered to lawy_so .fa1=._as._:E:'ondi1Cting' l and regulating the organised.1otte.ries_eitherby the Union of India or by any other itlloomes to imposition of tax, as the_'State also fall under the category of it is the State legislature
-------- -V V ow --.
which can i'legislaie Act' of Entry 62 of List Ii. The learned single VVJ'u:dge"--d_is»missed the writ petitions filed by Various order of the learned single Judge is V' _ inlpugned. theseappeals.
l4:7"5\;;{;\;.1':b y Before this Court in writ appeals. learned senior Altaf Ahmed, Mr. Udaya Holla and Mr. Ravi"Va_r7ma Kumar argued on behalf of the appellants by placing reliance on various decisions. Mr. Vijay Shankar, learned senior counsel argued for the respondent/State of Karnataka placing reliance on several decisions.___" .
6. According to the appellants, they organisiiig, it promoting and conducting lotteriesmunder3En-:tr;,f:iii) of'l;istV"'«1 of Seventh Schedule of the gVConstii'__utioAn of 'India Lotteries (Regulation) Act, to Act'). The appellantsVapproachedVli_theV"High tjou'1't"qa1estioning the validity of the that it was without any: . V" legislative competence to enact iltaxes, therefore sought for quashing Writ Petitions were filed by above only seeking declaration of the Act asl"i'll.egal and unconstitutional but also to issue . fiwrit _:of_ prohibition restraining the respondents from ~.inipilevrrietritingl"lithe provisions of the Act and writ of mandamus directing the respondent to refund the amounts * cQl_lected as tax under the State Act.
. 5:
7. According to the appellants, proceeds derivedfrorn conducting the State organised lotteries would be into public accounts of the State and the said ~ a significant portion of the State budget oi'.Vthe~?frespeVctiveV States. It is contended, even the organising, conducting and pro1--:iotingv- its ,ow:; Aio'tte.rie.s in . * and outside the State till 1.4.2yQO7».,a11.d was rcollectiing huge revenue from sale of t it was in direct competition withvthe lotteries o1'ganisedVg:l5y" the other State Governments, of Entry 40 List 1 thefSfe_vent3h' Scvhie_dul_ef--_toV'the Constitution of India, lotteries" Government of India or Governrnentu'ofilanyrstatefall under this entry, therefore only . ..,V_bAy"€entra1"A.ct, legislation pertaining to such lottery has to Therefore, the State 'cannot legislate any law in respect of organised lotteries in any manner whatsoever. Accordivng to them, this is one of the methods adopted by the V"'V'_AAres_pTc'ndent/ State to restrict competence of the lotteries I9 organised by the other States with an intention to enrich itself at the cost of other States in complete violation of Section 5 of the Central Act. Initially it levied aridlilioaiptolsed sales tax on lottery tickets of other State organisedAllott:er»iles,ll"
treating the same as goods. Afte--r"'realising _th:e'l'r4nistake,lwit S withdrew the sales tax and in its filace llii'nVAf)osVe«:l lotteries per draw by the Statelftot. The l.otterte.s orga1*1ised S the Government of India or thelS'tate--»..organised lotteries are taken out from the 'betting and gambling' of the'--individiial liberty to deal with from Entry 34 of Listll __and gambling, State run lotteries are tallsienj rout': Jllegislative field of the State Goxgerltment in of the observations made by the Apex According to the appellants in View of Article 246 (1.) [3},ztl?.e legislature of a State cannot make a law relating to lo«t.teliies organised by the Government of India or the State ,2/-' d. lNDlA CEMENTS LTD. AND OTHERS v. s'1fA:§i«:...§oF TAMIL NADU AND OTHERS -- 1990 (1) .1 "
e. P KANNADASAN & OTHERS v. TAM_lL*».
NADU AND OTHERS -- (1996 )5 sec 4. p in H. ANRAJ v. sTAtv1:fQF MQXHARA$}lTi?_:A"'--w r1986)" V 1 SCC 414. it was held that State" 'of..M.aharashtra imposed ban on the salstliibf other States by virtue of 258 (1) by Presidential<..o«rele;fl Apex Court held that the Ecompetent to impose ban on salelottery tickets of outside States, in the ahsenee of l'~'ar1iament and entrustment of execgjitinve povveritovlthe State under Article 258 [1) in that "1'egv'a1'ri. however held that the entrustment of power is Aiorily lotteries organised by the Government and that«.._Govei"nrnent in the context of the entrustment of power, V'"::_an only. mean Government of Maharashtra and none other. ' o'ndé} Entry 40 of list I of 7"! schedule of Constitution.
ix) ¥\) Parliament has exclusive powers to make laws in respect of lotteries organised by the Gévernment of India or the Government of a State. Since the subject of 'lotteries organised by the Government of India or the Govemirrientvvof a State' has been made a subject with _i;1;;.e legislative competence of Parlia1nen_t.....it__n1ust"fol1ovv» ofu I Art. 246 {1} and [3] that no iegislaturefof State law touching lotteries organisedjay the Invdias or there' Government of a State.
The Apex Court further Vobseivledlpltliatl the Union and the St-ate.'origanisepdalotterie_s~ were specifically taken out of the amlbitpll of lS'tate..:'le§islative field from the expression 'betting, andg_ambling' under entry 34 of State list. r1;'éref5.%e, :a"e{._:ording to them, State has no competence to l'1"13."lif'3x l.aw--:" pertaining to lotteries organised by the Govern_rn'ent~"of India or the Government of a State. In the case of WAVERLY JUTE MILLS CO, V. RAYMON AND co. (INDIA) PVT. LTD. (AIR 1963;"s'c..'s;o.}j referring to the entries in the list in the .. their Lordships of the Apex Court opined the list in the Seventh Schedule sholuldbe so as to" by give effect to all of them and result in any of them beiIIg"'i-rena;leredi':ljftztileor must be avoided. Where there general in its character former must be construed as"'_».eI(cl--I,Idirig. the: latter. This is only an applicationli ._niaI>?.'im "Generalia specialibus non derogalntf :_C'ontracts (Regulation) Act (1952) a legi;sl'ation of Foriavarld Contracts would be a legislation of Markets the meaning of entry 48 in List I of The word ' marketing' in entry 4-8 F'u_ture'M_ai°l{ets of List I Seventh Schedule has reference only xto and not to any location. Though a law of S' "Forward Contracts would also be a law with reference to for the regulation of leases. Their Lordships further held that the entire legislative field in respect of minorkihiinerals had been withdrawn from the State leglslatureandly vested rights could only be takenhiaway bylaw Concession Rules. Mere rule mAaki:jgA.:jooWer'~ Government would not asslist._gar1y*such situa'tion. authority to do so must the_1£lelf01}'e,--yV_ghave' totemanate from Parliament. The 5_relaiilng.__'gt.oA:"regulation of leases and matters connectedA.thVerevvit.h in future and not for alteratiotilhl_gofv;:'the:_ l"lcases which were in existence that special legislative provision was7necgessary_."".___ _ ' In lNDiA ClEMEiNT«S¥"LTD. AND OTHERS Versus STATE OTHERS um (1990)(1} sec 12, the ~ ;conVtroversylvv'as Whether levy of cess on royalty pertaining to H 'minerals is within the competence of the State legi4slatu_1fe..' The argument was? entry 50 in List II of the Seventh' Schedule deals with taxes on mineral rights subject 26 to limitation imposed by the Parliament relating to mineral development. Entry 23 of List II deals with regulatio'n..A'of mines and mineral development. subject to the List I with respect to regulation and d_evelopmen.t»u.rid4er the control of the Union. Therefore, "eVe:,'1"itl1ough"'rnine1r.a1.3'are part of State List, they are t1:¢at.ed separatelyi'L'f[h_erefQne, the,' principle that specific excludestthe general applied. After referring to ent1~3',;.. of of the State List, 49 of the State._List, their Lordships ultimately as such cess on royalty is legislature because sectioanltlvof the field and the State leg1slatu:rue"isV competence under entry 23 of the List IL" othervvise, cess on royalty cannot be tinder 49 of List 11 as being a tax on land. niineral right is not a tax of land but payment; for t.he:user land.
In P. KANNADASAN AND OTHERS Versus STATE or TAMIL NADU AND OTHERS [1996] 5 sec 670 t -- It as follows: S "The Constitution of India_recogn_ises. incorporates the doctrine of Zsieparattionre.oCf'-gfioxverse--..A Tr ' between the three organs of thel"State,V.»'§91z:.;their Legislature, the ExecutviveV.v.andV. the it Even though the Constyit_uitivon"Vhas .ad'op_tecl.:§the parliamentary oil govern_1ne'nt' where the dividing line between and the executive S separation of pox7C:ers}1is _Tva1i__d.j'-- V be government postulated;.V_ of India is a of The subjects in respect.ofvvhich"th:e'"Urlion and the States can make set out in List I and _List ot"_fthe Seventh Schedule to the Cortstitutieoiirespectively. [List III is, of course, a cioncurrevnt list] The Constitution has invested Court and High Courts with the po_weVr'3.:_to invalidate laws made by Parliament and 'the State Legislatures transgressing the constitutional limitations. Where an Act made by State Legislature is invalidated by the courts enacted the impugned law, avowedly to bail the States out of the predicament. The impugned enactment makes this objective clear beyo1'idr'a. any doubt. At the same time Par1iament.__doest:"wpg. not purport to clothe the State Legislatures the power which they do not posses. 3 _ had already deprived the :'j.3tate_:A'Legl:slatures,of the power to levy tax on minieralsphy mfakirig declaration contained'in"'Section- 2 of_tl}:;.t§;Al§/1:Ivi--R_l_?*':
Act as far back as 195'}h.y:'1"r1e said' delclaragtion remains intact. jthpat the States have no power a'to_a."1e'Vyf';'» "or cess on minerals so long. as-the s'a,i(l,'de.CvI.1El.1.".'a;tion remains in force. l?arlian--1erit'fherefore,"adopted the only pvtlelgi's1a:tiive :?fcoui=spe- to it in the 'vcircu1nstances..u. ltg._created those very levies with I' retrospective'"feife.c'tpby enacting the impugned law. P_arlia1'ne'nt,""l)eing empowered to make a lawywithffretrospective effect, is entitled to make _the -law. effective for such anterior period as it if vvthi.nxks:'-appropriate? It cannot be said that u.nle's.s'fVthe levy created with retrospective effect ' , also kept alive on the date the law is enacted By Parliament, such a levy would be incompetent. This would amount to evolving a 30 principle unknown to law and would also amount to creating a fetter on Parliament for which there is no basis in principle."
10. Mr. Udaya Holla, learned senior counsel"'a:fgfiing for the appellants relied upon the following cita.ll'ons::: V'
3.
STATE OF BOMBAY v. R.M.D.'CHAw:ARBAU:O'9.rA1,A7mD l ANOTHER _ AIR 1957 see 699:', A' H- ANARAJ v. STATE OF MA1>1ARAsie1TI<A9(Vi"9lé'6'} S1 SOC '
414. SUNRISE ASSOCIATES' OF N.C.T OF Drilll & (lollsoc 420.
STATE-Oi<' 1«:E}€A1_A' -~£lNDv~"OTHERS v. MINE SHAMSHUDIN AND Omiajizs, 290913) sec 466;
OF AND OTHRS V. PRABHAVATHY T_ AND OTHERS ~ 2009 (3) sec 511.
WATER DESPUTEZS TRIBUNAL -- 1993 SUPPL. E se_O;.96 (11);
3] g. KOCHUNI V. STATES OF MADRAS AND KERALA -- AIR 1960 SCC 1080;
h. JINDAL STAINLESS LTD. 3: ANOTHER HARYANA AND ORS. - AIR 2006 SC 255o;~. .. fjy. i. GODFRY PHILLIP INDIA LTD. :5. STATtE"'OI%5_U..R'.'~;q.I{_aeo5) {2) SCC 515;
In STATE OF' BOMBAY vAV._...;:"z,','1I".«I.'I:3~.,eAOIAIAIVIARBAIIOWAIA AM) ANOTHER -- AIR .S'c_1(5§9;9 when validity of an Act is called _i_1'1 q1:Ie'stIoII, examine Whether this Act is_ assigned to the partieuiar it. Then the Court has to cotisicier operation extends beyond the boundaries'-._Vot7the-__State»..for it cannot have extra--te1'ritorial 'V'AIIIw.._."e"I:-«If v. STATE OF MAHARASHTRA W {I986} 1 4v_1~4,_vt'itAtwas held that right to participate in lottery amounts" to transfer of goods. This proposition was reversed " .AAiI1..5_LinriSe Associates' case. L») Ix) In SUNRISE ASSOCIATES V. GOVT. OF DELHI 8: OTHERS _ (2000) 10 sec 4220, their _ that sale of lottely tickets does not involve V. lottery tickets are not goods. There is sate» the meaning of Sales Tax Act of vari-otizis States-. relevant in this case which readsas unde'r:._ ' " We are vt'i1erefore,§,of that the decision in H. that a sale of ticket i'nifolSfVes_._a:V.fsa1e of goods. There goods within the mearni:nVg':'.ofSS of the different highest a transfer of an decision to the extent thatitvheldactherwise is accordingly overruled ' ~ _thot1gh_ prospe-etively with effect from the date of 1" "«SohVfaSr'f--asi1=STATE or KERALA AND OTHERS v. MINI 0 SHANISUDINSSAND OTHERS _ (2009) 3 sec 466 & Disputes Act, 1956, was made by the Parliament pursuant to the provisions of Art. 262 of the Constitution specifically for the adjudication of the disputes between the riparian'aSta'tes with regard to the "use, distribution or control'.__oi'.th.evivtaters'V' of the inter--State river or river valleys. The _:adj'ut_EicationVl"of b disputes referred to above coulci.pb:'e._l re1ati'o.n «. distribution or control" of the .y(raters of,.__or state' river or river valley. was~«--«h.el--d"'that a's't<he.--}subject of adjudication of these talteinkpcare of by Art. 262, by necessary piniplicatiofln,' that the said subject t1'iefviielcllcovered by Entry 56 of List It was further held that it was not the Parliament or for a State legislature unde'r'res'pective entries. to enact a legislation piroyisionsmlbr adjudication of such disputes. They no adju.dica.to1'y process of the machinery fo1r..__adjudic.ation of disputes established by law under Art. 262 be interfered with. Their Lordships further held 35 that topic like inter«State river water disputes cannot he said to be covered by the residuary Entry 97 of List I. The Ordinance 1991 by the State held unconstitutional and ultra vires as '..effect of the it Ordinance was affecting the water-s -ojl'-thve"'lrive«r Cauvery into the territory of Tarriil Nadu ar1_tfl,AlPor1dicl'io1l't'y'..L which are the lower ripari'an°'l.States:._l their Lordships held that ~Qrdinanc'e.:l; ar1lleXtr'a--territoria} operation and hence itlhas h_f3l:ld--it is beyond the provision_s-- l ). * -l Reliance _isj1j~p1ae__ec:.'..on KOCHUNI v. STATES or' MADRASi4"ANlDl_I{ERALAl -- AIR 1960 so 1080. The ' V' controversy in thiscase is also like a controversy that arose "'cAI,jV'itRY"~..WATER DISPUTES TRIBUNAL and their tolrdshiplsdcililultimately held that Act passed by Madras 39 Tax Act, 1956 and most importantly the ADE of 1957 under which no sales tax can be levjed'»_l'~.. on tobacco at all if the State was to take benefits under the Act." it 2 it
11. Learned senior counsel 'Ra'v.iy'arma VKu_riiar representing some of the appellants relies .upon 't.he~foli:owingv S decision:
mwmmu'nmmw¢jfiWmic@§N mD.AM) crnasas venue STAEE ofirwtéfigaaitrnaeas ~(2oo2)5 scc20a:SlnS"° 'tin HN.C'i'u_»had__ set up several stations for super thermal power of the country. The power generated V-.one'1such 'stations stationed in the State of fed into the Southern grid so as to rnalie to the Electricity Boards of Karnataka, Ker_a1a,_.~'i'a_nftill Nadu and the State of Goa. Andhra Pradesh High held that levy of duty on such sales of electricity " was:-'in pursuance of contract of sales giving rise to inter- iii} State movement of electricity and the same was held as incompetent and outside the power of State '.~e"gis_"i*at"ure. Against the said order of the High Court the before the Horfble Supreme Court, wheyreiré was whether such sale was inter under sec. 3 of the AP. Ele_ctr.icity Act or y.fere_:'i'n;tr:i--state.S' sales. Their Lordships the S.taieil_¢gi;§1ation Carl be sustained only onlthel nexus and the same must be In iivere referring to Larger Bench .IMMUNI'I'_Y co. LTD. v. STATE or BIHFxRl',AIRe._.ll§t}:5§f and RAM NARAIN SONS LTD. VSSCST "I955 2765), while discussing Arts. 286 8:
S referencellltlo the entries in the List I, II 81 III of the were also referring to the law iaid down ah-.20T}j}.-ci:"i;\:*rURY FINANCE CORPN. 8: TATA IRON 8: STEEL co. SR. SARKAR. The law laid down in these J'uclgn1ents is to the effect that if a ban is imposed by Arts. 4] 286 8: 269 on the taxation powers of the State, as they are independent and separate, first they must be got overjbefore a legislature can impose tax on t.ransacl.io.ns purchase of goods. Such ban would..opera_te'by'lt:s it ' without reference to the language "in an of the V11 Schedule has couched.
measure given to the 'field of language of entry in List II of VII to the limits of constitutional er{1powerz_nenlvt.V and it can never cross the '_c1'eated, It was held that several 3l:j.liVsts of the V11 Schedule though fields of legislation, they are not the sourceélof legislative':einpowerment. It is further said that generally a legislation having extra territorial .o15'efa£1?§1a fucaln be enacted only by Parliament and not by State vleg.islatu.re unless one can establish territorial nexus. Th-;_s was reference to BURMAH SHELL OIL STORAGE * AAcase...vv._.'l"l'l1eir Lordships said that if sale and consumption were to take place in different states territorial nexus for the State, where the sale takes place, would be lost. By placing reliance on the above [they learned counsel contends that thovughtlaeo sale: 'tal_{esVplace_ the State of Karnataka by sale'v._oi"'--._lott61;lW.;.fiiCl{ets--,l'"the'a imposition of tax being on d'i"ayir'i.held oiitsm}; thelVlState of V Karnataka, there is n'o.__terI.ito'ria1':nexus forthe State to impose such tax.
12. As haivellheard the arguments of Mr. Vijay counsel appearing on behallivof rSc'sponde'i1t}3StateQ His argument mainly refers to the following contentiongséi it S should enact the State Act in question Within its 1 legi.slatiyeuvobjects. According to him, the State enactment must tax betting and gambling and in View of the fact that entry 40 of list I does not prescribe the State of A' --.AKarn;ataka to tax on betting and gambling, the legislature in 43 question is therefore relatable to entry 62 of list' further contends that the Central Act refers lotteries and not the taxes. In the lotteries are regulated under the nothing to do with the taxes imposed _ on and' gambling. As tax is ii;_11.posedg_.or:1g"vb_ettir1g landigariirbling, it is not on lottery tickets either in list E or list 111 to enable laws relating to betting adobted by the State Act to taxg_o_r"i as an act to mean that the draw itself referable to sub-
sectionlf} of the Act. Under Karnataka Sales Act after"~th_lel Zjrornulgation of the State Act no sales tax .1'_srleVialbgle:Vllon._ sale of lottery tickets. With these submissions, :li.e__ fr.$r.--the dismissal of the writ appeals by placing reliance following judgments:
44
. I.T.C. LIMITED V. A.P.M.C. (2002) ~ 9 SCC 232. . ASSOCLATION OF NATURAL GAS & ORS. V. U_.O.I. -- (200-4}} SCC 489.
. STATE OF BOMBAY v. R.M.D.C. -- AIR__1-957":'i§C----69Q,T' . R.M.D.C. [P] LTD. V. sTATI5:,"O'F AIR-_195'2'* 2 SC 594.
. B.R. ENTERPRISES.v.-STATIEOF u.r¢"V'{3,'999} s"cOf 700;
SUNRISE As'SOfcIATE.<3-- . OF' N.C.T. OF DELHI --. (200615. ,:'s1cc"B0.:3. 9 ' .. . DEB? -~ AIR 1959 SC 64 COMMERCIAL TAX OFFICER, ' " 'VBATNGALORE 81 ANR. ~ {1992} 86 STC V"Q"yABEiA.1~~OvERsEAs V. COMMISSIONER OF SALES AND ORS. -- (2008) 7 sec 681.
'GREATER BOMBAY CO--OP. BANK LTD. v. UNITED YARN TEX. (P) LTD. -- (2007) 6 SCC 236;
45 k. TWENTIETH CENTURY FINANCE CORPN. LTD. v. STATE or MAHARASHTRA -- (2000) 5 scc 12;-.___
1. THE BULLION & GRAIN EXCHANGE LTD"f{r.C"sTAfrE OF PUNJAB -- AIR 1961 SC 268.
m. STATE or SIKKIM & ANR; »v.».sTAf'Tr§'Vor--'l,r;ti'RALA"«S£ it oas. (2007) 15 KTR 426 (i{er.}';_" ~ in the case of I.T.C. Ltd. vs..A.-1§.M.C'...(2'o02} majority their Lordship:-3 held does not comprehend sale of ra:x.z_s.f"pi:obsi'_lccr§;~,.A V"'l'.he,re£ore, Parliament was not competent to legislate in and the question was yvhetrieertifthell to be construed liberally or givepal restricteVd.lVrriveaning. Their Lordships per majority held that d"ind'ustr}_J' Aincludes only process of manufacture or pifc_ie'..uc_t.ion but ldoesnot include process antecedent thereto, ' ssueh a.s"ac'quisition of raw material and subsequent thereto, asjtfdilsposal of finished product of that industry. Theieflore,V despite the declaration, Parliament is not Apcoinpetent to legislate in respect of such antecedent or ' ., pp .-/ 46 subsequent process, if the same is covered by any entry other than entry 24 in the List.
According to the learned counsel, organised or Union Government organised"-«l:lotterie'sR controlled and fall under entry 4f;')"so"far 'as b--e'i:tixn--g b and gambling falling under entryV_E:32' it of '~11 lotteries. Therefore, it is the which can law to"
impose and levy tax on. the lo'tte.ijes"'and it'i's~.not'E a subject which would be covereclunde'r_e'iitry':'4{) List I. in " ASSOCIATION or NATURAL GAS 4 SCC 489, the controversy was uritxh"-«.elregarci A'.to'«..."~the expression 'petroleum' and 'petroleurn proctuc.t.sTvor 'minerals' or 'oil resources'. It was :the expression 'petroleum' and 'petroleum l'productstlfricludes 'natural gas' and 'liquefied natural gas'. Hence Union has exclusive legislative competence to enact a »'~:,-'laws on natural gas. Therefore, it does not fall under entry 47 25 of list II, hence lacks legislative competence to enact on the subject of natural gas and liquefied gas. Their Lofrdships also referred to distribution of legislative to Articles 245 81 246 and held that where incidental' V' by Parliament and State Legislatuzices on each:
permissible and if any conflict arises. betweenblvthge 'Uf1ionl'a_n'd, the States, it should be endeaxiotired to._beAo1_9econcilled pith and substance rule..._ _' V Reliance is placed' on.sTA:rt: BOMBAY v. R.M.D.C. {AIR 1957 SC E399). The ifeads as under: V' " question canvassed _ before us lrela'tels'«.to the validity or otherwise of the i.mnp'u.gnedg:Act. The Court of Appeal has pointed out that when the validiw of an « in question, the first thing for the do is to examine whether the Act is a 'ivith respect to a topic assigned to the gyarticular Legislature which enacted it. 48 If it is. then the court is next to consider whether. in the case of an Act passed by the_',_ Legislature of a Province (now a State] operation extends beyond the boundaries ithef "
Province or the State; for und_er...1;,he p:'oyisio'_n,sV"'». ' conferring legislative powers on L ":
Legislature can only makea lawdforiis territvories'~ V or any part thereof and itsyjlglaws cvannotyin absence of a territorial nyexusv, have 'extra territorial operation, If s.at.i.sfies¥ljoth these tests, }ha:§"'to"'ascertain if there is part of the Ciehettttutaonllli'tyiateiig'*--;$1aee*s~«a'i1y fetter on the legislative 'pfoweifsl .. such Legislature. The imgjugned law all the tests."
i$1ai~eing.;e1ianee"""'en R.M.D.C. (P) LTD. v. STATE or .1962 SC 594) wherein it was contended that the'-«.subjec1;voilhetting and gambling enumerated under Entry : 34_of 'L:s,5t ll of the V11 Schedule and the taxes imposed on l.yAbtetti.ng and gambling coming under Entry 62 of List 11 are to 49 be read separately as separate powers and therefore, when control and regulation of prize COII1p€T_i'£lQ'I1S:.'<«."Vi?'CI'€ surrendered to Parliament by the State legislatures' of resolutions, as required under A.1ft._252_-,"the---- under Entry 62 of List II which isla separatehead clan"n.o'i7b:e said to have been surrendere'd_._ It was furt'ii_VelrAi.p:l";eldV in they"
said case that a tax has to be"'*imp--o_sed purpose of revenue and not for th..e':p'purpos_e.lof..(;on'trol and the Mysore Act, was really oolourapblevilegislationxbyl impugned tax was levied.
The _leam--ed.«.__éounSelv...for the respondent referred to a passagelfrom yvhich reads as under: is not"i'oir...the Court to express or indeed to l any opinion on the expediency of a
-'piece of legislation, if it is satisfied that it swas:--.V_'.7i:rithin the Competence of the legislature it enacted it; nor will it allow itself to be at influenced by many considerations of policy. for these lie wholly outside its sphere."
In the case of 133. ENTERPRISES v. S'FATE<iV:'€§.Ff'--.g:i}v..P. [(1999) 9 sec 7001 their Lordships held that ti':rider.'.f1;§t.tt:;?1't;sl"~. Regulation Act, 1988, there are 3: ir'1gredieuntsi linlthe vs.a,leVl'of lottery tickets, viz. 1. Prize, 2. Char1cé'_'_'afid So. when one purchases a ticket. he for a V V price which is a chance and the prize of the ticket. The knows that the consideration w--hvicl1 Eye for receiving nothing. _ may be lucky to recei\f¢~ Their Lordships further held~S__tat-e lotteries have the element of chancehw_ithout":ai1'$§g'/'sld1'i.::ggl'4'therefore, it remains within the boundaries of=gamh1in'g. The mere fact that proceeds are not in. the handsof individual group but is in the account of the 'V {ate would not take it outside the realm of ga1'nb1irig.._lt remains within the same species. When the character of both the State organised lotteries and other Iot.i'.eries remain the same. by clothing the State organised 'Ji lottery with the authority of law, would not make any difference. Therefore, it remains to be a gambling as element of chance persists with no element of skill. authorised by the State also have a sanctio'ii--« gambling may be taxed, may be__iorganised"lilorlfga.lspeciiiegd purpose but it would not attain :'§he1'_status».'o'f tlradeylifijge other business. Ultimately" 2. ffheirh ' - V «heyldai that L' transaction of sale of lottery___ti"cl~;ets__whichis gambling in nature cannot get protection'-unijerléfiirt. (1) {g}. DELHI] their Lordships held that sale of lottery lticlietsl does' not-.tVinyo1ve sale of goods and lottery ticl«.;et'sg.are lnot__goodsv.' There is no sale of goods within the "Sales Tax Act of various States.
in' CHAND V. STATE OF UP. [AIR 1959 SC 648} Ayayfterzreilerring to Article 245 etc. their Lordship held at para ' as under:
53
g .
' § {3} Subject to clauses {1} and (2). the Legislature of any State h.as exclusive pow_erV_St:)_"S~.e_ make laws for such State or any part with respect to any of the matters enumeriatedeiivn List 11 in the Seventh _SC,hr6(t1u_te Constitution referred to as the (4) Parliament Vha_is"~.Vpowe'r .__to .n'M;té..;v'1'aws:
with respect to any for any oi?' the territory of not in a State notwithstanding that is a matter enumerated_ in V it Straws in force in the .ivterri.to't*y 1m':»11~a' irtimetiiateiy before the VV:,Vcori'r1nerice"r(1entofythis' Constitution, in so far as they are inco.nsi_s'tent'with the provisions of this _ _ Parfl' ~sha11,V ';toi'the" extent of such inconsistency, be void. A' (2)/the State shall not make any law takes away or -abridges the rights . conferred by this Part and any law made in "contravention of this clause shall, to the extent of the contravention be void."
. M.' ~".W.,,, .
Article 31 {Before the --Constitutioi';--.yy {Fourth Amendment) Act. 1955):
" (1) No person shall be deprived---..ol':.A_lfiis_ S property save by authority of law. A y (2) No property; .mova'blell'or including any interestl"is«r,1:;"'t.or in'*a_ny~cVoni'pany owning, any A,..comrne«rc.iall'~.._ or ll"1dt1Sl;I'lal undertaking, bet, te;igen"v--.possession of or acquired for any law author1'sing-.'the§; «possession or such '.wa'CqLiA:lSllflOfl',_' __u'nles--s' the law provides for Corrnperitsatitinaforthe property taken possession {of OI"éldqtlilifid'C1>Il(Jl._Sl'lthCI". fixes the amount of the cornpensationf or---t.__s'pelcifies the principles on _which, ''..and A':the"' manner in which, the co1npensation__i_s,to be determined and given S " '1V'r':?'_.S.'.~CO1'I1lZ)lI'1€Cl effect of the said provisions stated thus: Parliament and the Legislatures of States have power to make laws l;\.:;{$;
in respect of any of the matters enumerated in the relevant lists in the Seventh Schedule and that: power to make laws is subject. to the provisions of the Constitution including i.e., the power is made subject to the imposed by Part III of the Constituti«o__n..:'iThe general power to that e;_<t.er,1_t< Legislature, therefore. has no power rnakelafiy f law in derogation of the injunction contained in; Art. 13. Article 13m deaIsV_ewithl' 1aws.,V:fit_:f6'-:66' nil the territory of India be_fore:'th.e cornmencerhent of the Constitution and laws in so far as they are inconsistent witlvli of Part III shall,' to the ;e§{tent lineclnsistency be void. H Vlrecognizes the laws and only declares th*at-- the. saic'l'"~iaws would be void 7,t_herea,ftei;to"thle=_e§<:t.entl of their inconsistency
- cl. (2) of that article _ impo'ses'a. prohibition on the State making laws taking aw'-ay_o_1j abridging the rights conferred by Part_"I«i_Iv and declares that laws made in * ayenjtion of this clause shall, to the extent of the contravention, be void. There is a clear distihnction between the two clauses. Under el. ('1----): a pre~Constitution law subsists except to the extent of its inconsistency with the provisions of 57 The words " any law " in that clause can only mean an Act passed or made factuValVl3§Dc._ notwithstanding the prohibition. The result such contravention is stated in that plain reading of the clausegpggoingdicates;"
any reasonable doubt, thatt11e_prt)hi]oit.ion to the root of the matter and lirnits ASta'te;sr"* it power to make law; the_V:vlaw made_in "the:
prohibition is a still-- born"'l.a:w.--'f_ NIRMAL AGENCY..v.,:'C10Ml\/I;3R'_C£A1}7ieztx OFFICER, XVI CIRCLE, BAi:\?C'}§'f§cI.tQR.V1¥f}.A'%\hlIjll ANo?I'r1EaV':(1992) 86 STC 450. This case perftalinsllwlto ;o"f'~lott'erx3'I tickets and sale prize with :teferen'ce,to Etarnatalia Sales Tax Act. In this case their Lordships .1§éi.d»gs'~£§1'1'c"§vs: S A " 'l;hev~t~ransfer of the right to participate in the which takes place on the sale of a it "lot--te_ryTtti*cket amounts to a transfer of goods wh.er'eals. to the extent that it involves the .. transfer of the right to claim a prize. depending on a chance. it is an assignment of an actionable 59 I Constitution Bench decision in SUNRISE ASSOCIATES case.
although in SUNRISE ASSOCIATES case, their Lordships did not approve the decision in VIKAS SALES case to _th_e-..ex.tent VIKAS case had given free marketability o.f--?:._a_n_ additional reason in support of conclus'ion:.f_»v Iiltiinatelyd their Lordships held that said decisio-rat. Way change the legai position regardingl" the saleriohf as concluded by VIKAS case hoCl'dir1g.Vit as GREAT]?/R__ BOMB.AY_ -Co'.-op. 'ILTD v. UNITED YARN TEX.[?__'P}h1j_;*i"_V. [v[2Q0_7}"x6.:SCC'"'236i . In this case it is relevant to refer to" the .fo'l1ovJiI1g: 0
X _ " egfiipress exclusion of cooperative Esfocivetiesi"1n-S.chedule VII List I Entry 43 and the inclusion of cooperative societies in List separately and apart from but along vvith1..V_corporations other than those specified in I x List and universities, clearly indicates that the constitutional scheme was designed to treat cooperative societies as institutions distinct from ()0 corporations. The constitutional intendment seems to be that the cooperative movement was to be left to the States to promote and 1egisla.te--.»y upon and the banking activities of cooperative'~«.Vy'""._ societies were also not to be touched.--§V__unl'esVs--. ~'-' Parliament considered it _ iom;5era'twiy'e Cooperatives form a spe'cies'*of 'tithe "corporation" and as such "t#ooj§_eratiVe. scciei,ie»s_S"*~,H'SA with objects not confined to one V'Statg-'g1;{§.V~;ead_:'§ in with the Union as provided in IV;ist'1'E-ntry: 44; the MSCS Act,v .2902 govertlsiidstlch fnuiis-state cooperatives. } banks performing functioinsy tI'ie.V"p:t1ybiic with a limited;'i':o1§1me§fcia.1...~i"ui1ctioi1.__aSS Opposed to vicorporate bf;-m.ks.ycani1ot"'be covered by List I :':Entry "banking". Thus the field of .__cooype'ratiVe'spocieities cannot be said to have . _ been"coVer.e.d Parliament by reference to List I Etitry 43*' «(.'.._o_operative banks constituted under ,C'o.operative Societies Acts enacted by the States would be covered by List 11 E}I1try_ "
6] TWENTIETH CENTURY FINANCE CORPN. LIMITED V. STATE or MAHARASHTRA [(2000) 6 sec 12]. In-«jt'1'":;li;.s--« Their Lordships per majority held at paragraph's;--~20; as under: ._
20. While examiningVW_the;' of ,. & . 1 i ' Legislatures under Entry 'List it earlier part of this judgment, five that the situs of. the sale Soi*--.pu.rchase' 'is..Wl'lolly immaterial as '«._th:~j:' Winter-.S"tate trade or commerce, as Co. Ltd., Case. Further, §the;SStateVAl;eg«islat:t1re cannot by law,__treat o1itsi.de--._"thfe State and sales in .t'r'1é"Cojjjrseiitfi'--irrifi,ort within the State' 'sales Within its State in defi_nitiof1 is within the exclusive ._domain_:V ofethe 'appropriate legislature, 1'.e., P_a1'ltamen't «touftx the location of sale by creating legalfiction or otherwise.
_ ' }=2S1. It may be noted that the transactions *~ contemplated under sub--clauses [a] to (H of clause [29--A) of Article 366 are not actual sales ()2 within the meaning of "sale" but are deemed sales by legal fiction created therein. The situs of sale can only be fixed either by the appropriate legislature or by judge--n1ade law, and there are no settle principles for determining the situspo-f_ sale. There are conflicting views on question. One of the principles ;_. l of sale was engrafted in the explanationtflto clause [1}{a] of Article 286,-a"s' itexistedllpiiiorltof, the Constitution {Sixth Amlendzrneiiit} l'A_ct~, provided that the sit1.1*s.'_of sale WouldiV»beV.vi7'here; the goods are deliVere'::lT'fo.r cons;,in"1Ap_t;ion;.: second View is, Jsitus of-sale. would be vthe...vplace Where the contract is third View ~'is"o'thAa'1j; thefi.;p1ace"where'*the goods are sold or l';_de!1vcre'drWould'be"the situs of sale. The fourth View is thatE.Vhe_re'l'lthe essential ingredients, which Vlcomiplete :1" sale. are found in majority iiyonld be"th__e__csitus of sale. There would be no _idtii'fic:ulty in finding out situs of sale where it has it ' .._lbjeerilproVided by legal fiction by the appropriate legislature. In the present case, we do not find x that' Parliament has, by creating any fiction, fixed the location of sale in case of the transfer ()3 of right to use goods. We, therefore, have to look into the decisional law.
31. It was then argued that if Section 4 of the Central Sales Tax Act is not applicable to the transaction of deemed sale under Article 366(2g9---.__ A]{d}, the same may be applied by analogy determining the situs of sale of the the right to use goods. We have already Pieldvthat situs of sale can only be fixedby.
legislature by crating a le.gal::"fictio'n_'like 7W ' omitted Explanation to:A'rticle'i2_$6[ l}(a}g.ljut of sale cannot be fixed analoghyofl 'ef the Central Sales Tax hi hi 'lF..HE Btj'LL1jc-in EXCHANGE LTD Vs. STATE OF PUNJAB[AIR 1961»-268}.
ln'~this casewtheir Lordships were considering Punjab .A :1'+'«oIfWé1.y1:'cii and its validity. The question was Whether ,it'-l'tfe11e' .;;;_f;.:11ie;a""entry 62 of List 11 of Schedule VII. Their Lof'dsli.i:p.s"held that if the Act provides for a tax on betting W. \'ir\ 64 and gambiing then and then only it can come within itern 62. It is the fact that though in form of an agreeme_nt.i:"for"'--sale purports to contemplate delivery of the payment of price. neither delive1fy....nor contemplated by the parties and Wi£f1'at'fVistcoidtemdplaiield./_is merely the receipt and paynéiemypof differen'cei:._be.t.vveen the L' contract price and the price thatfiimakes the contract a wagering "th'etd'efinition of "Forward Contract" in the act, directly or indirectly by reading of the words lnot made or taken" the words not to be made or taken"
and "is paid or received by the parties? the vvords to be paid or received by the parties"
'd if yanddalsio byypomittyinllgwfthe words "on the basis of which", that contract" as defined in the section can be a wagering contract. This however, the Court notverititled to do. Therefore, the words 'forward contract' as defined in the Act does not set out all the elements which 65 are necessary to render a contract a wagering contract and so the impugned legislation to tax forward coritr.8fLcts._'as defined does not come within Entry 62 andri;-3 legislative competence of the State, l.egi_slaturef "
STATE or sihimvi a AhI,jC)-T_EIER." 'KERAIA & OTHERS --»~ (2007) is KTR ,4i2s."'{'i<eh.1_ Hist' 'Lordship held as under:
"lil;éT_lerefo;ife, on lottery is v"thef»Si;ate List to the 7th _S(:h'E:lCli_1:l€:ti?::'thC«._CQl1Sl1t11tlQ)'l. The next question to 'lcon.si:d.ere1:l"'is_ whether Entry 40 of the lUnli0nV List stands in the way of state _Vlllegislation'«...lor tax on lotteries. Senior Counsel-Aalplpearing for the State has referred to the decision tttt in State of W.B. V. KESORAM LTD.{2004} 10 scc 201, where the court has held that power to taxation is a:lifferent from power to make legislation in the of regulation. it is specifically held by the Supreme Court in the said decision that even 6 6 though taxation may be adopted as a method for regulation, the power to tax is not incidental legislation by way of regulation.
this, petitioners have relied on E3xt.P1 judginent of the Bombay High Court _whe__rein High Court has struck down l€F.='-Y sales Al lottery based on draw. The ldecisioril_.oi' the':
Bombay High Court is 13.ot~~applicable--to:'vthle;iac'tsl of this case because___:lwvha't_y_V the "court; has considered therein. is lottery as 'sale of goods'. held that draw of lottery canlnotligbeiltrleated sale of goods for in this case it isto be se_enftha'twhathis taxed is draw of r1ot"tc1'y:"jundé;c'*law, m.ade"i1'1' 'exercise of statutory lipower .lVei"t'on'thelegisiature under entry 62 of the State =Listwhich"specifically authorizes levy _ _of amoifig o=:h'e*r' things on 'gambling'. Going the ab'0ve__.rcferred decision of the Supreme _vCourt'in KESORAM INDUSTRIES case it is clear thevylflonstitution does not bar State from makirigiln law on taxation in respect of the same zsuabjelct which is reserved for Parliament for regulatory legislation. in the circumstances, the contention of the petitioners that the power of 68 a lottery and includes any person appointed for selling lottery tickets in the State on its behalf by such Governnient or country where such country is not directly selfljilngkjlottery tickets in Endia. Section 2 {6} refers to the levy" of. 4_ means tax levied and collected on Actfs it Sub--seCt1'on [1] of section 6 provides there and collection of tax on the._lO_tte1'ies" at theflb.foli:oVW2ng":rates;if Viz.:
a] one lakh and fl:V for every bumpel.
draw: and T b} rupeesa respeclt other draw.
Sub~se'ction "if there is any reduction in the rate of as notified u:1'de1- su.b--sec. (1), a notification can beéssued enumerating restrictions and conditions. if any, in the notification. Sub--section (b) of section 2 reads as ~ "5lotte.ry" means a scheme, in whatever form and whatever name called, for distribution of prizes by lot or chance to those persons 69 participating in the chances of a prize by purchasing tickets."
Section 8 refers to registration of promoters and se11e§:_s";»,.. Section 4 of the Central Act reads as under:
"4. Conditions subject to which lotteries, organised, etc.--A State Government may o'rg'anise._' conduct or promote a lottery, suh:jec1;..to,ivtl1,e1follo\ésring__. at conditions, namely: ~«
(a) prizes shall not 'Vbe.'leffered._g';&jginyilipre-
announced numb.er_A"o--r°0n the"basis/of a single digi'tj~~..p_ _« ..
f {b} they "S:tate'-._'G»overnment shall print the
-' 'lottery ti_cl;et's bearing the imprint and logo of the State in such manner that the au.t_henticity of the lottery ticket is ensu're~d;"
it State Government shall sell the tickets either itself or through distributors or ' -. selling agents;
70
(d) the proceeds of the sale of lottery tickets shall be credited into the public account of the State;
(e) the State Government itself shall the draws of all the lotteries;
[i] the prize money Linclaimed wit'r1in'_~su'ch'_ time as may be prescribed by t;hey"St_ate'* Government or not o'ther_'wis~'e dist'rib'uté shall become the 'property '_.:)f"~vi:ha1:_"'--~ Government;
(g) the place of draWlvl4sh:all_VVbe within the Statevconcerped;*» it _ ____ H (h)"'.,tlO:}i?j;t'¢pf haV¢,»lI1OI'€ than one draw ' ' sin _a week;
(1) thedraws"of"all-'kinds of lotteries shall be "conducted between such period of the day " 'V as Vm«ay'*_ be prescribed by the State Government;
;.(j) the number of bumper draws of a lottery shall not be more than six in a calendar War;
. (}:']'; such other conditions as may be prescribed by the Central Government." to lotteries organised by the Government of India or the Government of a State. Entry 97 refers to any other;'n1atter not enumerated in List 11 8: III including mentioned in either of those lists. Entry 34 of refers to betting and gambling. "refersflto_ luxuries including taxes on entertainrnent,' ._aI~nVuseit_ienVtsy._ betting and gambling.
1969 {3} SCC 838 in the-.c_aste of BAIJNATH KADIO Versus STATE or s1i%m.i§f'ANi) iN"151'A. A'--ys"--9lSTATE or TAMIL NADU [1990{'1) «vs STATE or TAMIL 670] ~ refer to significance of * andV'say..it«'does not make any distinction between 9 entries or tax entries. The State legislature regulatory entry or otherwise.
'will'haye'.V'v'no..jurisdiction to legisiate matters enumerated in Entry of the Union list irrespective of whether such entry Their Lordships in H. Q 73 Anraj V. state of Maharashtra ~ AIR 1984 SC 7781 held that lotteries organised by the Covernment of India:._"or"'v.ythe Government of a State have been takenjioutr.ilronalithe'.'_ legislative field comprised by it gambling' and is reserved to be_d'ealt.:with the case of J K B -- AIR 1"ZlE_34»:..[3) 1542 .95 case' pertaining to private lotteriHes:'»r:a11d r1ot"E§tatet§ organised lotteries. While extertdiilhg between the two kinds of lotteries, they.ha:v.e'tstate'd_that 'two belong to two different Jorpérzliseldlllotteries and the other private lottteri.es,!pp lotteries definitely come within 40 and private lotteries come underlllisillil. or HARYANA v. SUMAN ENj:r,.Rr>R1ls"i:,sa ~~(*19é'4) 4 sec 217 their Lordships held that ' " the lprbhibvitign canhot extend to the sale of lottery tickets or lll-:3_tter'ie:s-.._oi§a-nised by other States. This is the implication ari.sing.oul_t£'.ofl a proper construction of entry 40 of list I and entryof List 11 of the VII schedule.
K 74
15. In Anrafs case the question arose was whether Govt. of Maharashtra could impose a ban on the sale of lottery tickets of other States by virtue of emtrustment of power by Art. 258 of the Constitution. By referring: 73 & 298 it was held that these 2 articles in fact have s and considered together. By readingso, thel ' . executive power of a state in a 'mattelr~'loflcarrying ariy trade or business in respeCt_svo*£..which the_State._:i;egislIatureVl' may not make laws is subje_c_tll:t~o__legislation.Vby_lParIiarnent but is not subject to'--lth.e bower of the union. Hence. there issno obligation to_o»bta.in nermission of the Union Govt, 'organise its lotteries in the absence of parliamentary lllegisla-i;i.o'n.l Even assuming that such permission i"s~.__srequi1'ed, a condition imposed by such Iottery tickets of one state may not be sold cannot be enforced by the other State. It was held -that the other State cannot make laws In regard to the lotteries organised by the first State. Its executive power flljf,' virtue of Art. 298 extends to lotteries, organised by itself 75 but not to lotteries organised by the other State. If a State violates condition imposed by the President while entrusting power under Art. 258, then it would be open to the President to revoke the permission or to take any_"-.alct_ion constitutionally permissible. In that situatiofnl"itf_'vcarin.o't_ possibly enable the Govt. of other State to do it I. except to complain perhaps to the "~In'Vtl1elSs.aid case. the contention that Entry 40l"0_f. 'List local acts a lottery organised bvy;a_llpState be construed to refer to a lottery orgarijsed._byn"aStateand that if a lottery is not lawfully orgfan_i.sedl would not fall within' Entry but would fall under the head gambling..p'undle'r. ".ist II and the State legislature would then.' be empowered to legislate in respect of the sale Taecepted by their Lordships. Therefore, their held-:"that the "lotteries organised by the Govt. Of India e.r'theSGovt. of a State" has been taken out from the nlegislatiye field comprised by the expression betting and I --..Vgamn'Sbling and is deserved to be dealt with Parliament. In "tit A. " \\:£\ .
76 this case Their Lordships further held that lottery tickets are goods for the purpose of Art. 366 {29--A) {a}. In a later decision or BR. ENTERPR1sEs....{_i:sé:'s:'fa)"
sec 7001 their Lordships took a different K nature of state organised lotteriezsr Lordships State organised lotter*iesA:"are'.V_riot it other lotteries because the inhe.rei1,t nature of V chance is the same. Asthe ucorisideratiorivl is what exactly made lotteries gafi1b.;lirig-athci State organised lotteries are to vlliordships while compaivtingthe'l'lState«.orgah-is_ed lotteries with other lotteries held thatlthe 'both the lotteries is the chance to wiri; either =.vuvay'1 the element of chance persists. The lddiffeirence' isthe stringent measures and other conditions organised lotteries which would incu.l__cat_e~ in the minds of the public to participate in 1ott_e'ry as the same would be conducted fairly with no cha,_r1c'e of any fraud, misappropriate or default. It assures 78 subject matter of sale which is assessable to sales tax was rejected. The lottery ticket has no Value in itself andtitpis a mere piece of paper. Therefore, its value lies in it represents a chance or a right to a cond.itio_'nal' 'cfu winning a prize of a greater value than the'1'con's3[é.erati_or1 paid for the transfer of that chancetflpflence, itl.i.s. ljncthirigl a token or evidence of such Thels.ale" 1($t:e;9§ ticket does not necessarily.inyolve'lnsalsiljptsfigotods.lsltltvlis like a contract of carriage as is .'.:'Vab'__'_ticket possesses merely a right of a lottery ticket possesses the ticket cannot be gequatied togolodsthecatzfse__of.transfer of a right of chance to win.
it further held that a purchaser of a lottery. have a claim to a conditional interest in the4__lprize~rr1joney which is not in the purchasers possession. 'I'here'fore, referring to A11raj's case their Lordships while holding that the sale of lottery ticket is not sale of goods but 79 held that the sale of lotteiy ticket involved a transfer of right to claim a prize depending on chance and it4.,wausgan assignment of an actionable -claim. in this§V_Wcasle*~--._tlieir«_ Lordships held that essentially- ttery is a «prize, * V. the sale of a lottery ticket can be_-Aalnsaflepofthatr and nothing else. They fui-*t'her said participate in the draw is a partthe colrtipfosite right of the chance to win and it 1n the definition of theyw0rd":1Q%EtAe1~§;églV different right. They further: chance to win assumes participation 4iii:'jth.e'----d,raW: and there is no value in the ntiere__ as the purchaser of the ticket does notfpay to participate. He pays consideration'-» for" the chance to win. Therefore, their "held the right to participate being an A of the chance to win, is therefore, part of an act._iona'ble§?'claim. The chance to win and the right to _ partifcipiate were both held to be future rights. 80 From a reading of the above decisions, initially the lotteries organised by the Government of India orvthe!lState Government Came to be taken out irorn the arfribit».r'o.f:S1s:_atey legislative field under the expression 'betting. .. as per Ff. ANRAJS case in 198151. jth--_e organised by the Goverr3.ment of India or theV»Governrn}§3nti a State has been made exclusive legislative competenceJ:of,_PaI_'li'ame'ii.t3 State legislative competence to rnake organised by the Governirie1litggVg:y1oi' Ihdia of a State. When we look:-lat State' list, though it refers to taxesflon_eritertaintlnentl'amusement, betting and gambling, it does not_ spe.Cii'ie'ally'*~._ignC'l'ude lotteries organised by the Government of A India or Government of a State. Entry 97 of l}fitonVVl'}~E.st refelrswto any other matter not enumerated in VII ilrieylliiding any tax not mentioned in either of those lists. V_.~PIQi5'I'ever, by Judge made law in the decision of B.R. AAENTERFRISES vs. STATE or up. their Lordships held that 'ever: the lotteries organised by the Govt. of india or the "it lotteries by the State wouid fall within the realm of 'gambling' as element of chance persists with no eiement of skill. Therefore, there is no change in the character between the 1.otteries under Entry 34 list II and the lotteries organised by the State under Entry 40. ..
16. However, one has to see whether ,.th.e_p*.S_ftea§te"of Karnataka could impose tax on an event placg V' outside the State of Karnataka.
17. In the case of Versus Govar. off --_ (2006) 5 sec 603, it was held that lotteries' claims and are expressly excluded fronftthe"deiinition of goods for the purpose of sales .. .. ..yp'co1§lt¢sl'iti;§n that lottery tickets itself which is was rejected. The Larger Bench of the this case held that there was no sale of goods AWit1'1l171:'_Af.::i'l€ meaning of sales tax of the different States but at itheihighest it can be a transfer of actionable claim when sale :5 of lottery tickets is involved. The decision in H. Anrajto the extent that it was held otherwise is over--ruled judgment.
18. So far as State organised"i«lyott.eries of Karnataka, their sales arel._th-rough" their d-iustn:blu'tors ash' authorised by section 4y__of the AC.eln"tral".Act. p.er..plrovisions of this €1'18.Cf1Tl€I1t__<':t proznloteil-_ on behalf of the State in View of the definition'inlsection 2 (6) of the State Act}: ownership of the lottery ticket.sV.'allfl;fihellll with the State as the State p the-.....'sehle1r1e, gets tickets printed. appointsthe the tickets and the draws are held as per the'direc'tives of the State within their State. «.£i1&tin1ately'A prizes arellldistributed only on behalf of the State lla_nd_.all prizes are retained by the State. Such retention Vbecloaries property of the State. State is the owner of everything from the beginning till the proceeds are in the public account of the State. Entry 40 of the S V' - «to'r*--the?State, 83> Union list refers to lotteries organised by the Government of India or any State or the Union territory of lndia. Therefore, they cannot be read into State list by taking assistance of any entry. Therefor, the regulation of these lotter1'es___cannot be read into State list by taking assistance of Even the rules and regulations pertaining_.--tollthe'=-- organised lotteries are covered under se'c;'ue1}1_g1'2 of the". Central Act.
19. if the contention loi".Lth.e respondent} is to be accepted, viz. the State gets l-eg.isl.ai'.iyet competence under section Act through delegated powers, it meanslthatytheyjladrn"th.at"the Parliament had the power to tax, the Sta'te.,Vot'ganisedllotteries and the power is delegated it ».dU.nder the State Act, charging Section can be llttnderstoodi from Section 6 of the State Act which refers to tax onflotteries at a fixed rate per draw. Conducting of lotteries and the draw both events take place outside the State of Karnataka so far as State Organised Lotteries. If the operation of the State Act extends only to the State of Karnataka, the event of draw takes place outside the territories of State of Karnataka.
21. The only event that takes place in_.._ Karnataka is sale of lotteries. In View of"-the'~.Vdec:is«i.or1ing Sunrise Associates, there cannotfggbe iimpvosiitionl "ofl'saiiesw.taX on the sale of lotteries. According t'o._the resgponrlentslgthere is no imposition of tax on the of ticl§e'ts:ais 'lthe?§1evy of tax is irrespective.' oi'ii§:g11an.turn lofsaile and the levy is on the facturn of draw." lCn:cega*p__ro:_noter registers within the State and doelsgnot it sell "afisingle ticket, according to the F€Sfi0nC¥€HtS, 'lta'X.b__e_comes due and payable. In that event, » :t'hegpayn3ertt"vof tax is not on draw but on conducting the H per the above decision the sale of tickets is a transfer' oflsactionable claim and the winner is entitled for 'rnonevlonly when draw takes place. When the event of draw, 85 a taxable event happens outside the State of Karnataka {extra territorial), and all other activities other than sale happens outside the State of Karnataka, can the aetiviety of sale alone be independently called as tE£2{abl€:v*'C-'Jti:i'ill_:"'l.:' is not denied by the respondent/ State that t'orHa.ny, ifxthee draw is cancelled, the payment in *advan[§e-- be refunded by the respondent/Statelto 'the State; tl*1'1*o'ulghltheir..p promoters by way of adjustnievntin final' reconciliation. This would mean that taX"'is_ chargedllglndrtlevied'only on draws and not on sale of tickets}. and the receipt of prize money... Accordiirig to_:.the.yresjpoiidents by marketing of ticl<e':f;js, t9'l'i.4partici'pate_* in a draw is sold to the purchasers within:--the"S}tate"'ol' Karnataka. This is directly in contravention with the law laid down in Sunrise Associates. 'l V' ATl1e:'d5r'aw""of lotterymis an intangible act which is the main llC;'.E)1"lIl3.p(3:v:lii(§1'Il"l(3--l:fc:i. lottery because the winning number cannot be44l<nox.xrr'iib:1iless there is a draw. The said act of draw leads to creation of actionable claim in favour of prospective twilriner of lottery. in a case where the winner of the lottery is so not residing within the State, then the measure adopted by the respondent i.e., the event of drawing numbers for pronouncing a winner cannot be a "measure for imposing tax within the State as the taxable event is outside the State. The act does not envisage any other taxable evenjtVt:o<--._rnake taxing statute to be valid. Measure of rational nexus with the taxable event enxj-isagedf; Actf Whether it is one ticket sold or one ti1ckets:l'soldl'ixvithin the State, under Section 6'ot"'--the said 'Act, ~iof the' tax is same.
.22; mean preparation of a schenrze of riiiinbjeringJo£_:ti'cl§ets, naming of tickets, printing of ticketspsale of ticl:_e'ts:t"hrough distributors and publishing th:€~iI'éSAults "th€.._§tE.te Gazette. All these activities except ~ lsale takes place outside the State of Karnataka. H also take place in various States as long a§"'ahe:¢ islno ban on the sale of tickets in those States. In "case, inore than one State makes a similar law as involved in 87' this case and if tax has to be imposed on every draw, the State which organises the lottery and conducts draw of the lottery may have to shell down tax to several States. Then the very purpose of holding organised lotteries by_lU_niQn of India or by a State to augment income which used for public at large is lost. Organisi.ng.i--s. legalised by virtue of decision in firs.
STATE OF UP. The revenue fromlorganisin.g'lV'sAt1 lottery e. not in the hands of _persons 751- groups or associations. but it ulotild be neither touthe fund of the Union or the State fund the fact whether it is organis'elt1\..by India or a particular State. 23l'.e.._According._toithe respondents it is not a sale of $31 8 for the " purpose of Sales Tax Act but an actionable » :'olaim_.: a case if a particular State does not wish to its own organised lotteries in the respondlerit/State. it need not get itself registered as a promoter. Then it is not liable to pay any tax. Such State 88 9 { though organises lottery is not liable to pay tax in Karnataka because it does not sell the tickets within the of Karnataka.
24. From 1.4.2007 the State of Kar_nat:aka'rleelared--«ll lottery free zone for the purpose ofétickets loltlteries organised by the State Governrnent inclmlling" lcwtterie.-:-.p organised by the State of Kariiaitaka. Titus' States can organise their lotteries sellltheir tickets in other lottery operating' :lBy'_..this,.Vlthere is no sale of lottery tiCket_in:th_'e Stategof therefore, there is no S'ectionll6".'oi'lllthe State Act. In such a situation, the _oth.erllwill be organising and conducting their lotteries and Aervleri.-'llholding draws. Then indirectly it ufotild __rne;_1n, on sale of lottery tickets and it cannot ' tax on lottery, per draw. The law declared in "S.L'1nlrise is no tax can be levied on sale of lottery t1¢i;e:é;..s1h'¢e there is no sale of goods. The expression of it sale' not used though it is tax on sale of lottery tickets C : _..' 90 in any provision. Several draws are held periodically as permitted under the Central Act. In other words, tjlielallleged charging section requires tax to be collected onbealchl meaning, to_ levy tax on each draw .held_"tind'elr'; scheme and not the scheme itself.'-,
26. The learned Singleldnrdge opined' 40 of V List I does not stand irithe may to tax on lotteries. This is opined reported in 2004(1) scc_.,20§-_-in WEST BENGAL VS. .,The real question of controversyllpllinllh Whether the expression 'betting and gdifferently for the purpose of taxation }an_¢1 for' of Legislation in the form of that" tptind in the same list. The law laid down » _ of Keshoram industries is not properly ll learned Judge though concedes and admits that draw takes place outside the State, but observes that the tax is not on the draw. but on the conduct of J /.
91 lotteries in reality. It is nothing but marketing____tickets thereby sale of tickets which takes place in of Karnataka. The observation of the Single Judge levy of tax on draw is only a __n1ea_sure'"oi'""
incorrect. It is the case ofl"A,appellants-.._l "'i€§5i.¢s';<.gor distributors and selling ager'i.ts<--are only to seirlvitheticpkets and: S' nothing more and they are as proni--oters the State Act. The promoter lotteries in the State of Karnataka. hf him becoming liable to single Judge erred in Conducting the lottery in _ when ultimate taxing activity being the draw happens outside the State of Karnatakall though thewlsale of tickets is in the State of .- V, AK'a-rnataka', can sale of tickets be taxed'? in the entire from printing and distribution of tickets realchingthelfinal stage of holding the draw, declaring the resulitvvaphd Valuation of prize, the only activity that happens V_i.r_p1plti_:e respondent State is sale and nothing else. If the View tau: 'wh"ich= V is » _ 92 is to be taken that tax has to be paid even on printing of tickets irrespective whether in the State of or outside, definitely Entry 62 of State list would such tax on activity outside the Kamataira.lvllylliiriless.lfiyclietsl ' T are sold in the State of Karnataka'levy_'_'ofltak'vvould though it is traceable to of the "':i2_vl'1'icli': takes place outside Kamataka. lavvpisg nothing but indirect method adopt.e{i._bl3;hg tax the sale of lottery tickets,.V.vvhic:hrllin the light of Judgment Associates Vs. NCT, New Delhi. ll» 27'.._ Inyview ofythe"'dgiscussion and reasoning above, we hold' that State has no legislative competence to make the ~ ., ifiipngliied State Actfland the orders impugned are liable to be A ~.. 'SCI-'11C"lnZ - . V zfiiecolrdingly, the appeals are allowed setting aside the "()1~'de'rsVlll0f the learned single Judge. Amount, if any, 93 deposned by the appeflanfia shafl be refignded {Q then:
within four months, from the date of receipt of c<:z}_')y.: this order.