Sales tax on lottery tickets cannot shift from sale to draw; the levy was struck down as unconstitutional and extra-territorial.

Section 8D of the Bombay Sales Tax Act, 1959 was held unconstitutional because it shifted the incidence of sales tax from the sale of lottery tickets to the draw, displacing the Act's turnover-based charging structure and effectively taxing both the right to participate and the prize-linked component. That design was also held to offend Article 286(1)(a) because liability could attach to sales occurring outside Maharashtra by reference to an extra-territorial draw. Articles 301 to 304 were held inapplicable, since sale of lottery tickets is not trade or commerce for Article 301 purposes. The amendment was struck down and the earlier levy restored.

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Issues: (i) Whether section 8D of the Bombay Sales Tax Act, 1959 shifted the incidence of tax from sale of lottery tickets to the draw and thereby impermissibly taxed both the right to participate in the draw and the prize-related component; (ii) Whether section 8D violated article 286(1)(a) of the Constitution of India by operating on sales occurring outside the State; (iii) Whether articles 301 to 304 of the Constitution of India were attracted to the levy.

Issue (i): Whether section 8D of the Bombay Sales Tax Act, 1959 shifted the incidence of tax from sale of lottery tickets to the draw and thereby impermissibly taxed both the right to participate in the draw and the prize-related component.

Analysis: The statutory scheme of the principal Act made sales turnover and sale of goods the basis of liability, whereas the impugned provision introduced a rate per draw and thus displaced the turnover-based levy. The first limb of section 8D treated sale as the taxable event, but the table fixed liability with reference to the draw, not the actual sale or turnover. That approach was inconsistent with the existing charging structure and effectively made the taxable base the draw itself. The Court also held that, on this design, the levy extended to both components of a lottery ticket, contrary to the accepted distinction between the right to participate in the draw and the prize-contingent component.

Conclusion: The provision was held to shift the incidence of tax from sale to draw and was held invalid on that basis.

Issue (ii): Whether section 8D violated article 286(1)(a) of the Constitution of India by operating on sales occurring outside the State.

Analysis: Since the levy was structured by reference to the draw rather than the sale within the State, it could operate even where the draw took place outside Maharashtra. A State law cannot authorise tax on a sale taking place outside the State, and the impugned mechanism, by divorcing liability from the local sale transaction, crossed that constitutional limitation.

Conclusion: The provision was held to violate article 286(1)(a).

Issue (iii): Whether articles 301 to 304 of the Constitution of India were attracted to the levy.

Analysis: The sale of lottery tickets had already been held by the Supreme Court not to constitute trade or commerce for the purpose of article 301, and therefore the freedom of trade and commerce provisions were inapplicable to the impugned levy.

Conclusion: Articles 301 to 304 were held to have no application.

Final Conclusion: The impugned amendment introducing section 8D was struck down as inconsistent with the charging structure of the parent Act and as unconstitutional; the writ petition succeeded and the earlier levy was restored.

Ratio Decidendi: A sales tax levy under a State sales tax law must remain anchored to the taxable sale turnover within the State, and a statutory mechanism that shifts the incidence of tax to a draw and thereby reaches extra-territorial sales is unconstitutional.

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