1998 (7) TMI 711 - HC - Indian Laws

Lottery tickets subject to sales tax; Delhi Sales Tax Act upheld as constitutional.

Haryana State Lotteries, Iqbal Chand Khurana, K & Co. and Ors. Versus Govt. of NCT of Delhi and Ors.

The court held that lottery tickets are 'goods' liable to sales tax and upheld the constitutionality of the Delhi Sales Tax (Second Amendment) Act, 1994. ... - Issues Involved:1. Whether lottery tickets are 'goods' liable to sales tax.2. Whether the levy must fail for want of machinery determining the value of 'goods' involved in the sale of lottery tickets.3. Whether the Delhi Legislative Assembly has the power to amend or add to a Central enactment under Article 239AA of the Constitution.4. Whether the State amendment is repugnant to the provisions of the Central Act.5. Whether the doctrine of desuetude applies to the levy and recovery of sales tax on sale of lottery tickets.6. Whether the principle of contemporanea expositio applies to the interpretation of the sales tax law regarding lottery tickets.7. Whether the impugned amendment and notices under Section 23(6) of the DST Act are vitiated by mala fides.8. Whether the tax on lottery tickets at 20% is unreasonable and discriminatory.9. Whether the judgment should be given prospective operation only.Detailed Analysis:(I) and (II) Whether lottery tickets are 'goods' liable to sales tax and if the levy must fail for want of machinery determining the value of 'goods' involved in the sale of lottery tickets:The court held that lottery tickets are 'goods' within the meaning of Section 2(g) of the DST Act and are susceptible to tax. The court relied on the Supreme Court's decision in H. Anraj v. Government of Tamil Nadu, which established that lottery tickets are movable property and thus qualify as goods. The court rejected the petitioners' argument that the levy must fail for want of constitutional amendment akin to clause (29A) in Article 366 of the Constitution, stating that no separate valuation of components of lottery tickets is necessary.(III) and (IV) Whether the Delhi Legislative Assembly has the power to amend or add to a Central enactment under Article 239AA of the Constitution and whether the State amendment is repugnant to the provisions of the Central Act:The court held that under Article 239AA, the Delhi Legislative Assembly has the power to make laws with respect to matters enumerated in the State List or Concurrent List, except certain entries. The amendment inserting clause (cc) in the DST Act is intra vires the legislative authority of the Delhi Legislative Assembly. The court also found no repugnancy between the State amendment and the Central Act, as the amendment specifically applies to lottery tickets, whereas the Central Act's clause (d) is a residuary provision.(V) Whether the doctrine of desuetude applies to the levy and recovery of sales tax on sale of lottery tickets:The court held that the doctrine of desuetude does not apply to the levy of sales tax on lottery tickets. The court noted that the doctrine has limited applicability, primarily to penal statutes, and requires a long period of non-enforcement and contrary practice. The court found no evidence of such contrary practice or non-enforcement in the case of the DST Act.(VI) Whether the principle of contemporanea expositio applies to the interpretation of the sales tax law regarding lottery tickets:The court held that the principle of contemporanea expositio does not apply to the interpretation of the DST Act regarding lottery tickets. The principle is applicable to ancient statutes with ambiguous language, which is not the case here. The court emphasized that the authoritative pronouncement of the Supreme Court in H. Anraj-II is the law of the land and cannot be bypassed by applying the principle of contemporanea expositio.(VII) Whether the impugned amendment and notices under Section 23(6) of the DST Act are vitiated by mala fides:The court rejected the argument that the impugned amendment and notices are vitiated by mala fides. The court stated that the legislative competence of the amendment is established, and the motives behind the legislation are irrelevant. The court also found no evidence of malice in fact regarding the issuance of notices under Section 23(6).(VIII) Whether the tax on lottery tickets at 20% is unreasonable and discriminatory:The court held that the tax on lottery tickets at 20% is neither unreasonable nor discriminatory. The court noted that the legislature is free to choose objects of taxation and impose different rates. The court emphasized that merely because the tax imposed is high does not render the statute arbitrary or unreasonable.(IX) Whether the judgment should be given prospective operation only:The court rejected the plea for prospective operation of the judgment. The court stated that a judgment of the High Court is an exposition of law that takes effect from the date of the legislation itself. The court also noted that the dealers in lottery tickets should have arranged their affairs in accordance with the law declared by the Supreme Court in H. Anraj-II.Conclusion:The court dismissed most of the petitions, except for CWP 1254/97 and 2106/97, where the petitioners were granted an opportunity for a fresh hearing before the assessing authority to determine the quantum of taxable turnover and any penalty. The court upheld the constitutionality and validity of the Delhi Sales Tax (Second Amendment) Act, 1994, and the notices issued under Section 23(6) of the DST Act. The court found no merit in the arguments based on desuetude, contemporanea expositio, mala fides, or discrimination and unreasonability of the tax rate.