TaxTMI 
TaxTMI 
2009 (8) TMI 1242
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....ith Ms.Gita Shastri, AGP for Respondent-State in WP 432/07 & 533/07, 629/07, 1111/07, 1126/07, 1127/09, 425/09 & 444/09. JUDGMENT: (PER D.K.DESHMUKH, J) 1. In all theses petitions the constitutional validity of the Maharashtra Tax on Lotteries Act,2006 has been challenged and therefore, all these petitions can be conveniently disposed of by common order. 2. The petitioners are the distributors of lottery tickets for sale in State of Maharashtra, of various States organizing, conducting and promoting their own lotteries in India. The Respondent-State Government is also organizing, conducting and promoting its own lotteries. It is submitted that the State of Maharashtra firstly levied and imposed sales tax on lottery tickets of the lotteries organized by the other State Governments by treating the lottery tickets as goods. However, when it was held that lottery tickets are not goods, the sales tax imposed on lottery tickets was withdrawn by the State Government and the Maharashtra Tax on Lotteries Act, 2006 (hereinafter referred to as the State Act) was enacted. 3. It is the contention of the petitioners that the legislature of State of Maharashtra has no legislative powe....
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....lnadu, AIR 1986 Supreme Court 63 and it was submitted that the lotteries organized by the State are necessarily excluded from betting and gambling mentioned in Entry 62 of List II of the Seventh schedule, and then it was contended that the State of Maharashtra has not shown any other source of power except Entry 62 of List II of the Seventh Schedule and therefore, the State Act is beyond its legislative competence. 5. Elaborating the second submission, it was submitted that prior to the decision of the Constitution Bench of the Supreme Court in the case M/s. Sunrise Associates Vs. Govt. of NCT of Delhi & Ors., AIR 2006 Supreme Court 1908, the State of Maharashtra has been collecting tax on State lottery tickets treating lottery tickets as goods . However, once it was held to be unconstitutional as lottery tickets were held not to be the goods, now again tax is being collected on sale of lottery tickets under the provisions of the State Act. 6. Elaborating the third submission, it was contended that the State Act seeks to levy and collect tax on lottery schemes. It was submitted that the lottery schemes of other States organizing and conducting lotteries save and except that o....
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.... on record as to how, because of the tax imposed, the business of sale of lottery tickets of the lotteries conducted by the other States in the State of Maharashtra becomes unviable, and therefore, the contention raised on that basis cannot be considered. 9. Now, in order to consider the first submission in relation to the legislative competence of the legislature of State of Maharashtra to enact the State Act, in our opinion, it becomes necessary to first refer to the Scheme of the State Act. Section 3 of the State Act is the charging section which reads as under:- 3.(1) There shall be levied and collected a tax on the lottery schemes specified in column (2) of the Table hereunder, at the rates specified against them in column (3) of the said Table:- TABLE No. 1 Lottery Schemes 2 Rate of Tax 3 1 Weekly lottery scheme 50,000 2 Fortnightly lottery scheme or any lottery scheme between week and fortnight 1,00,000 3 Monthly lottery scheme or any lottery scheme of any duration exceeding fortnight 2,00,000 4 Bumper lottery scheme 10,00,000 (2) The tax levied under sub-section (1) shall be paid by the Promoter. ....
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.... According to them, under Entry 62 in List II of the Seventh Schedule, the State legislature does not have power to impose tax on lottery because of Entry 40 in List I of the Seventh Schedule. Entry 40 in List I of the Seventh Schedule reads as under:- 40. Lotteries organised by the Government of India or the Government of a State. According to the petitioners, because the power to legislate in relation to lotteries organised 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 from the ambit of the term betting in Entry 34 of List II of the Seventh Schedule and it also stands excluded from the ambit of the term betting in Entry 62 of List II of the Seventh Schedule. In our opinion, the entire argument is misconceived and against the settled law. In nutshell, the argument....
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.... & 55) 4.The entries in the legislative lists must be construed broadly and not narrowly or in a pedantic manner.(AIR p.494, para 56) 5.The entries in the two lists Lists I and II must be construed, if possible, so as to avoid conflict. Faced with a suggested conflict between entries in List I and List II, what has first to be decided is whether there is any conflict. If there is none, the question of application of the non obstante clause subject to does not arise. And, if there be conflict, the correct approach to the question is to see whether it was possible to effect a reconciliation between the two entries so a s to avoid a conflict and overlapping. Illustration If it is possible to construe Entry 42 in List I as not including tax on inter-State sales it should be so construed and the power to levy such tax must be held to be included in Entry 54 in List II (entries as they existed per-Forty-second Amendment, 1976). (See Governor General in Council V. Province of Madras and Province of Madras V. Boddu Paidanna & Sons. (AIR p.495, paras 56-57) 6.In the event of a dispute arising it should be determined by applying the doctrine of pith and substance t....
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....this conclusion reached by us, by what is observed by the Supreme 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 ....
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.... Article 248 add anything to the exclusive residuary power of Parliament under Article 246 (1) read with Entry 97 List I, to make laws in respect of "any other matter" not mentioned in List II and List III, including any tax not mentioned in those Lists?" and answers by saying __ "The answer is 'No'." 103. As to the riddle arising in the context of mines and mineral development legislation by reference to the Entries in List I and List II, Seervai states: "The regulation of mines and mineral development is a subject of exclusive State legislation, but for the limitation placed upon that power by making it subject to the provisions in that behalf in List I. If Parliament does not exercise its power under Entry 54, List I, the States' power under Entry 23, List II would remain intact. If Parliament exercised its power under Entry 54,List I, only on a part of the field, as for example, major minerals, the States' legislative power over minor minerals would remain intact." (para 22.195 at p.2433) Power to tax must be express, else no power to tax 104. There is nothing like an implied power to tax. The source of power which does not specifically spea....
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....expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the Section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the tax-payer escaping if the letter of the law fails to catch him on account of Legislature's failure to express itself clearly. (See, Justice G.P. Singh, ibid, pp.638-639). 107. Power to tax is not an incidental power. According to Seervai, although legislative power includes all incidental and subsidiary power, the power to impose a tax is not such a power under our Constitution. It is for this reason that it was held that the power to legislate in respect of interstate trade and commerce (Entry 42, List I, Schedule 7) did not carry with it the power to tax the sale of goods in inter-state trade and commerce before the insertion of Entry 92A in List I and such power belonged to the States under Entry 54 in List II. Entry 97 in List I also militated against the contention that the power to tax is a....
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....ganised only by the Government of India and the Government of State has been excluded. Perusal of Entry 62 in List II of the Seventh Schedule of the Constitution shows that it confers legislative competence on State legislature to impose tax among other things on betting and gambling. Thus, there is specific entry made in Entry 62 in List II of the Seventh Schedule of the Constitution conferring power on the State legislation to legislate imposing tax on betting and gambling. There is no specific entry in List I of the Seventh Schedule like Entry 40 in List I of the Seventh Schedule of the Constitution conferring legislative competence on the Parliament to impose tax on betting and gambling and therefore, the lotteries organised by the Government of India and State Government will not stand excluded from the meaning of the term betting occurring in Entry 62 in List II of the Seventh Schedule of the Constitution. Therefore, we find that there is specific entry in List II of the Seventh Schedule of the Constitution conferring legislative competence on the State legislature to impose tax in relation to the lotteries. In view of the law laid down by the Supreme Court in its judgment....