1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.432 OF 2007
N.V.Marketing Pvt.Ltd. ...Petitioner.
vs.
1.State of Maharashtra & others. ...Respondents.
ig AND
WRIT PETITION NO.435 OF 2009
M/s.Mumbailaxmi Enterprises. ...Petitioner.
vs.
1.The Commissioner of Small Savings
& others. ...Respondents.
AND
WRIT PETITION NO.533 OF 2007
M/s.Mahalaxmi Company. ...Petitioner.
vs.
1.The Commissioner of Small
Savings & Lotteries & ors. ...Respondents.
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AND
WRIT PETITION NO.629 OF 2007
Sugal & Damani Lottery Agency
Pvt.Ltd. ...Petitioner.
vs.
1.The Commissioner of Small Savings
& Lotteries & others. ...Respondents.
ig AND
WRIT PETITION NO.1111 OF 2007
M/s.Sweta Enterprises. ...Petitioner.
vs.
1.The Commissioner of Small Savings
& Lotteries & ors. ...Respondents.
AND
WRIT PETITION NO.1126 OF 2007
M/s.Kenlott Gaming Solutions
Pvt.Ltd. ...Petitioner.
vs.
1.The Commissioner of Small Savings
& Lotteries & others. ...Respondents.
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AND
WRIT PETITION NO.1127 OF 2007
M/s.Tashi Delek Gaming Solutions
Pvt.Ltd. ...Petitioner.
vs.
1.The Commissioner of Small Savings
& Lotteries & others. ...Respondents.
ig AND
WRIT PETITION NO.425 OF 2009
M/s.Shree Enterprises ...Petitioner.
vs.
1.The Commissioner of Small Savings
& Lotteries & ors. ...Respondents.
AND
WRIT PETITION NO.436 OF 2009
Pradeep Lunkad. ...Petitioner.
vs.
1.The Commissioner of Small Savings
& Lotteries & ors. ...Respondents.
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AND
WRIT PETITION NO.444 OF 2009
M/s.Utsav Gaming Solutions
Pvt.Ltd. ...Petitioner.
vs.
1.The Commissioner of Small Savings
& Lotteries & ors. ...Respondents.
ig ---
Dr.V.V.Tulzapurkar with R.D.Soni & V.R.Kasle i/b. Ram
& Co., for Petitioners in WP Nos.413/09, 533/09,
1111/07, 1126/07, 436/09, 425/09, 1127/07.
Mr.R.D.Soni @ V.R.Kasle i/b. Ram & Co., for
Petitioners in WP 435/09.
Mr.S.H.Doctor, Sr. Advocate i/b. B.B.Parikh, for
Petitioners in WP 432/07.
Mr.S.Bharucha i/b. Thakore Jariwala & Associate, for
Petitioners in WP 629/07.
Mr.Aspi Chinoy, Sr.Advocate with Ms.Gita Shastri, AGP
for Respondent-State in WP 435/07 & 436/09.
Mr.A.A.Kumbhakoni with 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.
---
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CORAM: D.K.DESHMUKH &
R.S.MOHITE, JJ.
DATED: 14th August,2009.
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
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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 power to enact Laws relating to State
Lotteries including
ig Laws relating to taxation, and
therefore, according to the petitioners, the State Act
is beyond the legislative competence of the
legislature of State of Maharashtra. The second
submission is that the enactment of the State Act is
colourable exercise of the legislative power inasmuch
as it is another method of levying tax on lottery
tickets. The third submission is that the State Act
seeks to levy tax on lottery schemes, tax is collected
in advance in respect of each draw in the lottery
scheme at the rate specified in Section 3 of the State
Act. It is submitted that lottery scheme of all other
State organizing and conducting lotteries save and
except that of Maharashtra are formulated outside the
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State of Maharashtra and therefore, the Law has extra
territorial application. The fourth submission is that
the State Act levies tax on lottery schemes but the
term lottery scheme is not defined anywhere and
therefore, it is violative of guarantee under Article
14 of the Constitution of India. It was also
contended that the State Act has been enacted to
impose tax on sale of lottery tickets conducted by
other States in State of Maharashtra so as to make
selling of lottery tickets by the other States
uneconomical, unviable and thereby creating monopoly
in the lottery tickets of the lotteries conducted by
the State of Maharashtra.
4. Elaborating the first submission, the learned
Counsel appearing for petitioners submitted that the
legislature of State of Maharashtra has no legislative
competence to enact the impugned Act. By the
impugned Act, tax is sought to be levied on the
lottery schemes. The subject Lotteries organised by
the Government of India or the Government of a State
comes in Entry 40 of List-I in the Seventh Schedule of
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the Constitution of India, and therefore, only
Parliament is empowered to enact Law relating to
lotteries governed by Government of India or the
Government of a State or any law relating to such tax
on the lotteries. It is submitted that the State
legislature does not have competence to levy tax on
the lotteries under Entry 62 of List II of the Seventh
Schedule of the Constitution of India. The learned
Counsel relied on the judgments of the Supreme Court
in the cases H.Anraj & others Vs. State of
Maharashtra, AIR 1984(2) Supreme Court 781 and
H.Anraj & others Vs. Government of Tamilnadu, 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.
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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 of State of
Maharashtra are formulated outside State of
Maharashtra and in the respective State organizing and
conducting lotteries and the draws in respect of the
said schemes are also held in the said States itself
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and the results are also declared in the said States
and published in the official Gazettes of the said
States. Thus, by seeking to charge and collect tax on
lottery schemes, the State Act seeks to tax events
which have occurred outside the State and hence, the
State Act is dealing with the subject which is not
within its territorial jurisdiction.
7. Elaborating the fourth submission, it was
contended that though tax is imposed in relation to
the schemes, the term Scheme is not defined in the
Act. Thus, the tax is being levied with reference to
the concept which is extremely vague and therefore,
levying of tax in such a situation violates the
guarantee of Article 14 of the Constitution. It was
also submitted that extremely large amount has been
collected as tax under the Act with a view to make it
uneconomical to sell tickets of lotteries conducted by
other States in the State of Maharashtra with a view
to create monopoly in relation to the lottery tickets
of the lotteries conducted by State of Maharashtra.
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Thus, according to the petitioners, it is colourable
exercise of legislative power.
8. On behalf of the Respondent-State of
Maharashtra, on the other hand, it was contended that
the State Act has been enacted under Entry 62 of List
II of the Seventh Schedule of the Constitution of
India relying on the Judgment of the Supreme Court in
the Case
State of W.B. Vs. Kesoram Industries Ltd.
And others, (2004)10 Supreme Court Cases 201 . It was
contended that considering the constitutional scheme,
it cannot be said that the State legislature does not
have competence to enact the State Act. The learned
Counsel took us through the provisions of the Act to
show that by reading the definition of term lottery
it becomes clear that what is the meaning of term
scheme used in Section 3 of the State Act. It was
pointed out that it cannot be said that there is any
vagueness in this matter. It was then submitted that
the tax is not being collected on sale of lottery
tickets but the tax is collected in relation to the
lottery schemes once tickets are imported in the State
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of Maharashtra. It was submitted that there is no
material placed by the petitioners 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:-
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TABLE
No. Lottery Schemes Rate of Tax1 2 3
1 Weekly lottery scheme 50,0002 Fortnightly lottery scheme or any 1,00,000
lottery scheme between week and
fortnight3 Monthly lottery scheme or any 2,00,000
lottery scheme of any duration
exceeding fortnight4 Bumper lottery scheme 10,00,000
(2) The tax levied under sub-section (1) shall be
paid by the Promoter.
Perusal of the above quoted Section 3 shows that tax
is levied and collected on the lottery schemes
specified in Column 2 of the Table. Perusal of Column
2 of the table shows that the Act contemplates four
kinds of lottery schemes viz. (i) Weekly lottery
scheme, (ii) fortnightly lottery scheme, (iii) monthly
lottery scheme and (iv) bumper lottery scheme. Though
the term scheme has not been defined in the Act, the
term lottery has been defined by Section 2(d) of the
Act which reads as under:-
2. In this Act, unless the context otherwise
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14requires-
(d) lottery means a scheme, in whatever
form and by whatever name called, for
distribution of prizes by lot or chances tothose persons participating in the chances of
a prize, by purchasing tickets, conducted asper the provisions of the Lotteries
(Regulation) Act,1998.
Perusal of the above definition shows that Lottery
means a scheme for distribution of prizes by lot or by
chance. It is, thus, clear that lottery is nothing
but a scheme for distribution of prizes by lot or
chance. It is clear from the provision of sub-section
(2) of Section 3 of the Act that the tax levied under
sub-section (1) of Section 3 of the Act has to be paid
by the Promoter. The term Promoter is defined under
sub-section (f) of Section 2 of the Act, which reads
as under:-
2(f) Promoter means the Government of
any State or an Union Territory or any
country organizing, conducting or promoting a
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15first importer for marketing lottery tickets
in the State of Maharashtra on behalf of suchGovernment or country where such Government
or country is not directly marketing orconducting lottery schemes in the State.
From the definition of the term Promoter it is clear
that the promoter can be either the Government of any
State or an Union Territory or any country which is
organizing a lottery and it can also be a person who
has been appointed as first importer for marketing
lottery tickets in the State of Maharashtra by such
Government, Union territory or country. The
petitioners, in this petition, claim to be the
promoters. The Respondent-State is relying on Entry 62
in List II of the Seventh Schedule of the Constitution
which reads as under:-
62. Taxes on luxuries, including taxes on
entertainments, amusements, betting and
gambling.
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Petitioners do not dispute that the lottery is
betting. 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
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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 of
petitioners is that because of Entry 40 in List I of
the Seventh Schedule, the Parliament has power to
regulate lotteries run by the State Government, and
therefore, it excludes State lotteries from the ambit
of the term Betting not only from Entry 34 in List II
of the Seventh Schedule but also from Entry 62 of List
II of the Seventh Schedule. The scheme underlying the
Seventh Schedule of the Constitution has been
considered in a judgment by the Constitutional Bench
of the Hon ble Supreme Court in the case State of
W.B. Vs. Kesoram Industries Ltd. And others, (2004)10
Supreme Court Cases 201 . The observations of the
Hon ble Supreme Court in paragraphs 74, 75 and 76 are
relevant, they read as under:-
74. It is necessary to examine the scheme
underlying the Seventh Schedule of the
Constitution. We are relieved of the need of
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18direction in view of the availability of a
Constitution Bench decision inM.P.V.Sundararamier & Co. Vs. State of A.P.,
Venkatarama Aiyar, J., speaking for theConstitution Bench, traced the history of
legislations preceding the Constitution,analysed the scheme underlying the division
of legislative powers between the Centre and
the States and then succinctly summed up thequintessence of the analysis. It was held,
inter alia:ig
1.In List I Entries 1 to 81 mention the
several matters over which Parliament has
authority to legislate. Entries 82 to 92
enumerate the taxes which could be
imposed by a law of Parliament. An
examination of these two groups of
entries shows that while the main subject
of legislation figures in the first
group, a tax in relation thereto is
separately mentioned in the second.
2.In list II Entries 1 to 44 form one group
mentioning the subjects on which the
States could legislate. Entries 45 to 63
in that list form another group, and they
deal with taxes. (AIR p.493, para 51)
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3.Taxation is not intended to be comprised
in the main subject in which it might on
an extended construction be regarded as
included, but is treated as a distinct
matter for purposes of legislative
competence. And this distinction is also
manifest in the language of Article 248
clauses (1) and (2) and of Entry 97 in
List I of the Constitution. Under the
Scheme of the entries in the lists,
taxation is regarded as a distinct matter
and is separately set out. (AIR 494,
paras 51 & 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
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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 to find
out whether between two entries assigned
to two different legislatures the
particular subject of the legislation
falls within the ambit of the one or the
other. Where there is a clear and
irreconcilable conflict of jurisdiction
between the Centre and a Provincial
Legislature it is the law of the Centre
that must prevail.
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75. Referring to M.P.V.Sundararamier & Co.
Sabyasachi Mukharji, J. (as His Lordship then
was) speaking for six out of the seven Judges
constituting the Bench in Synthetics and
Chemicals Ltd. V. State of U.P. held that
under the constitutional scheme of division
of powers in the Seventh Schedule, there are
separate entries pertaining to taxation and
other laws. A tax cannot be levied under a
general entry.
76. The abovesaid principles continue to
hold the field and have been followed in
cases after cases.
General Power of regulation and control
does not include power of taxation.
Applying the principles laid down by the Supreme Court
in the above said paragraphs to the present case, it
can safely be said that because of Entry 40 of List I
of the Seventh Schedule, the State legislature does
not have power to legislate in relation to the
lotteries organized by the Government of India or
Government of State under Entry 34 of List II of the
Seventh Schedule, but because of that the State
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legislature will not lose its power under Entry 62 of
List II of the Seventh Schedule to impose tax in
relation to the lotteries organized by the Government
of India or other State under Entry 62 of List II
treating it as betting. There is no debate before us
on the question that lottery amounts to betting and it
was the admitted position.
10.
It was then contended before us that though
there is specific power vested in the State
legislature under Entry 62 of List II of the Seventh
Schedule, because of Entry 40 in List I of the Seventh
Schedule of the Constitution of India, the Parliament
will have legislative competence to levy tax under
Article 248 and Entry 97 in List I of the Seventh
Schedule of the Constitution of India. In our
opinion, this submission has also no force, because
power to tax is not an incidental power and under the
residuary power the Parliament will be entitled to
impose tax only if that power is not specifically
vested in the State legislature by any entry in List
II of the Seventh Schedule. We can draw support for
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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 igscheme of the Seventh Schedule
reveals an exhaustive enumeration of
legislative subjects, considerably enlargedover the predecessor Government of India Act.
Entry 97 in List I confers residuary powerson Parliament. Article 248 of the
Constitution which speaks of residuary powersof legislation confers exclusive power on
Parliament to make any law with respect toany 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 imposinga 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
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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 with it a power to impose a tax under
our constitutional scheme. According to
Seervai (Constitutional Law of India,
4th/Silver Jubilee Edn. Vol.3, para22.191):
22.191. Although in Dhillon case
conflicting view were expressed about the
nature of the residuary power, the nature of
that power was stated authoritatively in
Kesavananda case. Earlier, in Golak Nath
case, Subba Rao, C.J. (for himself, Shah,
Sikri, Shelat and Vaidyalingam, JJ.) had held
that Article 368 only provided the procedure
for the amendment of the Constitution, but
that the power to amend the Constitution was
to be found in the residuary power conferred
on Parliament by Articles 245 and 246(1) read
with Entry 97 List I and by Article 248.
Seven out of the nine Judges who overruled
Golak Nath case held, inter alia, that the
power to amend the Constitution could not be
located in the residuary powers of
Parliament. Hegde and Mukherjea, JJ. held
that —
It is obvious that these lists have
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25
been very carefully prepared. They are by and
large exhaustive. Entry 97 in List I was
included to meet some unexpected and
unforeseen contingencies. It is difficult to
believe that our Constitution-makers who were
keenly conscious of the importance of the
provision relating to the amendment of the
Constitution and debated that question for
several days, would have left the important
power hidden in Entry 97 of List I leaving it
to the off chance of the courts locating that
power in that entry. We are unable to agree
with those learned Judges when they sought to
place reliance on Articles 245, 246 and 248
and Entry 97 of List I for the purpose of
locating the power of amendment in the
residuary power conferred on the Union.
(emphasis in original)
101. Similar views were expressed by
five other Judges. According to Seervai:
“The law laid down in Kesavananda’s Case is
that if a subject of legislation was
prominently present to the minds of the
framer of our Constitution, they would not
have left it to be found by courts in the
residuary power. It is submitted that a
fortiori, if a subject of legislative power
was not only present to the minds of the
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26
framers but was expressly denied to
Parliament, it cannot be located in the
residuary power of Parliament.”
102. Vide para 22.194 the eminent jurist
poses a question:
22.194. Does Article 248 add anything to
the exclusive residuary power of Parliament
under Article 246 (1) read with Entry 97 List
I, to make ig 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
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27
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
ig is nothing like an implied
power to tax. The source of power which does
not specifically speak of taxation cannot be
so interpreted by expanding its width as to
include therein the power to tax by
implication or by necessary inference. States
Cooley in Taxation (Vol.1, 4th Edn):
“There is no such thing as taxation by
implication. The burden is always upon the
taxing authority to point to the act of
assembly which authorizes the imposition of
the tax claimed.” (para 122 at p.278).
105. Justice G.P. Singh in Principles of
Statutory Interpretation (Eighth Edition,
2001) while dealing with general principles
of strict construction of taxation statutes
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28
states :__
“A taxing statute is to be strictly
construed. The well established rule in the
familiar words of Lord Wensleydale,
reaffirmed by Lord Halsbury and Lord Simonds,
means : “The subject is not to be taxed
without clear words for that purpose; and
also that every Act of Parliament must be
read according to the natural construction of
its words”. In a classic passage Lord Cairns
stated the principle thus : “If the person
sought to be taxed comes within the letter of
the law he must be taxed, however great the
hardship may appear to the judicial mind to
be. On the other hand, if the Crown seeking
to recover the tax, cannot bring the subject
within the letter of the law, the subject is
free, however apparently within the spirit of
law the case might otherwise appear to be. In
other words, if there be admissible in any
statute, what is called an equitable
construction, certainly, such a construction
is not admissible in a taxing statute where
you can simply adhere to the words of the
statute. Viscount Simon quoted with approval
a passage from Rowlatt, J. expressing the
principle in the following words : “In a
taxing Act one has to look merely at what is
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clearly said. There is no room for any
intendment. There is no equity about a tax.
There is no presumption as to tax. Nothing is
to be read in, nothing is to be implied. One
can only look fairly at the language
used.” (at p.635)
106. The judicial opinion of binding
authority flowing from several pronouncements
of this Court has settled these principles:
(i) in
interpreting a taxing statute,
equitable considerations are entirely out of
place. Taxing statutes cannot be interpreted
on any presumption or assumption. A taxing
statute has to be interpreted in the light of
what is clearly expressed; it cannot imply
anything which is not 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
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30
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 inter-
state 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 an
incidental power under our Constitution (See:
Seervai H.M.:Constitutional Law of India,
4th/Silver Jubilee Edn, Vol.3, para 22.20)
(emphasis supplied).
It is clear from the above quoted observations that if
the power to tax in relation to a subject is clearly
mentioned in List II of the Seventh Schedule of the
Constitution, the same would not be available to be
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31
exercised by the Parliament based on the assumption of
residuary power. Entry 62 of List II of the Seventh
Schedule specifically empowers the State legislature
to impose tax in relation to the lotteries because
admittedly the lotteries are included within the ambit
of the meaning of the term betting . It cannot be
said that the Parliament gets legislative competence
to impose tax in relation to the lotteries because of
the residuary
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. As observed above, before us it is an
admitted position that the lottery is included within
the ambit of meaning of the term betting , therefore,
had there been no Entry 40 in List I of the Seventh
Schedule, the State legislature would have got,
because of Entry 34 in List II of the Seventh
Schedule, competence to legislate in relation to
organisation and regulation of the lotteries organised
by the State Governments also. The State legislature
cannot make law under Entry 34 in List II of the
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Seventh Schedule in relation to organisation and
regulation of lotteries organised by Government of
India and Government of State, because of Entry 40 in
List I of the Seventh Schedule of the Constitution by
that entry organisation and regulation of lotteries
organised by Government of India and Government of
State is excluded from the ambit of Entry 34 in List
II of the Seventh Schedule of the Constitution. In
other words, so far as the term betting appearing in
Entry 34 of List II of the Seventh Schedule is
concerned, it gives legislative competence to the
State legislature to enact law regulating lotteries
which may not be organised by the Government of India
or Government of State. Thus, from the ambit of the
term betting appearing in Entry 34 in List II of the
Seventh Schedule of the Constitution of India,
competence to legislate in relation to organisation
and regulation of lotteries organised 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
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33
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 in the case State of
W.B. Vs. Kesoram Industries Ltd. And others referred
to above the Parliament cannot be said to have power
to impose tax in relation to lotteries under residuary
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34
Entry 97 of List I of the Seventh Schedule of the
Constitution. Thus, we find that there is absolutely
no substance in the contention that the State
legislature did not have competence to legislate the
State Act under Entry 62 of List II of the Seventh
Schedule of the Constitution.
11. Now so far as the submission that the State
Act in fact levies tax on sale of lottery tickets is
concerned, in our opinion, this submission also does
not have any substance. Looking to the scheme of the
Act, it is clear that Draw is used only as a measure
of tax. What is said to be taxed is betting and
gambling. From the preamble of the State Act it is
clear that levy and collection of tax is on the
lotteries (betting and gambling). The tax , as
defined under the State legislation, means the tax
levied and collected on lotteries. The Act does not
levy tax on Draws or sale of tickets, the levy of tax
is on betting and gambling which is offered within the
State of Maharashtra by organising sale of tickets for
participation in the lottery. The measure of levying
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35
of tax depends upon as to whether the lottery
organised is relating to weekly draw, monthly draw or
bumper draw. It is, thus, clear that levying of tax
is not on the draw which takes outside the State. The
draw is only a measure of tax and the tax is not
imposed on the draw itself.
12. We do not find any vagueness in the scheme of
the Act. Merely
because the term Scheme is not
defined, the provisions under Section 3 of the Act do
not become vague.
13. So far as the submission that exercise of
legislative power is colourable is concerned, in our
opinion, once we find that there is clear legislative
competence in the State legislature to legislate,
there is no exercise of power being colorable merely
because earlier a particular type of tax was levied
which was found to be not legal. So far as the
submission that the State Act has been enacted to make
the business of selling of lottery tickets of the
lotteries organised by the other States unviable is
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36
concerned, we find from the petition that there is no
material placed in support of this submission, and
therefore, it is not possible for us to examine this
submission.
14. Taking overall view of the matter, therefore,
we do not find any substance in these petitions. They
are liable to be dismissed. They are, accordingly so,
ordered to be dismissed. Rule discharged. No order as
to costs.
(D.K.DESHMUKH, J.)
(R.S.MOHITE, J.)
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