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SUPREME COURT OF INDIA
(From the High Court of Karnataka at Bengaluru)
M.R. Shah and B.V. Nagarathna, JJ.
STATE OF KARNATAKA & ANR. ETC. – APPELLANT(S)
VERSUS
STATE OF MEGHALAYA & ANR. ETC. – RESPONDENT(S)
CIVIL APPEAL NOS. 10466-10476 OF 2011 WITH CIVIL APPEAL NOS.101-102 OF 2012 CIVIL APPEAL NO.911 OF 2021 CIVIL APPEAL NOS.869-870 OF 2022 CIVIL APPEAL NO.871 OF 2022
Decided on : 23-03-2022
| Table of Content |
|---|
| 1. nature of the controversy regarding lottery taxation. (Para 1 , 2 , 3 , 4) |
| 2. arguments on behalf of the state of karnataka. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12) |
| 3. submissions on behalf of state of kerala. (Para 13 , 14) |
| 4. arguments on behalf of the state of nagaland. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24) |
| 5. contentions regarding tax and revenue impact on north-eastern states. (Para 25 , 26 , 28 , 29) |
| 6. legal arguments from state of sikkim and implications of legislative powers. (Para 31 , 32 , 35) |
| 7. reply from the state of karnataka regarding legislative competence. (Para 39 , 40 , 41 , 42 , 43 , 44) |
| 8. constitutional distribution of powers and legislative competence. (Para 54 , 55 , 105 , 106 , 112) |
| 9. summary of conclusions regarding taxation of lotteries. (Para 118 , 119 , 124) |
| 10. final conclusion on the appeals and legislative authority. (Para 125) |
JUDGMENT
Nagarathna, J.
INDEX
| 1. | Bird's Eye View of Controversy | 4 |
| 2. | Submissions | 5 |
| 2.1. | Submissions on behalf of Appellants: | |
| 2.1.1. | Submissions on behalf of State of Karnataka | 5 |
| 2.1.2. | Submissions on behalf of State of Kerala | 9 |
| 2.2. | Submissions on behalf of Respondents : | |
| 2.2.1. | Submissions on behalf of State of Nagaland | 11 |
| 2.2.2. | Submissions on behalf of State of Sikkim | 22 |
| 2.2.3. | Submissions on behalf of State of Meghalaya | 26 |
| 3. | Reply Arguments | 29 |
| 4. | Points for Consideration | 34 |
| 5. | Constitutional Scheme | 35 |
| 6. | Acts under consideration : | |
| 6.1. | The Lotteries (Regulation) Act, 1998 | 62 |
| 6.2. | The Karnataka Tax on Lotteries Act, 2004 | 64 |
| 6.3. | Kerala Tax on Paper Lotteries Act, 2005 | 67 |
| 7. | Parameters of Taxation | 69 |
| 8. | Meaning of 'betting and gambling' and 'lotteries' | 73 |
| 9. | Discussion | 100 |
| 10. | Summary of Conclusions | 119 |
1. These appeals have been preferred by the States of Karnataka, Kerala and others being aggrieved by the judgments passed by the Division Benches of the High Courts of the respective States. The Division Bench of the High Court of Karnataka vide impugned judgments dated 27th December, 2010 and 7th March, 2011 held that the Karnataka Legislature had no legislative competence to pass the Karnataka Tax on Lotteries Act, 2004 (hereinafter referred to as, " KARNATAKA ACT , 2004") and, consequently, directed the amounts deposited by the respondents-States who had organised the lottery schemes to be refunded to them within four months from the date of receipt of the copy of the impugned judgment.
2. Similarly, the Division Bench of the High Court of Kerala by the impugned judgments dated 30th April, 2020, 9th August, 2021 and 10th August, 2021, held that the Kerala legislature had no legislative competence to enact the Kerala Tax on Paper Lotteries, Act, 2005 (hereinafter referred to as, "Kerala Act, 2005") and declared it as unconstitutional and invalid. Liberty was reserved to the respondents-States to seek refund of the tax already collected by the State of the Kerala under the said Act on producing proper account and proof and a direction was issued to the State of Kerala to pass appropriate orders making refund of the amounts due based on evaluation of such proof, without any delay.
3. Being aggrieved, the States of Karnataka, Kerala and others are in appeal before this Court. The respondents herein are the States of Nagaland, Arunachal Pradesh, Meghalaya, Sikkim, and others who are the organisers of the lotteries as well as promoters, inter alia, in the States of Karnataka and Kerala.
Bird's eye view of the controversy:
4. The controversy in these cases is regarding the interpretation to be given to the expression 'betting and gambling' in Entries 34 and 62 of List II of the Seventh Schedule of the Constitution of India. Further, whether the lotteries organised by the Governmen
Power of State Government to make rules - If a State Government opinion that Organising State or distributors or selling agents are organising lotteries in violation of provisions of Act and these ru....
State legislative competence prevails over Union taxation on amusement activities per Entries 62 and 97 of List I and II of the Constitution; imposition of service tax deemed unconstitutional.
Service Tax – Lottery tickets are actionable claims – Sale of lottery tickets by State is a privileged activity by itself and not rendering of a service for which assessees are rendering promotion or....
The court ruled that lottery distributors operate on a principal to principal basis, exempting them from service tax under the Finance Act, 1994.
Fantasy games predominantly involve skill and therefore, do not fall within gambling activities and that said games are protected u/a 19(1)(g) of Constitution.
Provision has to conform to the statute under which the Rule is made and exceeding the limits of the authority conferred by the enabling Act is one of those circumstances where the Rule could be stru....
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