Back
2001 Supreme(Bom) 355
IN THE HIGH COURT OF BOMBAY
S.H. Kapadia V.C. Daga, JJ.
Jiwankumar Sitaram Sondhi.... Petitioner.
Versus
Commissioner of Sales Tax others.... Respondents.
Writ Petition No. 129 of 2001, decided on 30-3-2001.
Advocates appeared :
V.V. Tulzapurkar, Sr.C., with R.D. Soni i/b. Ram Co., for the petitioners.
A.J. Rana with B.B. Saraf, for respondents 1 and 2.
S.R. Nargolkar, for the respondent No. 3.
Shifting the tax incidence from sales to draw and levying tax on both the contribution towards Prize fund and cost of participation in draw violated the basic taxation principle and constitutional provisions.
Headnote:
Sales Tax - Lottery Tickets - Bombay Sales Tax Act, 1959, Section 8-D - Summary
Fact of the Case:
The petitioner, a first dealer of State organized lotteries, challenged the Amending Act No. LII of 2000 to the Bombay Sales Tax Act, 1959, which proposed to tax lottery tickets based on the draw at a fixed rate per draw. The petitioner argued that the amendment shifted the incidence of tax from the value of sales to the draw, resulting in multiple taxation and violation of constitutional provisions.
Finding of the Court:
The court found that the Amending Act shifted the incidence of tax from sales to draw, levying tax on both the contribution towards Prize fund (C.P.F.) and cost of participation in draw (C.P.D.), which was contrary to the basic taxation principle of the Bombay Sales Tax Act. The court also held that the Amending Act violated Article 286(1)(a) of the Constitution. However, it found that Articles 301 to 304 of the Constitution had no application in the case. The court struck down the entire section 8-D introduced by the Amending Act as arbitrary, inconsistent, and ultra vires, reviving the earlier section 8 with Item 151-A of Schedule C.
Issues: Shifting of tax incidence, Constitutional violations, Validity of the Amending Act
Ratio Decidendi: The Amending Act shifted the tax incidence from sales to draw, violating the basic taxation principle of the Bombay Sales Tax Act and the constitutional provisions. Articles 301 to 304 of the Constitution had no application in the case. The entire section 8-D introduced by the Amending Act was struck down as arbitrary, inconsistent, and ultra vires.
Final Decision: The court allowed the writ petition, striking down the Amending Act and reviving the earlier section 8 with Item 151-A of Schedule C.
FACTS:
2. Petitioner is a citizen of India. Petitioner carries on business in the name and style of M/s. Sondhi Company as a sole proprietor thereof and he trades as a first dealer of various State organized lotteries.
3. The State of Maharashtra has been imposing sales tax on the sale of lottery tickets within the State of Maharashtra on the basis that lottery tickets are goods on which the State is empowered to levy sales tax. That, the Bombay Sales Tax Act, 1959 deals with levy of tax on sales and purchases within the State of Maharashtra. That, under section 3 of the Act it is, inter alia, laid down that every dealer whose sale or purchase turnover during the year ending 31st March exceeds a specified limit prescribed by the Act, shall be liable to pay sales tax under the Act on such turnover. According to the petitioners, lotteries were taxed initially at the rates prescribed in Item 152-A in Scheduled II of the Bombay Sales Tax Act, 1959. That, prior to the impugned amendment, lottery tickets were charged to tax at the rate of 13% by way of sales tax on the value of sales plus 10% surcharge. According to the petitioners, till date, the State of Maharashtra was collecting tax on the lottery tickets unit-wise at the above rates excluding the actionable claim part of the ticket. On 14th November, 2000, the State of Maharashtra issued on Ordinance Bearing No. XXVII of 2000 whereby section 8-D came to be introduced. Since then, the Ordinance has been replaced by the amending Act which is impugned in this case. Under the impugned amending Act, lottery ticket is proposed to be taxed on the basis of the draw at a fixed rate per draw. For weekly draw, the rate of sales tax is fixed at Rs. 20,000=00; for fortnightly, the rate of sales tax is fixed at Rs. 60,000=00 and for monthly draw, it is fixed at the rate of Rs. 1,00,000=00 and for special bumper draw or festival draw, it is fixed at Rs. 4,00,000=00. It is this amendment which is challenged in this petition. The petitioner has further stated in the petition that various States in India organize lotteries called as "State Organized Lotteries"; that normally the State organizing a lottery enters into an agreement with the sole distributor who takes the tickets from the Government and distributes the tickets throughout the country wherever the lottery tickets are being sold and that stockists are appointed in various States by the distributor for the sale of his lottery tickets in a particular State. Therefore, lotteries can be distributed into schemes, draws and units of tickets. That, each scheme has several draws and each draw has several tickets. That, a sub-distributor/stockist in a particular State would take the tickets in a draw in accordance with the scheme organized by the State for which he is appointed as a stockist. For example, if there are one lakh tickets in a draw under a scheme, the stockist may take ten thousand tickets for sale in Maharashtra whereas the remaining ninety thousand tickets may go to stockists/ distributors in other States as appointed by the sole distributor. That, out of one lakh tickets in a draw, only ten thousand tickets in a given case may be made available to a stockist in the State for sale and, therefore, the maximum available tickets for sale by the stockist in (sic to) the customer and/or actual purchaser in a State would be only ten thousand tickets. That, under the impugned enactment even if the stockist sells one ticket to a customer out of ten thousand tickets allocated to him, the stockist will have to pay Rs. 20,000=00 for a weekly draw, Rs. 60,000=00 for a fortnightly draw, Rs. 1,00,000=00 for a monthly draw and Rs. 4,00,000=00 for special bumper draw or festival bumper
