IMPORTANT POINTS
The price of the lottery tickets is fixed by the organising State and the Distributor gets only the commission. If the Distributor has paid any amount of tax under the impugned legislation, it cannot be taken that the liability has been passed on to the end consumer. It is clear that the liability in this regard is ultimately borne by the organising state. Since the ultimate liability with respect to payment of tax was borne by the State of Sikkim (the 1st appellant) the refund cannot be denied based on the doctrine of 'unjust enrichment'.

JUDGMENT :

Abdul Rehim, J:

The petitioners in the writ petition, W.P © No.12189/2007, are the appellants herein, challenging judgment of the Single Judge dismissing the writ petition. The 1st appellant is the State of Sikkim and the 2nd appellant is the Distributor of the paper lotteries organized by the 1st appellant in the State of Kerala. Constitutional validity of the Kerala Tax on Paper Lotteries Act, 2005 ('the Act' for short) is under challenge in the writ petition. The respondents herein are the respondents in the writ petition, the State of Kerala and its officials.

2. Brief history of the impugned legislation may be worthfull to mention. By virtue of the Finance Act, 2001, introduced with effect from 23-07-2001, the State of Kerala has introduced Section 5BA to the Kerala General Sales Tax Act, 1963 ('KGST Act' for short) imposing licence fee on the draw of lotteries, in lieu of tax payable under Section 5 (1) of the KGST Act. Validity of Section 5BA was under challenge before this court. In the decision in Commercial Corporation of India Ltd. V. Additional Sales Tax Officer and others (2007 (2) KLT 397) = (2007 (2) KHC 427) this court held that Section 5BA of the KGST Act is ultra vires and unconstitutional. Eventhough the State of Kerala filed appeal before the Division Bench, it was dismissed by relying on the dictum laid by the Hon'ble Supreme Court in Sunrise Associates V. Govt. of NCT of New Delhi and others (AIR 2006 SC 1908), in which earlier ruling of the Hon'ble Supreme Court in H. Anraj V. Govt. of Tamil Nadu (AIR 1986 SC 63) was reversed and it was held that no tax can be levied, collected or demanded in connection with sale of lottery tickets. A Special Leave Petition filed by the State of Kerala against the Division Bench decision was also dismissed by the hon'ble Supreme Court in the ruling reported in State of Kerala V. Prabhavathy Thankamma and others ((2009) 3 SCC 511).

3. In the year 2005, the impugned legislation was enacted, with effect from 08-04-2005, in the wake of replacement of the KGST Act by the Kerala Value Added Tax Act, 2003 (KVAT Act). In the KVAT Act there is no imposition of any tax on lotteries. In the preamble of the impugned Act the reasons for introducing the legislation is stated as; “Whereas it is expedient to provide for the levy and collection of tax on the conduct of paper lotteries in the State of Kerala.”. In the 'Statement of Objects and Reasons' it is mentioned that; “The Government have decided to levy and collect tax on paper lotteries sold in the State of Kerala and to bring a separate legislation for the purpose.”

4. It may be beneficial to extract relevant provisions of the impugned Act. Section 6 of the Act is the 'charging section'. Section 7 deals with registration of 'Promoters'. Section 8 deals with 'returns and assessment'. Section 10 deals with 'payment of tax in advance'. Section 6 to 10 of the Act are reproduced hereunder;

“6. Levy of Tax.—

(1) There shall be levied and collected a tax on paper lotteries at the following rates, namely:-

(a) Ten lakh rupees for every bumper draw and

(b) Two lakh fifty thousand rupees in respect of any other draw;

(2) Tax levied under sub-section (1) shall be paid by each promoter.

(3) Where the Government of India or a Government of a State or Union Territory or a Country appoints more than one promoters in the State, one such promoter duly authorized by the respective Government or Country shall pay tax levied under sub section (1);

7. Registration of Promoters.-(1) Every promoter selling lottery tickets shall get himself registered under this Act in such manner and on payment of such fees and security within such period as may be prescribed:

Provided that a person ordinarily selling lottery tickets in retail shall not be liable to get himself registered.

(2)The registration may be renewed from year to year on payment of the prescribed fees and security, until it is cancelled;

(3)Unless the registration is cancelled or renewed at the exp