The division bench of the Bombay High Court has upheld the Constitutional validity of Maharashtra Tax on Lotteries Act, 2006 which levies tax on sale of lottery tickets in the state.
The company Sri Mangal Murty Marketing, which operates as a sub-distributor of state-organised lottery of the governments of Arunachal Pradesh and Nagaland, sought a direction to the Maharashtra government to restrain itself from levying and/or collecting tax on sale of lottery tickets in the western state.
The petitioner marketing firm carrying on business of selling tickets of lotteries organized by Government of Andhra Pradesh and Nagaland in the State of Maharashtra. The sale of such tickets in State of Maharashtra was subjected to sales tax on the footing that the lottery tickets were ‘goods’ within the meaning of Sales Tax Act. The power to levy sales tax was derived from Entry 54 of Schedule II of the Constitution which related to tax on sale or purchase of goods other than newspapers. Since the lottery was treated as goods, the State of Maharashtra was empowered to levy and collect the tax on sale of lottery tickets in State of Maharashtra in respect of tickets of lotteries which were organized by other States. The lottery tickets, therefore, came to be included in Schedule C of Part A of Bombay Sales Tax Act under 151-A and the tax was charged @ 13% + surcharge.
The petition challenged the legislative competence of the State Legislature to enact the impugned legislation. The learned senior counsel contended that lottery is the subject included in the union list and the power to legislate in respect of lotteries is exclusively rests with the Parliament. In exercise of its power, the Parliament has already enacted the Lottery Regulation Act, 1998 to regularize the conduct of lottery business in respect of the State Organized lotteries and with a view to offer security to the purchaser of lottery tickets. The Senior Counsel for the Petitioner also argued that, Section 5 of the said Act which empowers the State Government to prohibit sale of lotteries of other States within its territory and Section 6 which empowers the Union Government to take measures against any lottery which violates the provisions of Lottery Regulation Act.
Relying series of judgments which have been cited and the Court said that, “The word “lottery” is defined as in Collin’s dictionary as ‘a type of gambling gone in which people buy numbered tickets. Several numbers are then chosen, and people who have those numbers on their tickets win a prize. Business dictionary defines “Lottery” as type of gambling in which winners are chosen by drawing of lots, from among those who have paid money to participate”.
While dismissing the Writ Petition, the division bench comprising of Justice S.C Dharmadhikari and Justice Bharati H. Dhangre observed that, “We are in agreement with the learned Advocate General who had canvassed before us the submissions that the fields of legislation in the entries either in the Union List or in the State List are distinct when it provides for taxation and when it intends to confer a power of Regulation. List I of Entry 40 which authorizes the Parliament to regulate the lotteries organized by the Government of India or Government of a Sate necessarily do not cover a taxing element. As a result, perusal of the Lotteries (Regulation) Act 1988 only regulates the lotteries and the Regulation is in form of the stipulation of terms and conditions when the Government organizes, conduct or promotes a lottery. The intention of the Parliament in introducing Section 5 in the said enactment is very apparent It authorizes the State Government to prohibit the sale of tickets of a lottery organized, conducted or promoted by every other State”.
The Court also said that, “we do not find any flaw in the observation of the Division Bench when it proceeds to hold that lottery falls within the purview of betting and therefore, Entry 62 List II is invoked by the State Legislature to enact a law imposing tax on betting and gambling. We are of the specific view that the judgment delivered in N.V. Marketing Pvt.Ltd covers the issue raised in the petition which has pronounced the said statute to be a valid piece of legislation and the State legislature being empowered to enact the same”.
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