Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: H. ANRAJ VS Respondent: GOVERNMENT OF TAMIL NADU
1987 P T D 217
1987 P T D 217
[Supreme Court (India)]
Present: V.D. Tulzapurkar and Sabyasachi Mukharji, JJ
H. ANRAJ and others
Versus
GOVERNMENT OF TAMIL NADU and others
Writ Petition Nos. 435 and 436 of 1985 and Civil Appeal No. 4099 (NT) of 1984, decided on 4th October, 1985.
(a) Sales tax--
--- Goods--Lottery tickets are goods and not actionable claims--Sale of Lottery tickets--Levy of sales tax thereon is within the legislative competence of State Legislature--Transfer of Property Act (IV of 1882), S.130.
The Lottery tickets to the extent that they comprise the entitlement to participate in the draw are "goods" properly so-called, squarely falling within the definition of that expression as given in the Tamil Nadu Act, 1959 and the Bengal Act, 1941, and to that extent they are not actionable claims and in every sale thereof, a transfer of property in the goods is involved. Therefore, the Amendments made in the two concerned Acts in the year 1984 for levying tax on sale of Lottery tickets would be valid as falling within the legislative competence of the concerned State Legislature under Entry 54 of List II in the Seventh Sched. to the Constitution. Entry 62 of List II in Seventh Sched. to the Constitution of India would not be attracted in such case.
A sale of a Lottery ticket confers on the purchaser thereof two rights (a) a right to participate in the draw and (b) a right to claim a prize contingent upon his being successful in the draw. Both would be beneficial interests in movable property, the former "in praesenti", the latter "in futuro" depending on a contingency, Lottery tickets, not as physical articles, but as slips of paper or memoranda evidence not one but both these beneficial interests in movable property which are obviously capable of being transferred, assigned or sold and on their transfer, assignment or sale both these beneficial interests are made over to the purchaser for a price. It is not correct to say that the concept of a Lottery cannot be sub-divided in two parts, namely, a right to participate and a right to receive the prize but the two together constitute one single right as the two entitlements which arise on the purchase of a Lottery ticket are of a different character, inasmuch as the right to participate arises in praesenti, that is to say it is a choate or perfected right in the purchaser on the strength of which he can enforce the holding of the draw while the other is inchoate right which is to materialise in future as and when the draw takes place depending upon his being successful in such draw. Moreover on the date of the purchase of the ticket, the entitlement to participate in the draw -can be said to have been delivered unto the possession of the purchaser who would be enjoying it from the time he has purchased the ticket and as such it would be a chose in possession while the other would be actionable claim or a chose in action. It is thus clear that a transfer of the right to participate in the draw which takes place on the sale of a Lottery ticket would be a transfer of beneficial interest in movable property to the purchaser and, therefore, amounts to transfer of goods and to that extent it is no transfer of an actionable claim; to the extent that it involves a transfer of the right to claim a prize depending on a chance it will be an assignment of an actionable claim. Therefore, two distinct rights are transferred to the purchaser of a Lottery ticket and not one and it is not correct to say that the two together constitute a single right.
The agreement that comes into existence as a result of the sale of a Lottery ticket by a promoter to a buyer is in the nature of a grant conferring the two rights (the right to participate and the right to claim a prize if successful) upon such buyer; if this be the true nature of the agreement it implies that both the rights come into existence and are with the promoter no sooner a Raffle Scheme together with the Rules governing it (Rules which fix the number of series to be issued, the number of tickets in each series, the manner of holding a draw, the number and the terms on which the prizes to be awarded, etc. etc.--) is sponsored, published and the tickets are offered for sale and these 'rights are transferred upon the sale of the ticket to the purchaser. The mere fact that under the Rules the promoter is disabled from participating in the draw or from claiming a prize in such draw does not mean that these rights do not come into existence or are not with the promoter before the actual sale of the tickets to the buyer nor does it mean that these rights come into existence for the first time only upon the sale of the ticket to the buyer. Such disability imposed upon the promoter by the Rules is necessary to create confidence in the participants about the promoter's bona fides in the Raffle Scheme and prevents the Scheme being viewed as a fraudulent or fishy affair. In other words, a transfer of the rights from the promoter (grantor) to the buyer (grantee) is clearly involved in the sale of a Lottery ticket. The right to participate in the draw under a Lottery ticket remains a valuable right till the draw takes place and it is for this reason that licensed agents or wholesalers or dealers of
such tickets are enabled to effect sales thereof till the draw actually takes place and as such till then the Lottery tickets constitute their stock in trade and, therefore, a merchandise and, therefore, goods, capable of being bought or sold in the market.
(b) Sales tax--
--- Lottery tickets--Levy of sales-tax by Provincial Government only on sale of Lottery tickets of other Provinces--Exemption granted to its own Lottery tickets of said Provincial Government--Discriminatory and violative of Art. 301 read with Art. 304(a) of Constitution of India.
Where the State Government had issued a notification under the Act and the arrangement under the Notification is that the Raffle Department of the State Government pays the tax to the Commercial Taxes Department of the Government of Tamil Nadu and the tax is not passed on to the purchaser; in other words, effectively exemption from payment of sales-tax is granted to the purchaser and, therefore, the Lottery tickets issued by the Government of Tamil Nadu do not suffer any tax while on the other hand the Lottery tickets issued by other Governments and sold within the State of Tamil Nadu are subject to tax and the net result is that sale of Lottery tickets of other Governments within the State are at a great disadvantage as compared to the sale of Tamil Nadu Government Lottery tickets inasmuch as a Tamil Nadu Government Lottery ticket of the face value of Re.1 will be available to the purchaser at Re.1 but a Lottery ticket of any other Government of the face value of Re.1 will have to be purchased by the purchaser at Re.1.20, the discriminatory treatment in the matter of levying the sales-tax on imported Lottery tickets which are similar to the ones issued by the State Government so as to hamper free flow of trade, commerce and intercourse is writ large on the face of the impugned Notification and it would be violative of Art. 301 read with Art, 304(a) of the Constitution of India.
A I R 1984 S C 781; A I R 1977 S C 548; A I R 1976 S C 1031; A I R 1970 S C 732; AIR 1969 S C 147; A I R 1969 Mad. 284; A I R 1966 S C 1637; A I R 1964 S C 1729; AIR 1963 S C 864; AIR 1963 S C 928; A I R 1961 S C 232; A I R 1958 S C 560; (1942) 1 All. E R 224; A I R 1939 All. 305; A I R 1936 Mad. 225 (F.B.); (1925) 133 L T 606; (1901) 85 L T 239; (1892-93) 37 Law E D 237; (1845) 8 QB 134; 191 S E 2nd 283; 178 S 0 69; 178 (2nd Series) Federal Reports 593; 127 S W 2d 221; 100 S W 2d 695; 96 Cal. Reptr 241; 61 C L R 596; 27 Ala 26 and 27 S 0 532 ref.
Soli J. Sorabjee, Senior Advocate, K. Srinivasan, N.D.B. Raju and Vineet Kumar for Petitioners (in W. P. No. 435 of 1985).
Dr. Y.S. Chitale, Vineet Kumar and K. Srinivasan for Petitioners (in W.P. 436 of 1985).
K. Parasaran, A.-G. with A.V. Rangam for Respondent (in W.P. Nos. 435-36 of 1985).
K.K. Venugopal with Vimal Dave, Miss Kailash Mehta and Mrs. Neelam Kalsi for Appellants (in C.A. No. 4099 of 1984).
N. Gooptu, with H.K. Purl for Respondent (in C.A. No. 4099 of 1984).
JUDGMENT
TULZAPURKAR, J.--These writ petitions and the Civil Appeal raise a common question of law, namely, whether sales-tax can be levied by a State Legislature on the sale of the Lottery Tickets in the concerned State?
2. The facts giving rise to the aforesaid question lie in a narrow compass and in the writ petitions the question arises out of the levy imposed for the first time on such sales of Lottery tickets by an amendment made in the Tamil Nadu General Sales Tax Act, 1959 with effect from January 28, 1984 while in the civil appeal it arises out of a similar levy imposed for the first time by making suitable amendments in the Bengal Finance (Sales Tax) Act, 1941 with effect from May 1, 1984.
3. Indisputably the subject of "Lotteries" organized either by the Government of India or by the Government of a State falls within the Union List (Entry 40 of List 1) but in the absence of any law having been enacted by the Parliament on the subject the running of Lotteries could be done by the Government of various States only under Article 258(1) of the Constitution on entrustment of that function by the Union to the concerned State. Accordingly at the instance of the Tamil Nadu Government which proposed to organise its own State Lottery the Central Government entrusted that function to the State Government by means of a Presidential Order, dated October 27, 1971, the operative part whereof ran thus:
"Now, therefore, the President is pleased to permit the 'Government of Tamil Nadu to conduct a State Lottery, subject to the condition that the tickets of the Lottery shall not be sold in any other State without the permission of the Government of that State.
The President is further pleased to entrust the Government of Tamil Nadu under clause (1) of Article 258 of the Constitution the executive power of the Union in respect of Lotteries organised by that Government."
Pursuant to the aforesaid Presidential Order the Government of Tamil Nadu organised a State Lottery by sponsoring a Raffle Scheme and framing appropriate Rules in that behalf. The State Government was also desirous of levying sales tax on the sale of the Lottery tickets by placing the incidence thereof on every dealer selling such tickets within the State and for that purpose by a Notification G.O.P. No. 77, dated January 28, 1984 issued under section 59 of the Tamil Nadu General Sales Tax Act, 1959 the State Government inserted an Entry 163 in the First Schedule to the Act whereby Lottery Tickets were brought within the purview of the charge and tax at the rate of 20% was levied on the sale of such tickets "at the point of first sale in the State". This Notification was later, followed by a regular legislative amendment made in the Act as required by section 59(2). Presumably this was done in the exercise of its own independent taxing power under Entry 54 of List II in the Seventh Schedule to the Constitution. It seems that under the Raffle Scheme so promulgated the first sale of Lottery tickets issued thereunder was by the State Government of Tamil Nadu to various licensed agents, wholesalers, stockists etc. and the State Government became liable to pay sales tax as the first dealer. Therefore, the Finance (Raffle) Department of the State Government issued a Notification G.O. Ms. No. 219 on March 31, 1984 bringing into force certain arrangement whereunder while retaining the sale price of the ticket at its face value the tax was not passed on to the licensed dealer or to purchaser; in other words effectively exemption from payment of sales tax was granted to the purchaser. Shri H. Anraj the common petitioner in both the writ petitions, who has been carrying on business in the State of Tamil Nadu as a dealer in Lottery tickets issued by the Royal Government of Bhutan, the State of Assam and various other Lotteries, has challenged the validity of both the levy of sales tax on the sale of Lottery tickets as also the exemption granted under Notification G .0. Ms . 219, dated 31-3-1984.
4. Presumably on the entrustment of the function of conducting a State Lottery by the Union Government under a similar Presidential Order the Government of West Bengal organised its own Lottery by sponsoring a Raffle Scheme and framing appropriate Rules in that behalf and for the purpose of levying sales tax on the sale of the Lottery tickets the State Legislature promulgated the West Bengal Taxation Laws (Second Amendment) Act, 1984 whereunder by making appropriate amendments (by way of additions) to sections 5(1)(aa), 5(1)(dd), 5(2) (a)(vb) and 5(2)(v)(iva) of the Bengal Finance (Sales Tax) Act, 1941 sales tax at the rate of 20% was levied on the taxable turnover of every dealer in regard to the sale of Lottery tickets. By a Notification No. 1020 Ft. dated March 29, 1984 the levy imposed under the aforesaid amendments was brought into force with effect from May 1, 1984. By a writ petition filed in the Calcutta High Court the appellants (being three petitioners who carry on business in the State of West Bengal as agents and stockists of various Lotteries organised by different States including the State of West Bengal) challenged the validity of the aforesaid amendments made in the Bengal Finance (Sales Tax) Act, 1941 whereunder sales tax has been levied on the sale of Lottery tickets substantially on the ground that a Lottery ticket when sold represented an actionable claim and not "goods" and such a transaction being merely a sale of a chance to win a prize in the draw was not exigible to sales tax and, therefore, the amendments made were beyond the legislative competence of the State Legislature, as Entry 54 of List II in the Seventh Schedule authorises legislation levying sales tax only on the sale or purchase of "goods", the matter ultimately went before a Division Bench of that Court who by its judgment and order, dated August 14, 1984 dismissed the writ petition upholding the constitutional validity of the amendments in question as also the levy imposed thereunder. In substance the High Court came to the conclusion that Lottery tickets were not actionable claims but "goods" within the definition of that expression given in the Bengal Finance (Sales Tax) Act, 1941, and, therefore, the State Legislature was competent under Entry 54 of List II to enact the concerned amendments levying sales tax on the sale of Lottery tickets. Hence the appeal.
5. Counsel for the dealers have challenged the levy of sales tax on the sale of Lottery tickets imposed under both the enactments the Tamil Nadu General Sales Tax Act, 1959 as amended and the Bengal Finance (Sales Tax) Act, 1941 as amended principally on the ground of lack of legislative competence on the part of the concerned State Legislatures Counsel pointed out that under the charging provision contained in both the Acts (section 3) of the Tamil Nadu Act, 1959 and section 4 of the Bengal Act, 1941) the taxable event is the sale of goods (here Lottery tickets) and the levy is imposed upon the taxable turnover of every dealer in regard to the sales of Lottery tickets and, therefore, quite clearly, each of the State Legislatures has purported to Act in the exercise of its own taxing power under Entry 54 of List II. But according to counsel Entry 54 of List II enables legislation imposing a tax inter alia, on "sale of goods"; that it is well-settled that the expression "sale of goods" has to be construed in the sense which it has in the Sale of Goods Act, 1930 (vide Ganon Dunkerley's case, 1959 S C R 379 at p. 416, A I R 1958 S C 560 at p. 574), that "goods" under section 2(7) thereof comprises within its scope every kind of movable property but specifically excludes actionable claim, that the essence of Lottery is a chance for a prize that a sale of such a chance is not a sale of goods and, therefore, the levy of sales tax on sale of Lottery tickets would be beyond the ambit of Entry 54 of List II. Alternatively, counsel contended that a Lottery ticket is an actionable claim as defined in section 3 of Transfer of Property Act or a chose-in-action known to English law, the ticket itself being merely a slip of paper or memorandum evidencing the right of the holder thereof to claim or receive a prize if successful in the draw and, therefore, the impugned levy is outside Entry 54 of List II. So far as the Madras Act is concerned. Counsel for the writ petitioners raised a further contention that the State Government's Notification G.O.Ms. No. 219, dated March 31, 1984 was discriminatory and violative of Article 14 and Article 304(a) of the Constitution inasmuch as thereunder the burden of sales tax, surcharge and additional surcharge is prohibited to be passed on to the purchaser of Tamil Nadu Lottery Tickets while there is no such similar treatment given to the Lottery Tickets of other States which are being sold in the State of Tamil Nadu thereby putting the sale of the latter tickets at a serious disadvantage.
6. On the other hand the learned Attorney-General appearing for the State of Tamil Nadu and counsel for the State of West Bengal strongly refuted the validity of the grounds on which the levy of sales tax on the sale of Lottery tickets was challenged by counsel for the dealers. For deciding the legislative competence of the impugned Amendments levying sales tax on Lottery tickets, apart from Entry 54 of List II (taxes on the sale or purchase of goods') reliance was also placed as Entry 62 of List II (Taxes on - - - -? - - - - -betting and gambling') and it was urged that if the dealers' contention were correct that Lottery is a chance and when a Lottery ticket is sold it is a chance that is sold, then the tax in the present case would be a tax on betting and gambling and the same has to be levied in the case of Lottery tickets at the time of the sale of the tickets because it is a that time that betting takes place and as such the impugned amendments would fall under Entry 62 of List II of Course, the learned Attorney-?General and counsel for the State of West Bengal justified the impugned Amendments under Entry 54 of List II by contending that a Lottery ticket was "goods" within the definitions of that expression given in the two Acts as also in the Sale of Goods Act, 1930 and not purely an actionable claim as contended for by counsel for the dealers and hence the levy on its sale was perfectly competent under that Entry, and in this behalf the contention in substance was that a sale of a Lottery ticket confers on the purchaser two rights (a) a right to participate in the draw and (b) a right to claim a prize if successful in the draw and though the latter may be an actionable claim the former constitutes beneficial interest in the movable property (incorporeal in character) in possession of the holder of the ticket and hence 'goods' capable of being possessed and bought or sold. As regards the exemption granted by the Tamil Nadu Government under Notification No. G.O.Ms. 219, dated March 31, 1984 it was contended that the circumstances that the Tamil Nadu Government decided not to pass on the sales tax to the purchaser cannot invalidate the same as falling under Article 14 or Art. 304 inasmuch as it is open to a dealer not to pass on the burden to the purchaser and bear it himself and further it is also open to all other State Government who run Lotteries to elect not to pass on the sales tax to the purchaser of their Lottery tickets.
7. As regards. Entry 62 of List II on which the reliance was placed by learned Attorney-General, counsel for the dealers have rejoined by saying that reliance on that Entry for finding the legislative competence will be of no avail for two reasons. First, if the tax was to be levied on betting and gambling the charging event ought to have been the organising of the Lottery and the levy should have been imposed on the two State Governments for having organized that activity by undertaking the conduct of the lotteries and not on any dealer selling Lottery tickets as is the case here; and secondly, Entry 40 of List I is 'Lotteries organised by the Government of India or the Government of a State 'while Entry 34 of List II is 'betting and gambling' and it is well-settled that the latter does not include Lotteries organised by the Government of India or the Government of the State which topic is specifically dealt with by the former (vide H. Anraj v. State of Maharashtra, (1984) 2 S C C 292, 299 : (A I R 1984 S C 781 at pp. 783-84)) and, therefore, the expression 'betting and gambling in Entry 62 of List II must be given the same meaning, that is, it excludes State Lotteries and, therefore, under entry 62 there cannot be any power to levy tax on State Lotteries and such construction of the relevant Entries in consonance with the constitutional scheme as explained by this Court in Kerala State Electricity Board v. Indian Aluminium Company, (1976) 1 S C R 552 : A I R 1976 S C 1031. In other words legislative competence if at all would be under entry 54 of List II and unless the sale of a Lottery ticket involves a sale of goods the levy would be incompetent being outside that Entry.
8. Elaborating the main contention of lack of legislative competence under Entry 54 of List II, counsel for the dealers have urged that since that entry enables legislation levying tax on 'sale of goods' it is necessary to appreciate the real concept of the expressions 'goods', 'sale', 'Lottery' and Lottery ticket'. Section 2(j) and 2(n) of the Tamil Nadu Act defines 'goods' and 'sale' thus:--
"2(j) 'Goods' means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes all materials, commodities, and articles; and all s-rowing crops, grass or things attaches.' to, or forming part of the land which are agreed to be severed before sale or under the contract of sale."
"2(n) 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods (other than by way of a mortgage;, hypothecation, charge or pledge) by one person or another in the course of business for cash, deferred payment or other valuable consideration", (Other clauses give extended meanings which are not material).
Similarly the expressions 'goods' and 'sale' are defined in section 2(d) and (g) respectively of the Bengal Act thus:
"2(d) 'goods' includes all kinds of movable property other than actionable claims, stocks, shares or securities."
"2(g) 'sale' means any transfer of property in goods for cash or deferred payment or other valuable consideration- -? - - - - - -" ??????????? The term 'goods' is defined in section 2(7) of the Sale of Goods Act, 1930 and so far as is material it means "every kind of movable property other than actionable claims and money," and this definition read with section 4 of that Act clearly shows that the concept of 'sale of goods' thereunder means "a transfer of property in the goods for a price".
9. Article 366(12) of the constitution gives an inclusive definition ,which mean thus---.
"'Goods' includes all materials, commodities and articles." ??????????? and Articles? 366(12) inserted by the? forty-sixth Constitutional Amendment Act gives an extended meaning to the concept of state or purchase of goods' while defining the expression "tax on the sale or purchase of goods" but we are not concerned with the extended meaning? in this case and only clause (a) thereof is material which means thus--
"(29-A) tax on the sale or purchase of goods includes--
(a)??????? a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for, cash, deferred payment or other valuable consideration. "
10. On a proper reading of the aforesaid definitions counsel urged that two significant aspects clearly emerge therefrom: first that sans the extended meaning accorded to the expression 'sale of goods' (with which I am not concerned in the instant case), the true concept of 'sae of goods' is that there must be-a transfer of property in the goods for a price, that is to say the concept has the same meaning which it has under the Sale of Goods Act, 1930 and secondly, the expression 'goods' covers with its scope every kind of movable property out actionable claims are specifically excluded from its purview.
11. For the purpose of bringing out the real meaning and concept of "Lottery and 'Lottery ticket' counsel relied upon the dictionary meanings of those expression as also on certain decided cases. In Webster?s Dictionary 'Lottery is defined as "a distribution of prizes by or chance". In the Oxford New English Dictionary 'Lottery' is defined as an arrangement for the…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.