STATE OF SIKKIM Vs. STATE OF KERALA

JUDGEMENT

(1.) The petitioners in the writ petition, W.P (C) No.12189/2007, are the appellants herein, challenging judgment of the Single Judge dismissing the writ petition. The 1 st 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."