LIS REGISTERED PALAKKAL COURT Vs. STATE OF KERALA

JUDGEMENT

(1.) Petitioner was served with a notice dated 15-5-2006 from the office of the Assistant Commissioner (Assmt.) Special Circle-I (KGST) Ernakulam directing it to furnish complete details of lottery tickets purchased and sold during the year 2005-06 and for the month of April and May, 2006. In response to the notice petitioner sent a reply dated 15-5-2006 along with the details of lottery tickets of the Government of Kerala purchased from District Lottery Office, Ernakulam and Kottayam. It was also pointed out in the reply that lottery tickets purchased from Government of Karnataka were not available since they had to be arranged from its Bangalore Office. Latter the petitioner was served with a notice dated 18-5-2006 from the office of the second respondent pointing out that the petitioner had sold various lottery tickets purchased from outside the State and prizes were awarded to various customers in the State of Kerala, for which no tax under the Kerala Tax on Paper Lottery Act was remitted. Petitioner was informed that it had violated Sections 7 (registration), 8 (filing of returns) and 10 (payment of tax in advance) of the said Act. It was informed that the petitioner is liable to be punished under Sections 22 and 23 of the Act. Petitioner was also informed that they are proposing to impose a penalty of rupees one lakh under Section 22 and rupees one thousand per day for the delay incurred in remitting the tax from 1-4-2005 till the amount is paid and 50% of tax i.e., Rs. 45,62,5,000/- together with 2% interest per annum from 1-4-2005 till the date of payment, Petitioner was called upon to file its objection to the said notice with supporting records.

(2.) Petitioner replied to the said notice vide Ext. P2 reply dated 5-6-06 stating that petitioner used to purchase tickets from the Lottery Department of Kerala as well as from the Karnataka State. Purchase of lottery tickets from Karnataka is done by the office of the petitioner functioning at Bangalore and no tickets are taken away to Kerala for sale or distribution among the members in the State of Kerala. Further, it was also stated there was no sale or distribution of lottery tickets by petitioner to his members or to anybody else and tickets from the Karnataka State are kept under safe custody at Bangalore. Further it was also stated that as per Sub-section (2) of Section 6 of the Act tax has to be levied from promoters. Petitioner is not a promoter of Karnataka State for sale of lottery tickets in the State of Kerala. It was therefore stated that there is no question of registration under Section 7 of the Act and therefore Sections 8 and 10 would not apply and therefore petitioner is not liable to be proceeded with under Sections 22 and 23 of the Act.

(3.) The second respondent then passed an order dated 25-10-2006 stating that as per the data available in that office petitioner had sold lottery tickets from outside the State and prizes were awarded to various customers in almost all districts of Kerala and hence it was proved that the petitioner had violated Sections 7, 8 and 10 of the Act. Further it was also stated that the mere physical possession of the tickets by the petitioner did not alter the character of sale and if the lottery tickets earmarked to a particular allottee won the draw, it is he who is eligible for the prize money and not the petitioner. Further, it was also stated that the bulk commission received by the petitioner from the purchase of tickets was not shared with the participants of the scheme. Referring to the definition of sale under Sub-clause (xxi) of Section 2 of the KGST Act 1963 it was stated that every transfer whether in pursuance of a contract or not of the property in goods by one person to another in the course of trade or business would satisfy the definition. Further it was also stated that there is no need for any physical transfer of goods and since sale is not defined under Kerala Tax on Paper Lotteries Act, the definition under KGST Act has to be looked into. Further it was also stated that the dealer is a person who purchases lottery tickets in bulk getting commission for that and allotting those tickets to its principals and hence petitioner is a person who is doing the activities of a promoter who is liable to get registration under the Act and that the entire activities of the dealer has got the character of a promoter. Holding so, it was ordered that an amount of Rs. 27,37,50,000/-is due from the petitioner. Petitioner was also served with another order dated 25-10-2006 imposing a penalty of Rs. 6,36,71,500/- due to non-remittance of tax and filing of returns.