Case Law Details
State of Sikkim Vs State of Kerala (Kerala High Court)
Conclusion: Levy of license fee on the draw of lotteries under Section 5BA of Kerala General Sales Tax (KGST) Act, within the state of Kerala was prohibited by the virtue of law, so the Kerala Tax under Section 5BA of Kerala General Sales Tax (KGST) Act on the lottery was declared unconstitutional.
Held: State of Kerala has introduced Section 5BA to the Kerala General Sales Tax Act, 1963 (‘KGST Act’) 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. The main ground of attack against validity of the impugned Act was the lack of legislative competence of the state as the subject “lotteries organised by the Government of India or the Government of a State” was within the realm of the legislative competence of the Parliament, by virtue of Entry 40 in List-I of the 7th Schedule in the Constitution of India. It was in exercise of that power that the Parliament had enacted the Lotteries (Regulation) Act, 1998. The said legislation did not provide any tax on lotteries, including paper lotteries. Since the subject was covered in the union list, the state had no legislative competence to levy tax on paper lotteries. The above contention was met on behalf of the State of Kerala by pointing out that, conduct of lottery will fall within the description of “gambling” contained in Entry 62 of List-II of the 7th Schedule, and therefore the imposition of tax on paper lotteries was within the realm of the state legislature. It was held that the constitutional validity of Kerala Paper Lotteries Act, 2005, which levy license fee on the draw of lotteries under Section 5BA of Kerala General Sales Tax (KGST) Act, what was sought to be taxed indirectly was the sale of the lottery tickets within the state of Kerala, which was prohibited by the virtue of law. It was clear that the Distributor had not passed on the liability to the consumers. But, the appellants had not furnished any materials to prove that the liability had been ultimately borne by the State of Sikkim. The refund could not be denied by applying the doctrine of ‘unjust enrichment’. But at the same time, it was for the appellants to produce materials regarding the person who had borne the real loss or who had ultimately borne the burden of payment of the tax, which was already collected invalidly. Proof regarding quantity of the tax collected was also not available. Therefore, appellants would be entitled for refund of the tax paid from the State Government, on their producing proper accounts and proof as to who had ultimately borne the burden. Such proof being produced, the State of Kerala was held liable for making refund.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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 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.
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