- (1.) 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" organised either by the Government of India or by the Government of a State falls within the Union List (Entry 40 of List I) 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 Art. 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 Cl. (1) of Art. 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 S. 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 S. 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 Winging 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 licenced 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 Tamilnadu 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 GOMs 249 dated 31-3-1984.;