Introduction:
To curtail the malpractices of lottery, the Indian government introduced Lotteries (Regulations) Act 1998, according to which no State government shall promote, organise, or conduct lottery[1], but there is no complete ban on lotteries as provided in section 4 of Lotteries (Regulations) Act 1998 (hereinafter Central act) where conditions are given according to which State government may organise, conduct, or promote the lottery. It is banned in almost half of the states and only allowed in 13 states.[2] Lotteries in the states like Maharashtra, Kerala, Nagaland and Sikkim are well-liked. The present case[3] was in dispute between Bhutan and Kerala regarding the sale of lotteries. India and Bhutan had an international agreement on trade, commerce, and transit, and the agreement has a status of law. As the terms of the agreement, sale of Bhutan lottery tickets and sale of Indian lottery tickets come within the scope of trade, commerce, and transit and are being regulated by relevant laws of territories. In Kerala, it is governed by the Kerala Tax on Paper Lotteries act 2005 (hereinafter Tax Act). This article tries to explore the detailed analyses of the case which revolved around the perplexity of the Promoter of Bhutan government and the limitation on the number of draws of lotteries.
Background
In the impugned judgement, a writ of mandamus was filed on refusal to collect levy payable to the appropriate authority under the Kerala tax act by A. John Kennedy (Megha distributor) and denial to consider it (Megha distributor) promoter of Bhutan government. It was contended that Megha distributor is a certified promoter to bring Bhutan lottery tickets into the territory of the State of Kerala and refusing to accept the levy payable under tax act is unlawful and against the terms of the international treaty. Respondents (the State of Kerala and other authorities under tax act) on the other hand showed that after probing there was a violation of the provision of the Central Act and they have material to show that Megha distributor is not a promoter, and Bhutan government was given an exclusive right to Monica enterprises. Learned single judge in the impugned judgement held regarding the promoter that State authorities are not justified in refusing to collect the levy under tax act and considered Megha distributors as the promoter of Bhutan government. There also arose a question in the impugned judgement regarding the total number of draws that could be there for the State, in the terms of the Central Act. Learned single judges held that the State can run 52 lotteries and 6 bumper lotteries per year. In the instant case, the Court revisits the impugned judgement given by a single judge.
Issues
First Issue- As held by a single judge, whether the authorities are obliged to collect levy under tax act by Megha distributor on behalf of Bhutan government?
Second Issue- Is a single judge justified in interpreting that the State can run only 52 ordinary lotteries and 6 bumper lotteries in a year according to the provision of Central Act and Central rules?
Arguments Advanced Before the Court w.r.t First Issue
- It was contended by the State that during the enquiry one key fact has appeared that the Bhutan government has given an exclusive right to Monica enterprises for the sale of lottery tickets in India and there is no evidence which shows that Monica enterprise has given any right to Megha distributor for selling Bhutan lottery tickets in India.
- On behalf of the Bhutan government, it was contended that they have the certificate to show that Megha distributor is its promoter for the State of Kerala and the enquiry conducted by the State stands nowhere because the State could not touch the matter which comes within the purview of Central Act.
Judgement w.r.t First Issue
- By considering the certificate given by competent authority of tax act to Megha distributor, Division bench held that there is no doubt that Megha distributor is the promoter of Bhutan government. As the promoter needs to register himself under the tax act for selling lottery tickets and there is no evidence to show that Megha distributor’s certificate has been cancelled. It was further held that when the Bhutan government itself appointed Megha distributor as promoter then there is no reason for the authority to refuse to receive tax from Megha distributor.
- Before upholding the impugned judgement w.r.t to the first issue, the court perused a letter, providing certain information in relation to lotteries of Bhutan government. In the letter, the Ministry of Home Affairs in the government of India has informed the Principal Secretary of Taxes Department that Megha distributor is the sole promoter of the Bhutan government for the selling of lotteries to the State of Kerala since 2005, and Bhutan government has not communicated to State regarding the appointment of any new promoter.
Arguments Advanced Before the Court w.r.t Second Issue
1. It was argued by the Bhutan government and Megha distributor that impugned judgement made an error in interpreting the provision of Central act and Lotteries (Regulations) Rules 2010 (hereinafter Central rules) because the impugned judgement overlooked the other relevant provisions of Central act. State governments including the State of Kerala were consulted by the Central and they had no objection regarding the number of draws per day fixed by Central rules, contended by the parties.
2. The state of Kerala, on the other hand, argued in the favour of impugned judgment and said that if the situation arises where the court finds any ambiguity with the statue taking into the view of social scenario and the evil impacts regarding the addictive tendency of paper lotteries, then the next step is to interpret the law and reach at the reconcilable situation, and learned single judge in impugned judgement did the same by emphasising that only 52 ordinary lotteries and 6 bumper lotteries could be drawn in a year
Judgement w.r.t. Second Issue
1. The court discussed the relevant provision of the Central Act and Central rules before giving the judgement. Division bench looks into the section 3(6) of the Central rules which says that the number of lottery draws except bumper draw by an Organising State, from all the lottery schemes put together, shall not be more than twenty-four per day and the view taken by the impugned judgement appears that section 4(h) of the Central Act which states that no lottery shall have more than one draw in a week, is in contradiction of section 3(6) of Central rules.
2. Section 3 of Central act provides the prohibition is on conducting, organising or promoting any lottery by the state save as otherwise in section 4 of the act which talks about the conditions in which lottery could be organised by the States, and after reading these provisions it was concluded that there is no restriction on the number of lotteries, said the court. Section 3(4) of the Central rules provides that if the organising state wants to organise more lottery, then the procedure is to be followed as provided in sub sec (3) of section 3 of Central rules in which conditions are stated about the Organising state, that they have to announce in advance the information about matters mentioned in clauses (a) to (j) of section 3(3) about the lottery.
3. It is beyond the doubt that State government or an Organising government may conduct any number of lotteries or schemes subject to the conditions prescribed in section 4 of the Central act and is organised only in the prescribed manner mentioned in Central rules because Central rules are framed invoking the power of Central act as mentioned in section 11 of Central act which talks about the power of Central Government to make rules. The court cleared the air and emphasised that as mentioned in section 4(h) of Central act that no lottery shall have more than one draw per week, operates on the lottery to lottery and scheme to scheme basis and has no impact on total numbers of lottery organised by Organising state. So there is no contradiction between section 3(6) and section 4(h) of Central rules and Central act respectively. Learned single judge in impugned judgement was at fault and this court unable to sustain the contrary views.
Conclusion
The present judgement by the division bench follows the jurisprudential approach in mitigating the shortcomings of the impugned judgement. The unpremeditated approach by the State of Kerala on tax was a concern because this could worsen the relationship between two countries who are subject to an agreement. Recently, in April 2020 by Judgement of Kerala High Court[4], it was held that section 5BA of Kerala General Sales Tax (KGST) Act under Kerala Paper Lotteries Act,2005 which talks about the levy of license fee on the draw of lotteries within the State of Kerala as unconstitutional, because Parliament enacted the Lotteries (Regulations) Act,1998 and the said legislation does not provide any tax on lotteries (Lotteries by Government comes within the scope of Union list of 7th Schedule) so by virtue of law, section 5BA of KGST Act is unconstitutional now.
References:
[1] Sec 3, The Lotteries (Regulation) Act 1998
[2] Sanjay, Is lottery legal in India? LOTTOLAND ( FEB 15,2019), https://www.lottoland.asia/magazine/is-lottery-legal-in-india.html
[3] (2010) 4 KLT 629
[4] State of Sikkim v. State of Kerala , https://indiankanoon.org/doc/146379485/
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