ORDER R.C. Lahoti, J.
1. Lottery is 'A chance for a prize for a price; a scheme for the distribution of a prize or prizes by lot or chance, the number and value of which is determined by the operator of lottery. Essential elements of a lottery are consideration, prize and chance and any scheme or device by which a person for a consideration is permitted to receive a prize or nothing as may be determined predominantly by chance', so defines the Black's Law Dictionary (6th Edn, p.947).
It goes on to say- "An unlawful gambling scheme in which (a) the players pay or agree to pay something of value for chances, represented and differentiated by numbers or by combinations of numbers or by some other media, one or more of which chances are to be designated the winning ones; and (b) the winning chances are to be determined by a drawing or by some other method based upon the element of chance; and (c) the holders of the winning chances are to receive something of value."
2. Lottery is a game of chance and hence like gambling it is a vice. Gambling is as old as the human ingenuity itself. So is the history of attempts at controlling if not preventing the evil. The expression 'Betting and gambling' included and has always been understood to have included the conduct of lotteries. That is Entry No.34 of List-II of Seventh Schedule. However, lotteries organized by the Govt of India or the Govt of a State have been included in Entry No.40 of List-I of the Seventh Schedule of the Constitution.
3. 'Gambling ( Dyuta) has been considered as a pernicious vice in all the works of Dharmashastras, but the instinct of gambling among individuals appears to have been in existence from very ancient times Mahabharatha (Udyogparv 37-19) states that it has been common experience that vice of gambling has generated great enmities in ancient times and therefore it is not wise to resort to gambling even in jest or for amusement".
3.1 Referring to Mahabharata P.V. Kane states :
Conceding, for the sake of argument, that indulgence in gambling even on the part of such a virtuous, noble and philosophic warrior as Yudhishitra was justified or at least excusable, there is nothing to show that the code of Kshatriya chivalry permitted him to gamble away his own spirited, devoted and virtuous queen and his four valiant brothers. It appears that the real aim of the great author of the Mahabharata is to emphasise that gambling is such a reprehensible pastime and so ruinous and degrading that even the greatest and the best, when once they indulge in it, lose all sense of duty, morality and the claims of love and affection. It has already been seen how gambling was looked upon as a great vice in the king by writers on politics and also the Dharmasastras. Even the Puranas here and there condemn gambling. For example, the Brahmapurana ( 171.29-38) condemns it in strong language. It says that the gambler's wife is always in distress and the gambler, on seeing the condition of his wife, is also worried ( this is in almost the same words as Rg. X. 34, 10-11), the Vedas condemn gambling and that there is no sin comparable to gambling.
(History of Dharmashastra, Vol III.p.542) 3.2 "The earlier SmrIT is and Puranas, were unanimous in condemning the vice of gambling and in advising that it should be prohibited. However, the later SmrIT is made provision for regulating gambling and betting. The writers of these SmrIT is appear to have come to the conclusion that the instinct to indulge in gambling and betting was so powerful and deep-rooted in human beings that prohibition was impossible and that total prohibition would only lead to such persons indulging in gambling and betting secretly, and not to the eradication of the vice. Therefore, they adopted the line that what cannot be prohibited must be regulated at least, so as to reduce its evil effects."
3.3 "Gambling has been prohibited by Manu on the ground that it destroys truth, honesty and wealth. But it has been permitted by other law givers when conducted ( with the permission of the King) subject to payment of tax to the King."
Contents of para 3 borrowed from Legal & Constitutional History of India, M.Rama Jois, Vol I, Ch.13, para 1 at pp 207-209)
4. Before the Supreme Court the first dispute as to lotteries was agitated and decided in H. Anraj, Vs. State of Maharashtra (hereinafter H. Anraj-I, for reference ). It appears that the Govt of Maharashtra and various other State Govts were requesting Union Govt to authorise them to conduct lotteries for the purpose of finding funds for advancing their development plans. Such authorisation was strictly not necessary in the absence of law made by Parliament pursuant to Entry 40 List-I of Seventh Schedule. Article 298 extends the executive power of the Union and of each State to the carrying on of any trade or business and to the acquisition, holding and disposal of the property and making of contracts for any purpose with the stipulation that if trade business or purpose is not one with respect to which Union may make laws, the said executive power of Parliament shall be subject in each State to legislation by the State and if the trade, business or purpose is not one with respect to which the State legislature may make laws, the said executive power of the State shall be subject to legislation by Parliament. There was no legislation by Parliament on the subject of lotteries organized by the Govt of India or the Govt of a State and hence the Govt of every state enjoyed an unrestricted right to organise lotteries of its own. It also appears that the Central Govt was opposed to the idea of lotteries being conducted by the Government yet they had decided to authorise the State Govts to conduct lotteries in view of the representations of some of the State Govts that it would help them to mobilise finances and to find funds for financing their development plans. In its communication dated July 1, 1968 the Ministry of Home Affairs, Govt of India made it clear to the Chief Secretaries to the Govts of all States that authorisation shall be available on the condition that tickets to such a lottery will not be sold in another State without the express consent of the State Govt concerned. The communication was followed by Presidential Order under Article 258(1) of the Constitution.
4.1. By a press release of the Directorate of Publicity, Sachivalaya Bombay, dated 24.9.1969 followed by a communication dated 24.8.81 by the Finance Department of the Govt of Maharashtra, a ban was sought to be imposed on the sale within the State of Maharashtra of tickets of lottery conducted by the Govt of other States. There was no express notification or order of the Govt of Maharashtra much less a legislation to that effect. Several agents for the sale of lottery tickets filed petitions challenging the ban sought to be so imposed. The State of Maharashtra defended itself by referring to the condition incorporated in the Presidential Order which accompanied the authorisation restraining the sale of lottery tickets in other states.
4.2 Their Lordships formed an opinion that if a State acts in breach of the condition imposed by the President while entrusting the power under section 258 it is open to the President to revoke the permission or to take such further action as may be constitutionally permissible but it could not have possibly enabled the Govt of other State to do a thing about it except to complain to the Union Govt. Their Lordships allowed the writ petitions and directed the State of Maharashtra to forbear from giving effect to the ban on the sale of tickets of lotteries organized by other States.
5. The effort of State of Maharashtra to prevent the evil of lotteries extended by other states into its territory thus failed ( though the State of Maharashtra intended to continue with its own evil of lottery, rather consistently, by monopolising its own lottery within its own State by excluding other States). The lottery trade by several Governments of States thus came to hold the field.
6. Then comes H. Anraj Vs. Government of Tamil Nadu (referred to hereinafter as Anraj-II.) Tamil Nadu General Sales Tax Act 1959 and Bengal Finance ( Sales Tax ) Act, 1941 were amended respectively w.e.f. Jan 28,1984 and May 1,1984 so as to bring the lottery tickets within the purview of the charge of sales tax and to levy tax on the sale of such tickets @ 20% at the point of first sale in the State. Presumably this was done in exercise of its own independent taxing power under Entry 54 of List-II in the Seventh Schedule of the Constitution. Several writ petitions were filed challenging the amendment and levy of tax on sale of lottery tickets raising the question of law- whether sales tax could be levied by a State legislature on the sale of lottery tickets in the concerned state.
We will revert back a little later to the law laid down by their Lordships in this case ( i.e. H. Anraj-II).
7. Delhi Sales Tax Act, 1975 ( 43 of 1975) was enacted by the Parliament to consolidate and amend the law relating to levy of tax on sale of goods in the Union Territory of Delhi. It came into force on 1.10.1975. A few provisions thereof which would be relevant for the purpose of the present batch of petitions are extracted and reproduced hereunder :
Section 2. Definitions- In this Act, unless the context otherwise requires xxx xxx xxx xxx xxx xxx
(g) "goods" includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers, actionable claims, stocks, shares, securities or money;
xxx xxx xxx xxx xxx xxx "sale" with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes (i) a transfer of goods on hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods; (ii) supply of goods by a society (including a co-operative society), club firm or any association to its members for cash or for deferred payment, or for commission, remuneration or other valuable consideration, whether or not in the course of business; and
(iii) transfer of goods by an auctioneer referred to in sub-clause (iv) of clause (e);
(m) "sale price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in trade, but inclusive of any sum charged for anything done by the dealer in respect of goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged;
(n) "tax" means sales tax payable under this Act;
(o) "turnover" means the aggregate of the amounts of sale price receivable , or, if a dealer so elects, actually received by the dealer, in respect of any sale of goods, made during any prescribed period in any year after deducting the amount of sale price, if any, refunded by the dealer to a purchaser in respect of any goods purchased and returned by the purchaser within the prescribed period :
4.Rate of tax (1) The tax payable by a dealer under this Act shall be levied
(a) in the case of taxable turnover in respect of the goods specified in the First Schedule, at the rate of twelve paise in the rupee;
(b) in the case of taxable turnover in respect of the goods specified in the Second Schedule at such rate not exceeding four paise in the rupee as the Central Govt may, from time to time by notification in the Official Gazette determine;
(c) in the case of taxable turnover in respect of any food or drink served for consumption in a hotel or restaurant or part thereof with which a cabaret floor show or similar entertainment is provided therein, at the rate of forty paise in the rupee;
(d) in the case of taxable turnover in respect of any other goods, at the rate of seven paise in the rupee:
Provided that the Administrator may with the previous approval of the Central Govt and by notification in the Official Gazette, add to, or omit from, or otherwise amend, the First Schedule or the Second Schedule either retrospectively or prospectively, and thereupon the First Schedule or as the case may be, the Second Schedule shall be deemed to be amended accordingly :
Provided further that no such amendment shall be made retrospectively if it would have the effect of prejudicially affecting the interests of any dealer :
Provided also that in respect of any goods or class of goods the Administrator is of opinion that it is expedient in the interest of the general public so to do, he may, with the previous approval of the Central Govt and by notification in the Official Gazette, direct that the tax in respect of the taxable turnover of such goods or class of goods shall subject to such conditions as may be specified, be levied at such modified rate not exceeding the rate applicable under this section, as may be specified in the notification.
8. On 24.8.1994, the Delhi Sales Tax (Second Amendment) Bill, 1994 proposing imposition of sales tax @ 20% on lottery tickets was introduced in the Legislative Assembly of NCT of Delhi. On 25.8.1994. The House adopted a motion for circulation of Bill inviting public opinion. Advertisements were published in newspapers seeking such public opinion. On 19.12.1994 the gist of the public opinion was tabled before the House. The summary note put up before the House reveals that out of the total 51810 opinion received, none has favoured the idea of levying the sales tax on the sale of lottery tickets for several reasons. As many as 46504 signatories had demanded sale of lottery tickets being banned as it was ruining the financial life of many families. However, the Delhi Sales Tax ( 2nd Amendment Bill), 1994 inserting clause (cc) in sub section (1) of Section 4 of Delhi Sales Tax Act, 1975 was passed by the Legislature. The said amendment came into force on 2.1.1995. Clause (cc) so inserted by the amendment reads as under :-
"(cc) In case of taxable turnover in respect of lottery tickets @ 20 paise in the rupee.
9. On 31.1.1995 a notification under Section 5 of Delhi Sales Tax Act has been issued specifying the tax under the said Act on the turnover of the goods viz. lottery tickets at the first point. The Commissioner Sales Tax New Delhi issued a general notification which reads as under :-
"GOVERNMENT OF THE NATIONAL CAPITAL TERRITORY OF DELHI.
OFFICE OF THE COMMISSIONER OF SALES TAX BIKRIKAR BHAWAN, MSO-II NEW DELHI-110002 ATTN: ALL LOTTERY DEALERS It is notified for information of all concerned that lottery tickets are now taxable at 20 paise in a rupee at first point.
For the convenience of the dealers engaged in the business of the sale of lottery tickets, a Lottery Cell has been created in the Department to give a centralised service and render assistance for the purpose of registration, levy and collection of tax and assessments of such cases.
Please note that it is an offence to carry on the business of lotteries after incurring the liability under the Delhi Sales Tax Act without seeking registration from the Department.
All concerned are, therefore advised to immediately apply for registration as per the provision contained in the Delhi Sales Tax Act.
In case of any difficulty please do not hesitate to contact STO (Lottery Cell Tel No. 3318487, 3318556 Extn 3603) or in person in room No. 312, Third Floor, Bikrikar Bhawan, MSO-II NEW DELHI-110002.
Commissioner DIP/291/95/K Sales Tax: New Delhi"
10. It is interesting to note while Presidential Order authorises the Government of States entering into lottery business and the decision of the Supreme Court in H. Anraj-I prevents the State from banning the sale of lottery tickets of other State within its territory, on 7.2.1995, the Commissioner of Police Delhi issued prohibitory order under Section 144 Cr.P.C. whereby prohibition was imposed on any person or persons from selling the lottery tickets and activities connected to it which are likely to cause disturbance to the public tranquility and public moral and breach of peace and/or danger to human life and property in the National Capital Territory of Delhi. The prohibition was promptly challenged before Delhi High Court in Crl Writ Petition No. 31/96. By order dated 24.5.1996 the Delhi High Court quashed the above said notification. All activities connected with lotteries remained suspended between 7.2.95 to 24.5.96. Those who had grievance against the gambling through lotteries got a brief spell of respite saving families from ruinous evil, which made its re-entry on 24.5.96 because the Court being the court of law found it difficult to sustain the legality of the prohibition by reference to Section 144 Cr.P.C.
whereunder it was sought to be imposed.
11. With this much backdrop of events we would now take up the individual writ petitions briefly setting out the facts thereof and the reliefs sought for therein. There are sixteen petitions in all:
CWP NAME OF THE PETITIONER 1254/97 HARYANA STATE LOTTERIES 172/97 IQBAL CHAND KHURANA 460/97 M/S K & CO. 529/97 SUNRISE ASSOCIATES 530/97 M/S.AMRIT AGENCIES (PVT) LTD 597/97 SAYAL & CO. 790/97 DEEPAK AGENCIES 845/97 GURU NANAK AGENCIES 1101/97 M.S. ASSOCIATES 1217/97 M/S K.KUMAR LOTTERY WALA 1144/97 V.KUMAR LOTTERY WALA REGD 1215/97 SANJAY LOTTERY 1218/97 SANJAY AGENCIES 1219/97 SURAJ BHAN & SONS 1272/97 M/S LOTTERY CENTRE HARISH VINOD 2106/97 RAJASTHAN STATE LOTTERIES DEPTT
12. The facts and the questions of law arising for decision in all these petitions are common excepting the cases of three petitioners which are at a little variation and hence will need a separate mention. All the petitioners deal in lottery tickets. They have been served with notices under Section 23(6) of the Delhi Sales Tax Act 1975 calling upon them to show cause why penalty be not imposed for their failure to secure registration and why best judgment assessment be not made for the period 1990-91 and onwards for their failure to file returns. The notices have been issued some time in the year 1996 and 1997. All the petitioners seek a declaration that the provisions of Section 4(1)(cc) of Delhi Sales Tax Act 1975, as inserted by the Delhi Sales Tax (Second Amendment) Act, 1994 w.e.f. 2.1.1995 are unconstitutional and void. The relief of quashing of the notices is also sought for .
13. CWP 1254/97 is filed by Haryana State Lottery. During the pendency of the petition, an order of assessment (Annexure-P/10) has been passed on 26.3.1997 whereby a demand of Rs. 59,60,000/- under Delhi Sales Tax Act and a demand of Rs. 10 lakhs under Central Sales Tax Act relevant to the period 1990-91 has been raised. An application for amendment in the writ petition has been filed by the petitioner seeking the setting aside of the said order of assessment.
14. In CWP 2106/97 filed by Rajasthan State Lottery Deptt an order of assessment, (Annexure-P/9), has been passed on 31.3.1997 by STO Ward 89 (Lottery Cell) whereby gross turnover/taxable turnover of the petitioner for the period 1990-91 has been assessed at Rs. 43,11,09,874/- resulting into a demand of tax to the tune of Rs. 3,01,77,691/-calculated @ 7% plus a penalty of Rs. 5,000/-.
15. In CWP 530/97 filed by Amrit Agency Pvt Ltd, the petitioner is a dealer in Maruti cars. It has also been dealing in lottery tickets. It had sought for registration of lottery tickets also as one of the items in the certificate of registration but it was granted registration for Maruti cars only. Though there is no speaking order passed but the fact remains that the lottery tickets were not mentioned as an item in the certificate of registration though the petitioner had sought for doing so.
16. In every petition there is an interim order passed by this Court staying further proceedings pursuant to the notice under Section 23(6) of Delhi Sales Tax Act, 1975 issued against respective petitioners.
17. In this order the Delhi Sales Tax Act , 1975 shall be referred to as "DST Act" and the Central Sales Tax Act, 1956 shall be referred to as "CST Act", for the sake of brevity.
18. The several grounds on which the petitioners have laid challenge to the vires of the impugned amendment levying tax on the sale of lottery tickets, as set out in various petitions and as argued and pressed at the time of hearing can briefly be catalouged hereunder :
(i) That the lottery tickets are not 'goods' and hence cannot be made susceptible to levy of sales tax;
(ii) That assuming that part of the price paid for purchasing a lottery ticket is paid as against that component of the lottery tickets which can be called 'goods', the impugned levy must fail for want of a constitutional amendment akin to insertion of clause (29A) in Art 366 of the Constitution and also because of there being nothing laid down either in the Act or in the rules made thereunder enabling separate valuation of that component of the lottery tickets which can be called goods;
(iii) That under Article 239AA of the Constitution, Delhi Legislative Assembly has no power to amend or add to a Central enactment;
(iv) That the State amendment being repugnant to the provisions of the Central Act and the State amendment having not been reserved for the consideration and assent of the President, the State amendment must give way to the Central enactment and hence must fail;
(v) That assuming the lottery tickets to be goods, for failure of the State ( through its Sales-tax Department) to enforce and implement the law as to levy of sales tax on the sale of lottery tickets for a period of about 8-9 years, the law should be deemed to have been repealed by doctrine of desuetude and therefore levy and recovery of sales tax on sale of lottery tickets cannot be enforced; (vi) That until the year 1996-97 the authorities administering the sales tax law as also all those dealing in the lottery tickets believed that trading in lottery tickets did not attract the applicability of sales tax law. By applying principle of contemporanea expositio the sales tax law should be so interpreted as to hold that the lottery tickets were not 'goods' and were not liable to levy of tax; (vii) That the impugned amendment and the impugned notice under Section 23(6) of the DST Act are vitiated by malafides and hence are liable to be annulled. (viii) That tax on lottery tickets @ 20% is unreasonable and discriminatory; hence hit by Art. 14.
19. On behalf of the respondents a brief counter has been filed in practically all the petitions. It is submitted that the impugned amendment is constitutionally valid and is within the legislative competence of the Legislative Assembly of National Capital Territory of Delhi. The impugned Amendment Act is not repugnant to any provision of Delhi Sales Tax Act, 1975 and so was not required to be reserved for consideration of the President, nor the President's assent was required. On a correct interpretation of Art 239AA(3) the transaction of sale of lottery tickets could legitimately be subject to levy of sales tax. The controversy stands resolved by the decision of the Supreme Court in H.Anraj-II. The tax on sale of lottery tickets clearly falls within the Entry No. 54 of List II to Seventh Schedule of the Constitution. All other relevant allegations have also been denied.
20. We will now take up for consideration each of the pleas so advanced.
(I) AND (II) Whether lottery tickets are 'goods' liable to sales tax ? If so, whether the levy must fail for want of machinery determining the value of 'goods' involved in the sale of lottery tickets ?
21. The first submission of the learned counsel for the petitioners has been that the lottery tickets are not 'goods' within the meaning of Section 2(g) of the DST Act and hence they are beyond the purview of the Act.
22. As already noticed 'goods' is defined in Sec.2(g) of DST Act to include all materials, articles, commodities and all other kinds of movable property but does not include newspapers, actionable claims, stocks, shares, securities or money.
23. We may straightaway proceed to refer to the law laid down by their Lordships of the Supreme Court in the case of H. Anraj Vs. Govt of Tamilnadu, , a decision which has been relied on by the learned counsel for both the parties in support of their respective contentions. Learned counsel for the petitioners have submitted that it stands concluded by H.Anraj-II that lottery ticket consists of two components : a right to participate in the draw and a right to claim a prize contingent upon its being successful in the draw. The latter is an actionable claim included in the lottery tickets and to the extent of the value of the actionable claim included in the price paid for the purchase of the lottery tickets, it cannot be taxed as 'goods', inasmuch as an actionable claim has been specifically excluded from the definition of 'goods'. On behalf of the State it has been submitted that the decision of the Supreme Court has left no manner of doubt that lottery tickets are goods and hence liable to sales tax; the controversy sought to be raised by the petitioners stands concluded by H.Anraj-II and cannot now be permitted to be revived.Thus each of the contending parties has tried to read the law laid down in H.Anraj-II as supporting its own plea.
24. Learned counsel for the petitioners have relied on the following passages from the judgment of the Supreme Court :-
"Every participant is required to purchase a lottery ticket by paying a price therefor (the face value of the ticket) and such purchase entitles him not merely to receive or claim a prize in the draw, if successful but before that also to participate in such draw. In other words, a sale of lottery ticket confers on the purchaser thereof two rights (a) a right to participate in the draw and (b) a right to claim a prize contingent upon his being successful in the draw. Both would be beneficial interests in movable property, the former `in praesenti', the latter `in futuro' depending on a contingency. Lottery tickets, not as physical articles, but as slips of paper or memoranda evidence not one but both these beneficial interests in movable property which are obviously capable of being transferred, assigned or sold and on their transfer, assignment or sale both these beneficial interests are made over to the purchaser for a price." (para 26) "It is thus clear that a transfer of the right to participate in the draw which takes place on the sale of a lottery ticket would be transfer of beneficial interest in movable property to the purchaser and, therefore, amounts to transfer of goods and to that extent it is no transfer of an actionable claim; to the extent that it involves a transfer of the right to claim a prize depending on a chance it will be an assignment of an actionable claim."(para 26) " not one but two distinct rights are transferred to the purchaser of a lottery ticket and it is not possible to accept the contention that the two together constitute a single right."
(para 27) " lottery tickets to the extent that they comprise the entitlement to participate in the draw are goods' properly to called " ( para 33)
25. Developing their arguments further, the learned counsel for the petitioners have referred to the decision of the Supreme Court in Govind Saran Ganga Saran Vs. CST (1985) 60 STC 1, wherein their Lordships have held:
"The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed and the forth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity."
26. It was submitted that as early as on 4.10.1985, law was settled by H. Anraj-II that one of the components of lottery tickets (and hence of the price paid for purchasing the same) was an actionable claim, specifically excluded from the definition of goods. Still the legislature has not provided for working out separately ( clearly and definitely) the value of those two components. In the absence of such provision having been made the value of 'goods' included in the value of lottery tickets cannot be separated from the value of actionable claim included in it and ascertained for computing the tax liability and therefore the levy must fail.
27. To test the validity of these submissions made by either party, we shall have to examine the law laid down by their Lordships in H.Anraj-II (supra) in little more details.
27.1 Question posed before their Lordships was: whether sales tax can be levied by a State legislature on the sale of lottery tickets in the same State ?
27.2 Tamil Nadu General Sales Tax Act, 1959 was amended w.e.f. 28.1.1984. A similar amendment was made in Bengal Finance ( Sales Tax) Act, 1941 w.e.f. May 1, 1984. The result of both amendments was to bring the lottery tickets within the purview of the charge to tax @ 20% on the sale of such tax at the point of first sale in the State.
27.3 The plea raised on behalf of the petitioner who was a licensed dealer in the lottery tickets was that the lottery was a chance for a prize for a price and sale of such a chance was not a sale of goods. Relevant definitions under the two acts defined the 'goods' to mean all kinds of movable property but specifically excluded actionable claims. Article 366(12) of the Constitution was referred to which provides," goods includes all materials, commodities and articles." Article 366(29A) inserted by the 46th Constitution Amendment Act was also referred to. Clause (a) thereof, material in the context, runs thus :-
"(29A) Tax on the sale or purchase of goods includes
(a) a tax on the transfer,otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment, or other valuable consideration;
27.4 During the course of the judgment, their Lordships referred to the dictionary meaning of lottery and lottery tickets. Their Lordships also referred to the definition of actionable claim as given in Section 3 of the Transfer of Property Act, 1882 and several provisions of the Sale of Goods Act especially the definition of goods as given in Section 2(7). What their Lordships have held, to the extent relevant for the purpose of present decision, is extracted and reproduced hereunder :
" As opposed to immovable property these tickets would be movable property and would normally qualify to fall within the expression goods." (pr. 22) "Even proceeding on the assumption that lottery tickets are contractual documents that fact cannot militate against the tickets being goods and certain rights thereunder being transferred to the purchaser."(pr.22) "Another facet of this right to participate in the draw which is transferred to the purchaser of a lottery ticket as distinct from the right to receive or claim a prize in such draw needs to be highlighted which has a significant bearing on the question whether the lottery tickets would be goods or not. It cannot be disputed that this right to participate in the draw under a lottery ticket remains a valuable right till the draw takes place and it is for this reason that licenced agents or wholesalers or dealers of such tickets are enabled to effect sales thereof till the draw actually takes place and as such till then the lottery tickets constitute their stock in trade and therefore a merchandise. In other words, lottery tickets, not as physical articles but as slips of paper or memoranda evidencing the right to participate in the draw must in a sense be regarded as the dealer's merchandise and therefore goods capable of being bought or sold in the market. They can also change from hand to hand as goods. Even in united States v. Mueller (178 2nd Series) Federal Reports 593) ( supra) on which counsel for dealers relied the court while emphasising the aspect that lottery tickets are more in the nature of choses in action (because of the right to claim a prize by chance) has observed that these are merchandise in the limited sense. The aforesaid aspect of the matter really clinches in my view the position that for the purpose of imposing the levy of sales tax lottery tickets comprising the entitlement to participate in a draw will have to be regarded as `goods' properly so called" (pr. 29) "It is true that this entitlement to a right to participate in the draw is an entitlement to beneficial interest which is of incorporeal or intangible nature but that cannot prevent it from being regarded as goods. (pr.30) " right to participate in the draw under a lottery ticket remains a valuable right till the draw takes place and it is for this reason that licence agents or wholesalers or dealers of such tickets are enabled to effect sales thereof till the draw actually takes place and therefore lottery tickets, not as physical articles but as slips of paper or memoranda evidencing the right to participate in the draw can be regarded as dealer's merchandise and therefore goods which are capable of being bought or sold in the market." (pr.47).
27.5 Vide paras 30 to 32 their Lordships have referred to several decided cases wherein incorporeal and intangible things like electric energy, right to exhibit the film and copyright have been held to be goods for the purpose of levying sales tax.
28. A reference to the law laid down by their Lordships of the Supreme Court of India in a recent decision in Vikas Sales Corporation and Anr Vs. CCT and Anr, would be apposite wherein relying on the law laid down in H.Anraj-II ( supra) REP licence/exim scrip have been held to be goods, on transfer whereof sales tax is leviable.
28.1 Influenced mainly by the decision of the Supreme Court in H.Anraj-II,Karnataka and Madras High Court took the view that REP licence/exim scrips constitute 'goods' and therefore on their transfer sales tax was leviable.
The decisions were challenged by the assessees preferring appeals to the Supreme Court while a number of other assessees approached the Supreme Court directly by way of writ petitions under Article 32 of the Constitution of India raising identical questions.
28.2 The import policy in vogue during the concerned years provided for issuance of replenishment licence; the object behind being to provide the registered exporters a facility of importing the essential things required for the manufacture of the products exported. The licences were issued equal to prescribed percentage of the value of exports. These licences were made freely transferable by providing that the transfer of such licences did not require any endorsement or permission from the licensing authority. The transferee became the due and lawful holder of the licence and could either import the goods permitted therein or sell it to another in turn. With effect from July 3, 1991, the name of the licence was changed to exim scrip ( export and import licence). These licences were being traded freely in the market and all stock exchanges.
28.3 Their Lordships took into consideration the definition of goods enshrined in Clause (12) of Article 366 of the Constitution and in the Sales Tax enactments as also in Clause (7) of Section 2 of the Sale of Goods Act.
Vide para 18 their Lordships have held that all the definitions of the expression 'goods' say that it includes all kinds of 'movable property' and therefore, it becomes necessary to notice the meaning of the expression 'movable property' which was not defined in the Sales Tax enactments. The definition in the respective State General Clauses Acts was not very helpful as all that they said was that the movable property means property of every kind except immovable property. Accordingly, their Lordships proceeded to refer to Black's Law Dictionary, Jowitt's Dictionary of English Law, Dictionary of Commercial Law by A.H. Hudson and Salmond's Jurisprudence and concluded that the expression 'movable property' includes corporeal as well as non-corporeal property. Applying the principles so deduced to REP licence, their Lordships held, vide para 24, that REP licences have their own value. They are bought and sold as such. They are traded and dealt with in the commercial world as merchandise, as goods. Thus a REP licence is by itself a property and it is for this reason that it is freely bought and sold in the market. For all purposes and intents, it is goods. Unrelated to the goods which can be imported on its basis, it commands a value and is treated as such. This is because it enables its holder to import goods which he cannot do otherwise.
28.4 Their Lordships turned down the argument that a REP licence/ exim script was either a chose in action or an actionable claim. Their Lordships also refused to treat it something in the nature of a title deed. The REP licence/exim scrip was held to be 'goods' attracting leviability of sales tax.
29. Though a lottery ticket comprises of two rights referred to hereinabove, it has a value of its own. It is bought and sold as such. No permission by anybody is required to purchase or sell it in the market. It is freely transferable. It can safely be held that in the commercial world it is a merchandise, a goods, for all purposes and intent. Unrelated to the prize which a lucky ticket may ultimately earn, it has a value of its own and is therefore, treated as such. It is sold because till then it has not earned any prize. It is purchased because it enables its holder to participate in a draw and to get a prize if he be successful which he could not do otherwise. The law laid down in Vikas Sales Corporation ( supra) additionally reaffirms the view that lottery tickets are goods.
30. Mr Adarsh Goel, learned Sr. standing counsel for the respondent gave a very apt illustration. He submitted that seeds are bought and sold in the market as goods. What is being sold as a seed in praesenti has a potential for growing into a tree and it may be called a tree in futuro yet the sale of a seed would not be called the sale of a tree. Borrowing several passages from the law laid down by their Lordships in H.Anraj-II, the learned counsel for the respondents submitted that what is being sold for the price of a lottery ticket is a cohate or perfected right to enforce the holding of the draw and to participate therein. The right which may materialise in future as and when the draw takes place depending upon his being successful in such draw is an incohate right or a right in futuro. The right to claim a prize may materialise on the chance of a ticket turning out to be a lucky ticket earning a prize on the draw taking place. This line of distinction between the sale of a lottery ticket before the draw has taken place and the sale of a lottery ticket on a date when the draw has already taken place and the ticket having or having not earned a prize should be kept in view. Once the draw takes place a ticket which has failed to earn any prize becomes a useless piece of paper or a waste merely. Such of the tickets which have earned a prize, become actionable claims entitling the purchaser to claim the prize. Therefore, so long as the draw has not taken place the lottery ticket remains goods.
31. We are constrained to observe that the controversy sought to be raised by the petitioners on the issue whether the lottery tickets are 'goods' is wholly unwarranted in view of the authoritative pronouncement of their Lordships in H.Anraj-II which has set at rest the entire controversy and it is only unfortunate that such controversy should have been reopened. The petitioners are trying to make a capital out of the phraseology used by their Lordships in para 33 of the judgment and quoted hereinabove in para 24- "lottery tickets to the extent that they comprise the entitlement to participate in the draw are goods properly so called". They are utilising this phraseology to contend that their Lordships have held the lottery tickets comprising partly of the goods and partly of the actionable claim (not goods.) Such a reading of the judgment of their Lordships is not permissible by picking up a sentence or an expression in isolation.
31.1 A reading of the judgment in its entirety and especially their Lordships' holding vide para 29 and 47 ( extracted and reproduced in para 27.4 above with leaves no manner of doubt that the lottery tickets have been held to be merchandise or trading stock of the dealer and hence goods properly so-called Undoubtedly, one of the components of the lottery tickets is a right to enforce the holding of the draw and to claim a prize but that is a right running along with the lottery tickets. It does not detract from the holding that the lottery tickets are goods. Even at the risk of repetition we would like to stress that in H.Anraj-II their Lordships have held the lottery ticket comprising of two components in the process of analysing its juridical concept. But at more places than one they have clearly said-(i) lottery tickets are movable property as opposed to immovable property, (ii) the assumption of lottery tickets being contractual documents cannot militate against their being goods, (iii) till the draw takes place they are freely marketed as goods, and (iv) they must be regarded as the dealer's merchandise or stock-in-trade freely changing hands. The lottery tickets have 'a value of their own' de hors their components. This conclusion of ours stands fortified by the holding of their Lordships in Vikas Sales Corporation's case (supra) wherein their Lordships have stated :-
"Indeed in H Anraj the main contention of the petitioner was that a lottery ticket was in the nature of an actionable claim. The said argument was rejected after an elaborate discussion of law on the subject." ( para 26) "We are of the opinion that the ratio of the said decision fully supports the contention of the States herein If lottery tickets are goods, there is no reason why these licenses/scrips are not goods." (para 32) 31.2 The characteristics of a REP licence/exim scrip noticed vide para 24 of Vikas Sales Corporation's case are to be found existing in lottery tickets as well. The law laid down in Vikas Sales Corporation's case fortifies the holding in H.Anraj-II that lottery tickets are goods.
32. Whether in spite of the law laid down in H. Anraj-II, lottery tickets would not be leviable to tax in the absence of the Constitutional amendment analogous to Clause (29A) of Article 366 as inserted by 46th Amendment? It was submitted by the counsel for the petitioners that if only a part of the property involved in the transaction passes as goods, and such two components be indivisible or not separable, the transaction in its entirety would not be susceptible to sales tax. Attention of the court was invited to a series of decisions beginning with First Gannon Dunkerley's case (1958) 9 STC 353 and various cases thereafter such as State of Himachal Pradesh Vs. Associated Hotels of India Ltd (1972) 29 STC 474, Hindustan Aeronautics Ltd vs State of Karnataka (1984) 55 STC 314, Builder Association of India Vs. UOI (1989) 73 STC 370 and Gannon Dunkerley & Co Vs. State of Rajasthan (1993) 88 STC 204. Most of the cases relate to works contract and hoteliers, whereat in pursuance of the performance of the building or service contracts some property in goods also passed to the other party and in such circumstances their Lordships held that where the transaction was one entire and indivisible involving transfer in part of the property in goods so as to amount to sale of goods and another part amounting to sale of non-goods, then it was not within the competence of the State legislature to tax it. It was submitted that this view of the law led to the insertion of clause (29A) in Article 366 whereafter only the transfer of property in any goods involved in works contract or service contract etc became susceptible to tax. It was further submitted that in view of the law laid down by their Lordships in H.Anraj-II, an amendment in the Constitution on similar lines was warranted which having not been done lottery tickets would remain not taxable as goods. It was also submitted that this is an argument which has become available to the lottery ticket dealers only in view of the law laid down by the Supreme Court in Anraj-II.
33. This submission need not detain us for long inasmuch as we have already held that lottery tickets are goods, taxable as such. The impugned tax is within the legislative competence of legislature of NCT of Delhi. No constitutional amendment akin to insertion of clause (29A) in Art 366 of Constitution was called for to tax the sale of lottery tickets as the sale price of taxable goods susceptible to sales tax.
34. On the same reasoning stands rejected the argument on behalf of the petitioners based on Govind Saran Ganga Saran's case ( supra). As we have held the aggregate sale price of lottery tickets to be taxable turnover, it was not necessary for the legislature to have made provision for separate valuation of the two components of lottery tickets. In Nirmal Agency Vs. CTO (1992) 86 STC 450, a Division Bench of Karnataka High Court set aside assessment of sales tax on lottery tickets and remanded the matter with a direction to the assessing authority to split the sale price of lottery tickets into two, to determine the extent of sale price which may be referable to transfer of goods and tax it as per law. We express our respectful dissent with the view so taken, not only in the light of the law laid down in H.Anraj-II as stated hereinabove but also as per the law laid down subsequently by the Supreme Court in Vikas Sales Corporation's case (supra).
(III) & (IV) Whether the impugned amendment is hit by Art. 239AA of the Constitution (i) for want of Legislative power, and (ii) on account of repugnancy ? :-
35. Article 239AA was inserted in the Constitution by the 69th Amendment Act, 1991 w.e.f. 1.2.1992. Clause (3) of this Article which is relevant for our purpose, is extracted and reproduced hereunder :-
3(a) Subject to the provisions of this Constitution, the Legislative Assembly shall have power to make laws for the whole or any part of the National Capital Territory with respect to any of the matters enumerated in the State List or in the Concurrent List in so far as any such matter is applicable to Union territories except matters with respect to Entries 1,2 and 18 of the State List and Entries 64,65 and 66 of that List in so far as they relate to the said Entries 1,2 and 18.
(b) Nothing in sub-clause(a) shall derogate from the powers of Parliament under this Constitution to make laws with respect to any matter for a Union territory or any part thereof.
(c) If any provision of a law made by the Legislative Assembly with respect to any matter is repugnant to any provision of a law made by Parliament with respect to that matter, whether passed before or after the law made by the Legislative Assembly, or of an earlier law, other than a law made by the Legislative Assembly, then in either case, the law made by Parliament, or, as the case may be, such earlier law, shall prevail and the law made by the Legislative Assembly shall, to the extent of the repugnancy, be void. Provided that if any such law made by the Legislative Assembly has been reserved for the consideration of the President and has received his assent, such law shall prevail in the National Capital Territory : Provided further that nothing in this sub-clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislative Assembly."
36. It is submitted on behalf of the petitioners that though this Article makes a provision empowering the Parliament to enact a law which may add to, amend, vary or repeal the law so made by the Legislative Assembly but it does not provide for a vice versa situation empowering the Legislative Assembly to add to, amend, vary or repeal a law made by the Parliament. It was also submitted that the amendment made by the Legislative Assembly is repugnant to the law as enacted by the Parliament and hence it is hit by sub clause (c) of Clause 3 of Article 239AA. Developing the argument further, learned counsel for the petitioners submitted that if the law laid down by their Lordships of the Supreme Court in the case of H. Anraj-II was to be read in the manner as submitted by the learned Senior Standing Counsel for the State then the law as enacted by the Parliament i.e. the clause (d) of sub-section (1) of Section 4 of the Act includes the lottery tickets within the meaning of 'any other goods' rendering the same liable to tax @ 7% while the amendment by the Legislative Assembly of NCT of Delhi proposes to tax the lottery tickets @ 20%. Thus, the two provisions are repugnant to each other and hence the amendment made by the Legislative Assembly must give way to the main provision as contained in the principal enactment which is by the Parliament.
37. The two submissions, though attractive on their face have to be discarded on deeper scrutiny as would be demonstrated presently.
38. By the Constitution (69th Amendment) Act, 1991, Article 239AA was introduced in Part VIII of the Constitution. This Article renamed Union Territory of Delhi as the National Capital Territory of Delhi and provided that there shall be a Legislative Assembly for such National Capital Territory. The Legislative Assembly so created was empowered by Clause (3) of the said Article to make laws for the whole or any part of the National Capital Territory with respect to any of the matters enumerated in the State List or in the Concurrent List in so far as any such matter is applicable to Union territories except matters with respect to Entries 1,2 and 18 of the State List and Entries 64,65,66 of that List in so far as they relate to the said entries 1,2, and 18. Clause (3) further provides that the power conferred upon the Legislative Assembly of Delhi by the said Article shall not derogate from the power of the Parliament " to make laws with respect to any matter for a Union Territory or any part thereof". It further provides that in case of repugnancy, the law made by the Parliament shall prevail, whether the Parliamentary law is earlier or later to the law made by the Delhi Legislative Assembly. The Parliament is also empowered to amend, vary or repeal any law made by the Legislative Assembly.
38.1 Article 239AA came into force w.e.f. 1.2.1992. Pursuant to the Article, the Parliament enacted the Government of National Capital Territory of Delhi Act. It not only provided for constitution of a Legislative Assembly but also its powers as contemplated by Article 239AA. This Act too came into force on 1.2.1992 ( see NDMC Vs.State of Punjab ).
39. There is no substance in the submission that while Art 239AA clause (3) specifically provides for Delhi Legislative Assembly enactment capable of being amended, varied or repealed by the Parliament, there is no provision vice versa and therefore an enactment by the Parliament cannot be amended or varied by the Delhi Legislative Assembly in the manner in which the impugned amendment does. If the subject matter of Delhi Sales Tax, 2nd Amendment Act, 1994 be within the legislative competence of the Delhi Legislative Assembly, then it would be intra vires the Constitution whether it forms the subject matter of an independent legislation or makes an insertion in a central enactment. This is a matter of form merely. The test which it is required to satisfy is that it should be within its legislative competence and should not be repugnant to any provision of law made by the Parliament. If These tests are satisfied, it need not have been reserved for the consideration by the President and his assent. Of course the Parliament is still at liberty to repeal the amendment so added by Delhi Legislative Assembly to the Central Act.
40. Can the provisions of clause (cc) be said to be repugnant to clause (d) of the principal Act ?
41. A State law may be repugnant to a Central law, (i) if there is a direct conflict between the two provisions such as where one cannot be obeyed without disobeying the other, or where obedience to one of them may not be possible without disobeying the other; or (ii) though there is no direct conflict yet it is evident that the central enactment was intended to be a complete and exhaustive code relating to the subject eliminating permissibility of any state legislation relating to the subject; or (iii) when the two enactments occupy the same field. These are well settled propositions of Constitutional law.
42. The test of repugnancy between the laws made by the State and the Parliament has been laid down by the Constitution Bench in the case of M.Karunanidhi Vs. UOI, . Vide para 24, their Lordships have held :
"It is well settled that the presumption is always in favour of the constitutionality of a statute and the onus lies on the person assailing the Act to prove that it is unconstitutional.
Prima facie, there does not appear to us to be any inconsistency between the State Act and the Central Act. Before any repugnancy can arise, the following conditions must be satisfied
1. That there is a clear and direct in -consistency between the Central Act and the State Act.
2. That such an inconsistency is absolutely irreconcilable.
3. That the inconsistency between the provisions of the two Acts is of such a nature as to bring the two Acts into direct collision with each other and a situation is reached where it is impossible to obey the one without disobeying the other."
42.1. Having made a review of the authorities available on the point, their Lordships have summed up the following principles vide para 35 :-
"35. On a careful consideration, therefore, of the authorities referred to above, the following propositions emerge :-
1. That in order to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provisions, so that they cannot stand together or operate in the same field.
2. That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes.
3. That where the two statutes occupy a particular field, but there is room or possibility of both the statutes operating in the same field without coming into collision with each other, no repugnancy results.
4. That where there is no inconsistency but a statute occupying the same field seeks to create distinct and separate offences, no question of repugnancy arises and both the statutes continue to operate in the same field."
42.2. Vide para 34, their Lordships have quoted from their earlier judgment in T.S. Baliah Vs. T.S.Rengachari, , wherein their Lordships have held that to be inconsistent or repugnant, it has to be held that the two legislations cannot stand together and they are so inconsistent that it becomes impossible for them to stand together. In other words, when there is a direct collision between the two enactments which is irreconcilable then only repugnancy results. The expression employed by the Constitution bench in Om Parkash Gupta Vs. State of U.P. 1957 SCR 423 ( at p.434) is-" the provisions of the two are wholly incompatible or that the two statutes together would lead to wholly absurd consequences."
43. Out of the several principles of law laid down, in Shyamkant Lal Vs. Rambhajan Singh , the following three are relevant for our purpose:- (i) repugnancy must exist in fact, and not depend merely on a possibility; (ii) the onus of showing the repugnancy and the extent to which it is repugnant should be on the party attacking its validity; (iii) there ought to be a presumption in favour of its validity, and every effort should be made to reconcile them and construe both so as to avoid their being repugnant to each other; and care should be taken to see whether the two do not actually operate in different fields without encouragement.
44. We may now test the two provisions on the touchstone of the tests so laid down. It is clear that clause (d) of sub section (1) of Section (4) of the principal enactment is a residuary provision which covers only such goods as are not covered by any of the preceding clauses. Clause (cc) as inserted by the Delhi Legislative Assembly makes a specific provision for taxable turnover in respect of the lottery tickets which amendment has the effect of automatically excepting the same from within the ken of clause
(d). With effect from the date of amendment, the lottery tickets have ceased to be 'any other goods' within the meaning of clause (d). The two provisions can therefore stand together: while clause (cc) would apply to lottery tickets, clause (d) would apply to 'any other goods'- not covered by clauses (a)(b)(c) until 2.1.95 and not covered by clauses (a)(b)(c) and (cc) w e.f.2.1.95.
45. In Cantonment Board Mhow Vs. MRSRTC their Lordships have held that if any harmonious construction can be worked out by which both the provisions suggested to be repugnant remain operative, it is the duty of the court to adopt such construction.
46. Thus, there is no repugnancy between the amendment inserted as clause (cc) by the Legislative Assembly for the National Capital Territory of Delhi and the provisions of Section 4 of the Delhi Sales Tax Act, 1975 as they stood enacted by the Parliament.
(V) Whether DOCTRINE OF DESUETUDE hits levy of tax on sale of lottery tickets ?
47. The plea based on the doctrine of desuetude was raised and most vehemently canvassed by Shri Raja Ram Aggarwal, learned Sr Advocate appearing for the petitioner in CWP 530/97. The learned counsel submitted that assuming that Delhi Sales Tax Act ( 2nd amendment Act) 1994, inserting clause (cc) in sub-section (1) of Section 4 of the Act, was within the legislative competence of Delhi Legislature, still levy of sales tax on sale of lottery tickets prior to that date cannot be sustained in view of the principles of desuetude and contemporanea expositio. Mr Aggarwal submitted that Delhi Sales Tax Act, 1975 has been in force ever since 1975 and if the sales of lottery tickets attracted incidence of sales tax then there is no reason why the authorities should not have promptly, timely and contemporaneously caught the sales transactions of lottery tickets in the net of sales tax law. Whatever be the doubts prevailing earlier, with the pronouncement of the Supreme Court in H.Anraj-II on 4.10.1985, it became the law of the land, as contended by the learned counsel for the State, that the lottery ticket was goods and sale of lottery tickets attracted levy of sales tax thereon. Still even after 4.10.1985 nobody in the State tried to apply the provisions of Delhi Sales Tax Act to sales of lottery tickets and to the dealers dealing in lottery tickets. No dealer in lottery tickets filed any returns nor secured registration and yet none acted to set the law in motion. There were no assessments of sales tax made on turnover of lottery tickets. There are instances where the dealers in lottery tickets had sought for registration as dealers under the Act, but the prayer was not entertained. There were dealers dealing in other admittedly taxable goods as also in lottery tickets and yet the goods other than lottery tickets were mentioned in their certificates of registration but prayer for inclusion of lottery tickets as one of the items in the registration certificate was not entertained. Two consequences follow, forcefully submitted the learned senior counsel. Firstly, the sales tax law was not treated as applicable to lottery tickets even by those on whom laid the responsibility of administering and enforcing the law. The law of sales tax was thus suffering an implied repeal by practical obsolescence in so far as lottery tickets are concerned. This deep slumber of the statute qua the lottery tickets would attract the applicability of doctrine of desuetude. The subject or the citizens cannot now be subjected to the law and made liable to levy of tax and/or called upon to explain non-compliance for such period for which the law itself was slumbering. Secondly, the principle of contemporanea expositio will be attracted, as every one dealing with the sales tax law in the State was not only under an impression but also believed that lottery tickets were not goods. Those who have dealt in lottery tickets cannot now be made to suffer by interpreting the law in such a way as would run counter to the contemporaneous belief and let the citizens suffer in retrospect. Strong reliance was placed by Mr Aggarwal, Sr Advocate on the law laid down by their Lordships of the Supreme Court in a recent decision delivered in Municipal Corporation for City of Pune Vs. Bharat Forge Co Ltd (1995) 3 SCC 434.
48. First we will deal with the principle of desuetude. Black's Law Dictionary ( 6th Edn 1990 ) defines desuetude to mean-"disuse, cessation, discontinuance of use, especially in the phrase 'to fall into desuetude.' Applied to obsolete practices and statutes."
49. It would be appropriate to have a review of the opinion of the jurists on the principle of desuetude. Craies on the Statute Law ( 7th Edn, 1971) dealing with the principle at pages 6-7, states :
" a Scottish statute may be lost by desuetude. The English lawyer feels himself much at a loss here: he cannot conceive at what period of time a statute can be held as commencing to grow into desuetude, nor when it can be held to be totally worn out. All he can do is to submit to what great authorities have declared the law of Scotland to be."
"Desuetude is the process by which an Act of the Scottish Parliament may lose its force without express repeal. It does not consist merely of obsolescence or disuse; there must also be contrary practice. Moreover the contrary practice must be of some duration and general application. Lord Mackay usefully described the nature of desuetude in Brown v. Magistrates of Edinburgh when he said, "I hold it clear in law that desuetude requires for its operation a very considerable period, not merely of neglect, but of contrary use of such a character as practically to infer such completely established habit of the community as to set up a counter law or establish a quasi-repeal". (underlining by us )
50. Francis Bennion on Statutory Interpretation ( Butterworths 3rd Edn, 1997 at pages 232 -233) deals with desuetude and also practical obsolescence in the same section. To quote :
Section 95.Desuetude "An enactment contained in an Act does not become inoperative through lack of use or the passage of time. This applies even though the enactment is disobeyed over a long period, and not enforced. Once in force, it remains law until it is repealed or expires.
Desuetude is a legal process by which, through disobedience and lack of enforcement over a long period, a statute may in some legal systems lose its force without express or implied repeal or expiry. This doctrine does not apply to United Kingdom Acts. This is salutary, since otherwise an inquiry would be needed before the subject could know whether or not an apparent Act was binding. The idea that an Act need not be applied if it had never been enforced was put forward in England in the fourteenth century, but was later rejected.
Practical obsolescence. Although there is no doctrine of desuetude in English law, an Act may in practice be a dead letter. This may even apply to a relatively modern Act if it falls into disuse, or is not applied as intended.
Where the court has a discretion as to the application of an Act, for example in relation to the sentence to be imposed for a statutory offence, it is likely to take account of practical obsolescence where it exists. So recently as 1979 Omrod J cited approvingly Bacon's dictum: 'Therefore let penal laws, if they have been sleepers of long or if they be grown unfit for the present time be by wise judges confined in the execution'.
The courts are quite willing to apply the term 'obsolete' to an Act. Moreover where judges dislike an Act, their decisions tend to reflect the Fact."
51. Crawford in Statutory Construction, (1998 Edn), states (vide para 133) that the power to repeal i.e. the power to abrogate or revoke the existing legislation is a legislative function or attribute. By way of footnote, the learned author has noticed Mix v. Illinois Central R. Co. 116 III, 502 6 NE 42 taking the view:-
" Still statutes may be repealed by non-user or desuetude. The instances are numerous of statutes being repealed in fact- a kind of silent legislation. As to the abrogation of statutes by `non-user', there may rest some doubt; for myself, I own my opinion is, that non-user may be such as to render them obsolete, when their objects vanish or their reason ceases. The common law ( and this is but a customary punishment) what is it, but common usage. The long desuetude of any law amounts to its repeal It certainly requires very strong grounds to presume a law obsolete, yet as the whole community includes as well the legislative power as its subjects total disuse of any civil institution for ages past, may afford just and rational objects against disrespected and superannuated ordinances Time silently and gradually introduces; it silently and gradually withdraws its customary laws."
51.1 In para 323 at page 662, the learned author notices that on repeal by non-user or by desuetude authorities are not in harmony. He further states:-
"While it would seem that long and continued violation of a statute or disregard of its terms by the people generally or acquiesced in by them, should operate as a repeal of the statute by the direct exercise of their legislative power by the people, or at least as the implied repeal of such statute by virtue of custom arising to the status of a rule of the common law, a recent case refuses to recognise a repeal by this method largely, if not entirely, on the ground that the courts cannot make the law but are confined to its interpretation. Since the construction placed upon a statute by the people may determine the construction which will be accepted by the courts, it is difficult to see any real objection to proceeding a step further and recognising the complete abrogation of a statute by the conduct of the people from whom the statute originally owes its life."
52. Maxwell on Interpretation of Statutes (12th Edn, 1976/1993 at page 16) under the chapter of Repeal opines 'a law is not replaced by becoming obsolete. There is no doctrine of desuetude in English law'.
53. Doctrine of desuetude has been exhaustively dealt with in Sutherland's Statutory Construction, (5th Edn), Vol-2, in two chapters entitled "Abrogation of Penal Statutes by Non-enforcement" and "Desuetude as the defense" (pp 558-660). We will briefly sum up the statement on the doctrine therefrom, extracting a few excerpts wherever necessary.
53.1 According to Sutherland the doctrine appears to be relevant in the field of penal law only wherein penal statutes may be treated as having been rendered ineffective without resort to any legislative or judicial action. The community at large does not obey such provisions, and the administrators of such penal laws do not apply them. Long unenforced, these acts are in fact a dead letter. (p. 558 supra) 53.2 Despite the legislature's failure to repeal such acts two points can be preliminarily suggested. First, a very long continued and well settled failure to enforce a widely-ignored statute is as much a positive expression of public policy as would be its express legislative abrogation. Second, when the community acquiesced in an enactment's long continued administrative nullification, the provision disappears as law in any meaningful sense. (p. 560 supra) 53.3 Abrogation by desuetude, however, required greater proof than the state's mere failure to enforce the enactment for a protracted period. A tacit consent to the act's demise could not be realistically inferred from just any protracted failure to enforce it. Merely protracted customary failure to apply a statute is not enough. A statute would fall into desuetude only if the long failure to enforce it was in the face of a public disregard so prevalent and long established that one could deduce a custom of its non-observance. ( p. 564 supra) 53.4 Desuetude could abrogate enacted law only if the case of non-application of a written law during a long period of time had actually arisen and nevertheless the statute had not been applied. Non-application where no case had occurred for its application cannot be desuetude. ( p 567 supra) 53.5 Sutherland makes a review of the doctrine around the world. Amongst the German commentators there is a divergence of opinion as to the applicability of desuetude. French statutes can never be abrogated by protracted non-use and non-performance. Netherlands Code expressly rejects the doctrine so also many a modern codes including those of Spain and Italy.
53.6 Norwegian jurisprudence recognises that under some circumstances a protracted failure to enforce a statute may permanently nullify it. Scotland has long recognised the ability of its courts to declare a statute abrogated by non-enforcement. ( pp 567,568,570) 53.7 In England, 14th Century witnessed emergence of the doctrine but modern English courts unanimously agreed that a statute cannot be abrogated by a protracted failure to enforce it even in the face of its widespread and long established non-observance. (pp 573,575) 53.8 n America the Supreme Court has held this rule applicable to penal laws on the reasoning that the administration of such laws would violate equal protection ( p.577). However, in America desuetude requires two things: (i) a sufficiently wide spread violation of the statute, (ii) a period of absolute non-enforcement of such duration and feasibility as to clearly and fairly establish well settled and reliable nature of the administrative policy congruent with the relevant body politic. ( p.585) 53.9 Sutherland opines ( at page 609) that after Fourteenth Amendment there ought to be some express recognition of desuetude's abrogative effect on penal statutes.
53.10 At page 647 summing up the conclusion, Sutherland states :-
"The cases rejecting the notion of desuetude are correctly decided. The effect of doctrine is not to obviate the necessity for debate upon the wisdom of foolish statutes, but rather to transfer that debate from the legislature to the courts. The judiciary, however, is inherently limited as a creative agent. Judges simply "can't" weigh the evidence and judicially determine that a statute has been abrogated by a contrary custom, the facts involved are legislative in nature.
The unsettling effect of an assumption of power by the judiciary to declare a statute inoperative for nonuser would be widespread, the price would be too high to pay, particularly in view of the fact that executive abuse of desuetudenal legislation has been minimal, considering the pernicious potentialities. In many states a good portion of the penal law has never been invoked. If the courts adopted a pro-desuetude position, whatever deterrent effect these laws might carry would be jeopardized. There is also a danger that ordinances and statutes protecting minority rights may often be frustrated by apathy or even hostility on the part of some law enforcement officials. Most important, this form of negative law-making is highly unsatisfactory, for it creates perpetual uncertainty as to the rules that govern our conduct. The notice objections cut both ways: "If statutes can only be repealed by other statutes, everyone has notice of the rules of statute law by which he is bound. But, if statutes may be repealed by process of desuetude, no one can say with certainty whether or not desuetude has effectively set in until the matter has been judicially determined ex post facto."
54. It is thus clear that the doctrine of desuetude has its origin in Scottish law but it has been refused to be extended and applied in English law. Wherever applied round the world the doctrine has been held confined in its applicability to penal laws. There too not a mere passive overlooking but a widespread practise to the contrary running over a length of time shall have to be shown to exist. It has been frowned upon because of the risk involved inasmuch as to attract the applicability of the doctrine an enquiry is needed for recording a finding- was the law totally worn out ? The determination of the period of time which must be lost before a statute can be said to have grounded in the desuetude (wholly or partially) defies definition. Yet another difficulty is-would not the judiciary be treading into forbidden field of repealing an enactment- a field meant to be occupied by the legislature only? It would be recording a finding of implied repeal though the legislature has chosen not to record an express repeal or an implied repeal, by an appropriate legislative exercise. A legislative enactment is a certainty both on the question of applicability as also on the question of repeal. De hors the legislation how many findings and of what length in terms of time consisting of judicial pronouncements would be needed to get rid of the arms of legislation by resorting to desuetude?. How can a citizen arrange his affairs and catalogue his do's and don'ts by resorting to desuetude? According to Francis Bennion it is the penal laws whose rigour a subject may escape on the court arriving at a finding that though a penal law was enacted it had fallen into such practical obsolescence as to be held to have become a dead letter.
55. Two pronouncements of the Supreme Court other than the case of Municipal Corporation of City of Pune ( supra) have come to our notice and they may be referred.
56. In the State of Maharashtra Vs. Narayan Shamrao Puranik , a plea of statute having fallen into desuetude or become inoperative through obsolescence or by lapse of time came up for consideration. Their Lordships quoted with approval the following passage from R. Vs. London County Council, (1931) 2 KB 215, wherein Scrutton L.J. put the matter thus:
"The doctrine that, because a certain number of people do not like an Act and because a good many people disobey it, the Act is therefore "obsolescent" and no one need pay any attention to it, is very dangerous proposition to hold in any constitutional country. So long as an Act is on the statute book, the way to get rid of it is to repeal or alter it in Parliament, not for subordinate bodies, who are bound to obey the law, to take upon themselves to disobey an Act of Parliament."
56.1 On the theory of desuetude, their Lordships quoted Allen Law in the Making, 5th Edn, p 454 :-
"Age cannot wither an Act of Parliament and at no time, so far as I am aware, has it ever been admitted in our jurisprudence that a statute might become inoperative through obsolescence." ( p.52 ) 56.2 Their Lordships observed :-
"The learned author mentions that there was at one time a theory which, in the name of `non-observance' came very near to the doctrine of desuetude, that if a statute had been in existence for any considerable period without ever being put into operation, it may be of little or no effect." (p.52) 56.3. Vide para 15. their Lordships have held:
A statute can be abrogated only by express or implied repeal. It cannot fall into desuetude or become inoperative through obsolescence or by lapse of time. The rule concerning desuetude has always met with such general disfavour that it seems hardly profitable to discuss it further."
57. In The State of U.P. Vs. M/S Hindustan Aluminum Corporation, (vide para 65 at p.1473) their Lordships have referred to six modes of repeal mentioned by Craies on Statute Law, one of which is 'Obsolete'. These six were selected in England for inclusion in the Statute Law Revision Acts as having ceased to be in force otherwise then by express repeal or having by lapse of time otherwise become unnecessary. Their Lordships have then held : -
"Whether a piece of legislation has spent itself or exhausted in operation by the accomplishment of the purpose of which it was passed, or whether the state of things contemplated by the enactment has ceased to exist, are essentially questions of fact for the legislature to examine, and no vested right exists in a citizen to ask for a declaration that the law has been impliedly repealed on any such ground.
It has to be appreciated that the power to legislate is both positive in the sense of making a law, and negative in the sense of repealing a law or making it inoperative. In either case, it is a power of the Legislature, and should lie where it belongs. Any other view will be hazardous and may well be said to be an encroachment on the legislative field., in an extreme and clear case, no doubt an antiquated law may b said to have become obsolete the more so if it is a penal law and has become incapable of user by a drastic change in the circumstances. But the Judge of the change should be the Legislature and courts are not expected to undertake that duty unless that becomes unavoidable and the circumstances are so apparent as to lead to one and only one conclusion. This is equally so in regard to the delegated or subordinate legislation. (para 65-66)
58. It is unfortunate that the two decisions of the Supreme Court referred to hereinabove, namely State of Maharashtra vs. Narayan Shyamrao Puranik which is by a three Judges Bench and the State of U.P. Vs. Hindustan Aluminium Corporation which is by two Judges Bench were not placed before their Lordships deciding Municipal Corporation for City of Pune (supra). This decision is again by three Judges Bench. Being the latest law laid down by the Supreme Court would be the law of the land and binding on this court. Therein the dispute related to imposition of octroi duty by reference to certain notifications. Material was brought on record to show that certain notifications of 1918 were not implemented till date and in fact, what had been done was to the contrary and that too for a long period. Their Lordships held that the notifications of 1918 had stood repealed quasily. Vide paras 30 to 36 of the judgment their lordships have dealt with 'desuetude'. Having referred to Francis Bennion's Statutory Interpretation and Craies on Statute Law and several other authorities, their Lordships have (vide para 34) so stated the law :-
"Though in India the doctrine of desuetude does not appear to have been used so far to hold that any statute has stood repealed because of this process, we find no objection in principle to apply this doctrine to our statutes as well. This is for the reason that a citizen should know whether, despite a statute having been in disuse for long duration and instead a contrary practice being in use, he is still required to act as per the "dead letter". We would think it would advance the cause of justice to accept the application of doctrine of desuetude in our country also. Our soil is ready to accept this principle; indeed, there is need for its implantation because persons residing in free India, who have assured fundamental rights including what has been stated in Article 21, must be protected from their being, say, prosecuted and punished for violation of a new which has become `dead letter'. A new path is,therefore, required to be laid and trodden." (underlining by us)
59. The statement of law by their Lordships emphasises by reference to Article 21 of the Constitution the need to protect the citizens from being prosecuted and punished for violation of law, by applying doctrine of desuetude in our country.
60. Post Municipal Corporation for City of Pune's case, the only decision by the Supreme Court dealing with the doctrine of desuetude which has come to our notice is Cantonment Board Mhow Vs. MP SRTC . Their Lordships have held that to apply the principle of desuetude, it is necessary to establish that the statute in question has been in disuse for long and the contrary practice of some duration has evolved.
61. Though we have dealt with the opinion of eminent jurists available in their celebrated works and treatise, also referred to two decisions of the Supreme Court which have preceded the Municipal Corporation for City of Pune's case, that being the later case, under Article 141 of the Constitution the law laid down therein is binding on us. However, we are of the opinion that it does not have applicability to the facts of the case at hand and the effort of Shri Raja Ram Aggarwal, learned Sr Counsel for the petitioner to take assistance therefrom is misplaced. The authorities referred to by their Lordships in the course of their judgment themselves point out that to attract the applicability of the principle of desuetude, not only disuse of the statute but a contrary practice for long is essential. Their Lordships in the case before them found on the material on record that the 1918 notifications were not only not implemented till date ( at least upto the year 1963) but ,in fact, what was done was to the contrary and that too for a long period (see para 36). Therefore 1918 notifications were held to have stood repealed quasily.In the case before us, there are a few distinguishing features. Firstly, as we have already stated, the sales tax legislation under consideration is of the year 1975 i.e. of a recent origin and not an ancient one. Secondly, except in the case of M/S Amrit Agencies (CWP 530/97), there is no other material brought on record to show non-implementation of the Act to lottery tickets. Even in the case of M/S Amrit Agencies the order as to registration of the petitioner as dealer for lottery tickets suffers from silence merely. It does not expressly record that the Sales Tax Act was not applicable ( in the opinion of the Sales Tax Officer dealing with the petitioner) to lottery tickets. Thus, there is total lack of material before us enabling recording of a finding that what was being done was contrary to the provisions of the statute. Thirdly, the present one is a case where there was a legal quarrel over the juristic concept of the goods whether it would include lottery tickets and that was settled by the Supreme Court in the case of H. AnrajII. We are definitely and unhesitatingly of the opinion that desuetude shall have no application in such facts and circumstances of the case.
(VI) Impact of Contemporanea Expositio ?
62. Simply stated the meaning of the doctrine of contemporanea expositio is " the best exposition of a statute or any other document is that which it has received from contemporary authority".( See Maxwell on Interpretation of Statute,12th Edn., P.264).
63. Usage or practice developed under a statute is indicative of the meaning ascribed to its words by contemporary opinion and in case of ancient statute is an admissible external aid to its construction ( Principles of Statutory Interpretation by Justice G.P. Singh, 5th Edn 1993, P.
64. Subject to use made of contemporary official statements and statutory instruments the principle of contemporanea expositio is not applicable to a modern statute. Even if the persons who dealt with the act understood it in a particular manner, that does not prevent the court in giving to the Act its true construction. The doctrine "is confined to the construction of ambiguous language used in very old statutes where indeed the language itself have had a rather different meaning in those days". ( Principles of Statutory Interpretation, supra, pp 205-206).
65. In the case of Municipal Corporation for City of Pune ( supra) relied on by the counsel for the petitioners, their Lordships have held (vide para 24) :
"On the principle of contemporanea expositio, we have two obser vations to make. First, this principle is not decisive or controlling of the question of construction; it has only persuasive value. If occasion arises, such interpretation may be even disregarded and in a case of error court would without hesitation refuse to follow such construction. Secondly, as already stated reliance is being placed on the notings in the file, not to interpret the notifications in question, but to declare them as dead. This is not permissible."
66. Re: the principle of Contemporanea expositio, the features relevant for our purpose and deducible from the above said authoritie are - (i) the principle is applicable to ancient statutes; (ii) there must have been an ambiguity in the language or expression used, (iii) not a mere passive tolerance of a view of the law but a positive exposition should have remained prevalent; (iii) even if attracted, the principle is not decisive but has only a persuasive value. In the case at hand, assuming that everybody was under an impression that application of Delhi Sales Tax Act was not attracted to transactions of sale of lottery tickets, the principle of contemporanea expositio would not be attracted. The present one is not a case where the question was consciously deliberated upon and the authorities implementing the Act consciously took a decision and then expressed their opinion that a vague expression or ambiguity in Delhi Sales Tax Act was to be so interpreted as to exclude the sale of lottery tickets from within its ken. Secondly, the Delhi Sales Tax Act is not an ancient law; it is an enactment comparatively of modern origin. Moreover the authoritative pronouncements of their Lordships in H.Anraj-II is the law of the land and what has been held therein cannot be afforded to be bypassed by applying the principle of contemporanea expositio. As held by their Lordships of the Supreme Court in Suresh Chander Verma v. Chancellor Nagpur University, , the interpretation given by the Court in a judicial pronouncement declares the law as it stood from the very beginning as per its decision and that it was never the law otherwise. A judicial interpretation neither changes the law nor brings a law in existence on the date of pronouncement. We are therefore clearly of the opinion that lottery tickets cannot be held to be excluded from the definition of "goods" by relying on contemporanea expositio and thereby set at naught the law laid down by the Supreme Court in H.Anraj-II.
(VIII) Plea of mala fides re: (i) the impugned legislative amendment and (ii) the impugned notices u/s 23(6) DST Act :
67. The learned counsel for the petitioners in all the cases submitted generally that the impugned amendment is vitiated by mala fides. It was submitted that legislation is a colourable exercise of power and documentary evidence is available on record to show that the real object behind enacting the impugned amendment was to prohibit the lotteries by thrusting upon taxation at an exorbitantly high rate. It was submitted that documentary intrinsic evidence is available to show that the real purpose sought to be achieved behind enacting the impugned amendment was to prohibit the lottery trade but instead of banning the same, wherein the respondent may not succeed, the legislature has resorted to the device of subjecting the sale of lottery tickets to taxation at a prohibitive rate. The subsequent act of attempting at scuttling trade in lottery tickets by passing a prohibitory order under Section 144 Cr.P.C. which ultimately proved to be abortive is also a piece of evidence pointing out to the real purpose which was in view of the Government. It was submitted that this being the colourable exercise of legislative power, the impugned amendment deserves to be struck down on this ground. The learned counsel for the petitioner in CWP 530/97 in particular, made not only the above submission but also went on to contend that the impugned notice under section 23(6) of the Delhi Sales Tax Act too was vitiated by malafides as the real motive behind issuing the notice was to harass the lottery dealers so as to dissuade them from dealing in lottery tickets. The factual material on which the above said submission is based and the manner in which the submissions have been couched are briefly noticed in the succeeding paragraphs.
68. The statement of Objects and Reasons of Delhi Sales Tax (Second Amendment) Bill, 1994 reads as under :
"STATEMENT OF OBJECTS & REASONS.
Lotteries as an instrument of speculative investment have become a social evil. The Government is eager to ban Delhi Lotteries to curb this evil. Unless accompanied by a similar ban on all lotteries by the Central Govt such a measure by the Govt of Delhi may not achieve the desired objective.
However, imposition of 20% tax on sale of all lottery tickets can serve as a deterrent to this social evil and will curb, if not totally eliminate, lotteries. The Government may also gain some revenue as a result of this measure.
It is, therefore, proposed to impose Sales Tax @ 20% on sale of lottery tickets by amending the Delhi Sales Tax Act, 1975.
69. In the Financial Memorandum attached to the Bill, it was stated :
"For levy of tax on lotteries no extra financial expenditure would be involved and this can be done without spending any amount with the existing infrastructure available with the Department."
70. While presenting the budget proposals for 1994-95, the Hon'ble Finance Minister of the Govt of NCT of Delhi had stated on the floor of the House :
"Our Government is painfully conscious of the increase in prices caused by the policies of the Government of India. I,therefore, do not propose any new levy or increase in the rates of Sales Tax. However, to offset any loss in revenue due to concessions given, I am making an exception. Our Government is committed to deter people from taking to social evil of lottery which has ruined many families. I propose to tax sale of lotteries @20%, necessary legislation will be made in this regard.
71. The Bill was considered by Delhi Legislative Assembly on 25.8.94 when a motion was moved that the bill be circulated for the purpose of eliciting opinion thereon. The motion was adopted by the House. Notice was widely published in newspapers inviting public opinion. The public notices so issued under the signature of the Secretary to the Legislative Assembly stated, inter alia, that the bill provided for levy of Sales Tax @ 20 paise per rupee in the case of taxable turnover of lottery ticket; the tax having been proposed to discourage sale of lottery ticket in Delhi and to curb this social evil.
72. The gist of opinion on the Bill on the question of levy of sales tax tabled before the Legislative Assembly stated, inter alia, :
"As many as 46,504 signatories have stated that the sale of lottery should be banned as it is ruining the financial life of many families. These persons have not favoured the levy of Sales-tax but instead have demanded that the sale of lotteries should be banned in Delhi."
73. On 7.2.95, the Commissioner of Police Delhi issued a prohibitory order under Section 144 Cr.P.C. prohibiting " any person or persons from selling of lottery tickets, both of State and private and all activities connected to it." By way of preface it was stated in the prohibitory order :
"Whereas it appears to me that the lotteries both State and Private have found a favourite haven for massive sale of such tickets in the National Capital Territory of Delhi.
2. And Whereas an unhealthy competition between the lottery ticket sellers has developed.
3. And whereas such lotteries allure thousands of people of different walks of life particularly young, poor wage earners and working masses who engage themselves in such reckless gambling till they are finally exhausted.
4. And Whereas the addiction to lotteries does, seriously affect the living of the persons so addicted and thus, endangers human life and safety.
5. Whereas such lotteries encourage a spirit of propensity for making easy gain by lot of chance which lead to the loss of the hardened money of the undiscerning and improvident common man and thereby lower the standard of living and drive him into a chronic stage of indebtedness and eventually disrupt the peace."
74. As has already been noticed in the earlier part of the judgment, the above said prohibitory order was challenged in the High Court of Delhi and was struck down as it could not withstand the test of judicial scrutiny wherein it was found to be ultra vires the authority of the police commissioner to issue such prohibitory orders.
75. It was contended that what could not be done directly was sought to be achieved indirectly. The legislature could not have banned the sale of lottery tickets of other States in Delhi and therefore, the legislature resorted to levying of sales tax at a high rate of 20% so as to render the trade in lottery tickets non-lucrative and therefore, let it die its own death suffering from asphyxia. It was also submitted that the impugned notice under Section 23(6) of the Delhi Sales Tax Act calling upon the dealers to explain why proceedings be not taken for failure to file the return and secure registration for the period which had already elapsed amounted to malafide exercise of statutory power by the executive inasmuch as the intendment was to teach a lesson to the dealers by penalising them for having undertaken the trade in lottery tickets.
76. The contention cannot be accepted for more reasons than one. Firstly, it is a misnomer to call the impugned amendment a colourable exercise of power of legislation. "Colourable legislation is that where apparently a legislature in passing a statute purports to act within the limit of its powers yet in substance and in reality it transgresses those powers; the transgression being veiled by what appears on proper examination to be a mere pretense or disguise. A thing is colourable which is in appearance only and not in reality what it purports to be. We have already held that the impugned enactment is within the legislative competence of the Delhi Legislative Assembly and hence the question of its being colourable legislation does not arise. Secondly, we have grave doubts if a legislative enactment, otherwise within the legislative competence, can be subject to judicial review on the ground of motive behind passing the same. The Court is not concerned with the motives of Parliament ( M/S RMDC Mysore Pvt Ltd Vs. State of Mysore, ).
77. In R.S. Joshi etc. Vs. Ajit Mills Ltd, ),the Constitution Bench has held that if the legislature is competent to pass the particular law the motives which impel it to pass the law are really irrelevant. Malice or motive is besides the point and it is not permissible to suggest parliamentary incompetence on the score of malafides. So is the view taken by the Constitution Bench in B.R. Shankarnarayana and Others Vs State of Mysore & Ors, and also in Lalit Narain Mishra Institute of Economic Development and Social Change Patna Vs. State of Bihar, . Thirdly, there is nothing wrong in subjecting the lottery trade to heavy taxation with a view to achieving the object of curbing the same. In M/S Sat Pal & Co Vs. LT Governor, Delhi , special duty on import of country liquor in the Union Territory of Delhi was imposed which was challenged. Evidence was available to show that the bill was piloted by the Minister not only as a fiscal measure but also with a view to achieving the object of prohibition. Their Lordships held (vide para 18) that there was nothing wrong if the Act was intended to be a fiscal measure earning revenue to the State and also safeguarding the public health and public morality because of the liquor trade being instinct with injury to individual and community. In S. Kodar Vs. State of Karela, the Constitution Bench has approved the object of taxation being not only to raise revenue but also to regulate the economic life of the Society.
78. So far as, challenge to the notice under Section 23(6) of the DST Act on the ground of malafides is concerned it should also fail. The Constitutional authority of the impugned amendment having been upheld, the notice cannot be said to be vitiated by malafides in law inasmuch as the authority issuing the notice is merely exercising a power statutorily vested in it. There is no allegation of malice in fact in the sense of the authority issuing the notice being motivated by any malice or any ill-will towards the persons noticed. Whatever pleas that are available to the persons noticed are available still to be raised before the authority concerned. There is no reason to assume as to why such pleas would not be heard and disposed of as per law.
(VIII) If the tax @ 20% is arbitrary and discriminatory ?
79. The challenge on the ground of unreasonability of the impugned enactment because it seeks to tax sale of lottery tickets @ 20% should also fail. It cannot be denied that a tax law must withstand the scrutiny of Art 14 of the Constitution but it is equally true that the tax laws are aimed at dealing with the complex problems of infinite variety necessitating adjustment of several disparate elements. Protection of the equality clause does not predicate a mathematically precise or logically complete or symmetrical classification. The legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject different classes of property to tax in different ways and adopt different modes of assessment. A taxing statute is not, therefore exposed to attack on the ground of discrimination merely because different rates of taxation are prescribed for different categories of persons, transactions, occupations or objects. ( See. V. Venugopala Ravi Varma Rajah Vs. UOI , Kheyer Bari Tea Co Vs. State of Assam & Ors . Merely because the tax imposed is ( unreasonably) high or heavy, taxation statute is not rendered colourable, arbitrary or unreasonable.
(Raja Jagan Nath Baksh Singh Vs. State of U.P., ), Jagan Nath Vs. UOI , ITO Shillong Vs. NTR Rymbai AIR 1976 SC 670 (para 24), M/S Hoechest Pharmaceutical Vs. State of Bihar , Malwa Bus Servive Pvt Ltd Vs. State of Punjab, . The impugned amendment cannot be termed either arbitrary or unreasonable.
(IX) Whether this court's judgment should be given prospective operation merely ?
80. It was submitted on behalf of the petitiones and especially by Dr A.M.Singhvi, the learned Sr Adv that if this Court be inclined to hold that the lottery tickets are goods and hence liable to sales tax then the operation of the judgment be made prospective, otherwise it will be ruinous to the traders. Reference was made by Dr. Singhvi to Federation of Mining Assns of Rajasthan Vs. State of Rajasthan , Orissa Cement Ltd Vs. State of Orissa, . NDMC Vs. State of Punjab, . It was submitted that the rate of tax is very high- 7% prior to 2.1.1996 and 20% w.e.f. 2.1.1996. If only the dealers were taxed parri passu they would have passed on the burden of tax to the purchasers of lottery tickets which they have not done till date. This contention has again to be rejected for several reasons.
81.1 Firstly, a judgment of High Court is merely an exposition of law; it declares what law is and such exposition takes effect w.e.f. the date of legislation itself. In the garb of explaining the law, the High Court cannot usurp the function of legislature by saying that such act would apply only w.e.f. a particular date. However, such power does vest in the Supreme Court by virtue of Article 142, which supplements the existing law and confers vastly broad based power on the Supreme Court- undefined and uncatalogued- to meet myriad situations and do complete justice [See-Supreme Court Bar Association Vs. Union of India, Chanderkant Patil Vs. State DDA Vs. Skipper Construction Co (P) Ltd ] If the ends of justice so demand the Supreme Court may say that the law declared by it shall apply only prospectively or with effect from a particular date. Obviously such a jurisdiction does not vest in the High Court. Wherever their Lordships have felt inclined to direct that the law declared by the Supreme Court shall apply prospectively or from a particular date, their Lordships have been pleased to say so expressly.
81.2. Secondly, such a plea is not even available to be raised. With the pronouncement of H.Anraj II, it was the law of the land known to everybody that lottery tickets were goods liable to sales tax. The dealers in lottery tickets should have arranged their affairs accordingly. They cannot plead ignorance of law.
81.3. Last but not the least, a plea of unreasonability or hardship cannot be founded on the dealer being unable to pass on all the incidence of tax to its customers. We may quote at least three decided cases wherein the plea of a legislation being an unreasonable restriction was rejected by their Lordships of the Supreme Court merely because the dealer was disabled from passing on the incidence of sales tax to the purchasers. (M/S Kodar Vs. State of Karela, , M/S Hira Lal Rattan Lal Vs. STO , and M/S Krishnamoorthy & Co Vs. State of Madras )
82. To sum up, our findings on the various contentions raised before us ( referred to in para 18 above) are as under :
i) Lottery tickets are 'goods' within the meaning of Clause (g) of Section 2 of Delhi Sales Tax Act, 1975 and are susceptible to tax as 'any other goods' under clause (d) until 2.1.1995 and under clause (cc) of sub section (1) of S. 4 of the Delhi Sales Tax Act w.e.f. 2.1.1995.
ii) The levy of sales tax on sale of lottery tickets does not suffer from any infirmity for want of constitutional amendment akin to insertion of Clause 29(A) in Art 366 of the Constitution; also the levy cannot fail for want of any principle or machinery laid down either by the Act or rules framed thereunder enabling separate valuation of two components of the lottery tickets; no such separate valuation is called for.
iii) Under Art.239(AA) of the Constitution, the Legislative Assembly of NCT of Delhi is competent to insert by amendment Clause (cc) in DST Act, 1975. The amendment is intra vires the legislative authority of Delhi Legislative Assembly.
iv) There is no repugnancy between the provisions of Delhi Sales Tax (Second Amendment) Act, 1994 and the provisions of Delhi Sales Tax Act, 1975.
v) Levy of Sales Tax on lottery tickets cannot be defeated by reference to the doctrine of desuetude.
vi) 'Contemporanea expositio' rule of interpretation of statutes does not assist the petitioners in supporting the plea that the lottery tickets are not goods.
vii) The Delhi Sales Tax ( 2nd Amendment) Act, 1994 and the notices under section 23(6) of DST Act issued pursuant thereto are neither vitiated by malafides nor are void.
viii) The impugned levy of tax @ 20% on sale of lottery tickets is neither arbitrary nor discriminatory.
ix) The present judgment cannot be made to operate prospectively merely ( i.e. made effective from the date of its pronouncement.
83. In view of the above said findings all the petitions excepting CWP 1254/97 and 2106/97 are held liable to be dismissed in their entirety. As to the above said two petitions we would like to deal with them separately so as to highlight their peculiar facts and construct the marginal relief to which alone they are found entitled in our opinion.
84. In CWP 1254/97 ( Haryana State Lottery Vs. Govt of NCT of Delhi and Ors) though an interim order of stay was passed on 21.3.97, an order of assessment ( Annexure-P10) was passed that very day. For the period of assessment 1990-91, the sale of the petitioners has been taken at Rs. 850 crores as per best judgment assessment resulting into tax liability of Rs. 59,50,000/- calculated at 7% plus a penalty of Rs. 10 lakhs each under the CST Act and the DST Act for failure of the petitioner to obtain registration.
85. In CWP 2106/97, Rajasthan State Lotteries Deptt vs Govt of NCT of Delhi also an interim order was passed on 20.5.97 but the order of assessment was already framed on 31.3.97. This is again the best judgment assessment for failure of the dealer ( petitioner) to appear before the assessing authority. For the period 1990-91, the gross turn-over of the petitioner has been assessed at Rs. 43,11,09,874/ followed by levy of tax of Rs. 3,01,77,691/- calculated at 7% plus penalty of Rs. 5000/- under Section 23(6) of the DST Act.
86. In both these cases the counsel for the petitioners have submitted that adequate opportunity of hearing was not afforded to the petitioners. We do not wish to dwell much upon the details and validity of the contention so advanced. A singular aspect of the plea which only has appealed to us needs only to be noted. Right or wrong the two petitioners were in doubt if they would at all be liable to be taxed for the sale of lottery tickets. May be they were in error but we have no reason to doubt the bonafides of their impersonal advisory machinery- both being States. The two petitioners were under a reasonable apprehension that they may not be taxed for sale of lottery tickets. In one case, the date of passing of the interim order by the Division Bench of this Court synchronized with the date of passing of the assessment order by the assessing authority. In our opinion, it would meet the ends of justice if the two petitioners are afforded an opportunity of hearing before the assessing authority and make available such material to the assessing authority as would enable determination of the exact figures of sales instead of the same having been arrived at by resort to the best judgment assessment. To that limited extent the two petitions deserve to be allowed relief by affording each of them a hearing before the assessing authority.
87. For the foregoing reasons the CWPs 172/97, 460/97, 529/97, 530/97, 597/97, 790/97, 845/97, 1101/97, 1217/97, 1144/97, 1215/97, 1218/97, 1219/97, 1272/97 are dismissed. CWP 1254/97 and 2106/97 are partly allowed. The impugned orders of assessment marked as P-10 and P-9 respectively in the two petitions are hereby quashed and set aside. The petitioners are directed to appear before the STO, Ward 89, Lottery Cell. Bikrikar Bhawan, New Delhi or any other authority in whom the power of assessment vests as on the day, on 14-9-1998. The assessing authority shall afford each of the two petitioners an opportunity of hearing limited to the question of determining the quantum of taxable turnover and whether any penalty is liable to be imposed. Thereafter orders of assessment may be passed afresh. Looking to the purely legal issues arising for decision in all the petitions, the parties are left to bear the costs as incurred.