IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT :- THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN SATURDAY, THE 19TH NOVEMBER 2011 / 28TH KARTHIKA 1933 W.P.(C).No.31671 of 2007(U) ---------------------------------------- PETITIONER:- --------------------- M/S NATARAJAN AGENCY, 15/651, KUNNATHURMEDU, COIMBATORE MAIN ROAD, PALAKKAD-13, REPRESENTED BY ITS PROPRIETOR, G.NATARAJAN. BY ADV. SRI.A.KUMAR. RESPONDENTS:- ------------------------ 1. THE COMMERCIAL TAX OFFICER, SECOND CIRCLE, COMMERCIAL TAXES, PALAKKAD. 2. THE COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- APPENDIX PETITIONER'S EXHIBITS:- ------------------------------------- EXT.P1 - TRUE COPY OF LIST OF BANK GUARANTEES. EXT.P2 - TRUE COPY OF JUDGMENT OF THIS HON'BLE COURT IN W.P.(C).NO.26214 OF 2001 DATED 6.2.2007. EXT.P3 - TRUE COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2001-02 DATED 13.8.2004. EXT.P3(a) - TRUE COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2002-2003 DT.13.8.2004. EXT.P4 - TRUE COPY OF THE ORDER PASSED BY THE FIRST RESPONDENT DATED 7.7.2007. RESPONDENTS' EXHIBITS:- --------------------------------------- NIL. - true copy - K.Vinod Chandran, J. ---------------------------------------- W.P.(C).No.31671 of 2007-U ---------------------------------------- Dated this, the 19th day of November, 2011 JUDGMENT The petitioner, who was engaged in the distribution of lotteries, was an assessee in the rolls of the first respondent. The instant writ petition was filed challenging Exhibit P4 order on an application filed by the petitioner for release of bank guarantee. The first respondent passed Exhibit P4 order on the premise that no demands were made after the judgment of the Supreme Court in Sunrise Associates v. Government of NCT of Delhi, (2006) 145 STC 576 (SC), and that the bank guarantees given for the earlier periods cannot be returned and the State is legally entitled to encash the sum assured in the bank guarantee. 2. The learned counsel for the petitioner points out that the Hon'ble Supreme Court in Sunrise Associates case (supra) held that “lottery” is not “goods” as it is an actionable claim and hence no sales tax can be levied on the sale of lotteries; especially in the context of Section 5BA of the KGST Act being declared unconstitutional. It is also specifically pointed out that the Supreme Court had made the decision prospective in view of the fact that the earlier decision in H.Anraj v. Government of Tamil Nadu, (1986) 1 SCC 414, was holding the field for a long period and the States had been collecting tax on the sale of lotteries; which, if ordered to be refunded, WP(C).No.31671 of 2007-U - 2 - would cause prejudice to the State. The learned counsel also invites my attention to the decision of the Supreme Court in State of U.P. v. Sugal & Damini, (2007) 8 VST 469 (SC), which considered the effect of “prospective overruling”. Their Lordships in the said decision held:- “Where a provision of a taxing statute is declared ultra vires but the Supreme Court only prospectively overrules, then neither the State is liable to refund tax already collected thereunder prior to the judgment, nor entitled to collect further tax for the period prior to the date of the judgment”. In view of the clear declaration of the Supreme Court in Sunrise Associates case (supra) as also the meaning placed on the words “prospective overruling”, I am of the opinion that the State cannot encash any bank guarantee after the judgment of the Supreme Court in Sunrise Associates case; which has been collected as security towards licence fee or penalty and furnished by the petitioner in compliance with the interim directions issued by this Court or otherwise. In the circumstances, the bank guarantees furnished by the petitioner and remaining not encashed by the State shall be cancelled and returned to the petitioner within a period of three months from the date of receipt of a copy of this judgment. The writ petition is disposed of as above. Sd/- K.Vinod Chandran, Judge. vku/-