The Kerala High Court in the case of M/s. Teesta Distributors & Anr. vs. State of Kerala & Ors., on Friday invalidated Rule 56(20A) (iii)(d) of Kerala State GST Rules which allowed tax officers to decide whether the lottery was being conducted as per the Lotteries (Regulation) Act,1998 and the rules made thereunder.
The other rules namely-Rules 56(19) and some sub-rules of Rule 56 (20A), demanded the agents and distributors of other State lotteries to furnish details of the lottery sold, including the identities of the winners. These rules also required the distributors to furnish the details of percentage of commission they received, details of unsold tickets within 48 hours. Challenge made to these rules were dismissed by the court as it found that the compliance and non-compliance of such Rules would depend upon the satisfaction to be arrived in appropriate enquiry in assessment or in other proceedings. The Court was of the opinion that if the explanation provided was reasonable then there would not be any violation of the rules, but an opportunity should be given by appropriate enquiry.
The Single Bench of Justice A. Muhammed Mustaque held that the Government of Kerala lacked the legislative competence to make such rules. The subject of the lottery is dealt in item number 40 of the Union List under the Seventh Schedule of the Constitution of India. Since it falls under the Union List, only the Parliament has the sole authority to make laws/rules with respect to lotteries. The Court further observed that in a federal set up, one State cannot frown upon and decide the legitimacy of the lottery of other State and that The State Government or its officials are not the authority to decide that lottery conducted by other State is not in compliance with the Lotteries (Regulation) Act. The Government of Kerala cannot delegate any power to any authority under the Kerala State GST Rules to adjudicate the violations of Lotteries (Regulation) Act, 1998.
High Court was considering a Writ petition filed by agents of Mizoram Lotteries challenging the provision of the rules. Last year, the Government of Mizoram tried to sell lottery tickets in Kerala, but Kerala Government accused Mizoram of violating the Lotteries (Regulation) Act,1988 and directed to suspend the selling activities.
The ruling by the High Court states that police is incapable of receiving complaints of wrongdoings based on the information furnished solely by tax officials. Powers of Police in this matter are confined to the Lotteries (Regulation) Act, 1998.
“The State’s competency to legislate on the subject under the head ‘Betting and Gambling’ in Entry 34 of List II, Schedule VII of the Constitution cannot empower the police officials or the tax officials to declare the lottery organized by the State of Mizoram as illegal and to interfere with such business of the petitioners.” said the court.
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