TMI Blog2018 (4) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the Lotteries Regulation. The petitioners pointed out the practical difficulty in complying Rule 56(20A)(II) within 48 hours. Explanation as above, certainly, is meritorious. The Court cannot brush aside such an explanation. How far an action can be initiated for non compliance is a vexing question to be decided by this Court. The petitioners should not be prevented from the sale of lottery for non compliance of Rules 56(19) and 56(20A) of the Kerala State GST Rules, in respect of which they have explained their practical difficulty in complying the same. In respect of the other Rules, the petitioners having expressed their willingness to comply the same in the writ petition itself, I need not advert to the consequence and non compliance of such Rules. Rule 56(20A)(iii)(d) of the Kerala State GST Rules is struck down holding that the State has no legislative competence to formulate such Rule. - WP(C).No. 27158 of 2017 - - - Dated:- 13-4-2018 - A. MUHAMED MUSTAQUE, J. Petitioner: By Sri. N. Venkat Raman, Senior Advocate. Advs. Sri. A. Kumar, Sri. P.J. Anil Kumar, Smt. Mini, Sri. P.S. Sree Prasad. Respondent: R1 to R10 by Sri. Pallav Shishodia, Senior Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as names of selling agents/distributor, name of the Lottery Scheme, number of tickets printed, gross value of tickets etc. However, this notification was superseded by another notification dated 24.7.2017 and published, which is evident from Ext.P14. This was owing to the reason that notification dated 13.7.2017 carried a mistake as it was mentioned that the notification was forwarded to West Bengal instead of Kerala. According to the petitioners, the lotteries were also printed and supplied by State of Mizoram after complying with the security norms and the Government of Mizoram made arrangements to deliver the tickets to the petitioners in the State. It is specifically pleaded that Ext.P14 notification dated 24.7.2017 was also addressed to the State of Kerala. 4. The first petitioner also obtained GST Registration Certificate from the Union Government and the Government of Kerala. An officer of Mizoram Government delivered the tickets to the petitioners on 26.7.2017. This was accompanied by documents for movement of goods. These tickets were for the period of draw to be held from 7.8.2017 to 13.8.2017. 5. It is to be noted that under Rule 3 of Lotteries (Regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice issued by the Deputy Commissioner directing them to comply with the matters mentioned therein. This notice is Ext.P26. The dispute in this writ petition essentially rests on the validity of the rules and the power exercised by the Deputy Commissioner of Tax Department relatable to the Rules. 9. Apart from the challenge as above, the petitioners also have raised a contention that the officials under the Kerala State GST Act are not entitled to invoke the provisions of the Kerala State GST Act against the petitioners for sale of lotteries as the sale of lotteries is governed by Integrated Goods and Service Tax Act, 2017 (IGST Act) since the sale of lotteries by the supplier and the place of supply are in two different States. Therefore, it is argued that the State officials cannot take any action against the petitioners. 10. The State Government defended their action pointing out the irregularities detected. The State, particularly, pointed out that the notification was issued only on 24.7.2017 and it was published on 27.7.2017 and tickets were delivered to the distributor on 26.7.2017, to demonstrate illegality. It was also pointed out that the Mizoram State, by notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ickets received from the organizing State for sale; (d) The tickets issued for sale; (e) The tickets sold, (f) Tickets which remain unsold at the time of the draw; (g) Details of the prize winning tickets along with the amount of prize or prizes prizes in respect of each draw, name and address of winners; (h) Proof of despatch and receipt of unsold tickets by the organizing State, in case the licensee is a distributor or selling agent; (i) proof of payment of sale proceeds of the lottery to the organizing State or deposit in the Public Ledger Account of the organizing State in case the licensee is a distributor of selling agent; and the same shall be produced for verification by any authority under this Ordinance. 13. Rule 56(20A) reads as follows: Rule 56(2OA): Every agent or distributor selling lottery tickets or a selling agent of lotteries authorised by the State and who is registered under the Ordinance, shall file the information return in Annexure before the Deputy Commissioner of State Tax, Thiruvananthapuram, Deputy Commissioner of State Tax, Ernakulam or Deputy Commissioner of State Tax, Palakkad, as the case may be, regarding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose under the Kerala State GST Act. Therefore, these rules have been included as a colourable exercise of power and beyond the scope of Article 246-A of the Constitution. 15. The Government defended these Rules by contending that these rules were made for proper assessment of levy of GST. It was submitted that for fair and complete assessment of GST, these rules are necessary. 16. On application of IGST, this Court is called upon to decide whether there is an infraction on the right of the petitioners to carryout legitimate business in lottery of the State of Mizoram in the context of Ext.P26 issued by the Deputy Commissioner of State GST Department, Kerala. Though various arguments have been raised as to the power of the State Officials to proceed against the petitioners under the Kerala State GST Act, this Court cannot decide such issues without the same being considered by a primary authority which issued such notices. Merely because this court was addressed and called upon to decide certain issues, which primarily need to be considered by a primary authority, as the court's jurisdiction on such matters can be exercised only by judicial review, the court must resist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned counsel particularly referred Section 6(a) of the General Clauses Act and argued that repeal does not revive anything not in force or existing at the time of appeal and therefore, what was repealed on 5.9.2017 cannot be resurrected by another notification 28.11.2017. 19. It is to be noted that this court is not entering into validity of the notification issued but on the other hand deciding an issue based on the right of petitioners which is threatened by Ext.P26. 20. The Senior Counsel appearing for Mizoram Government reiterated that the Mizoram Government want to sell the lotteries in this State. The Mizoram Government also issued notification cancelling earlier notification. 21. The argument raised by the learned Senior Counsel for the Mizoram Government that what was repealed cannot be revived by cancelling earlier notification withdrawing the introduction of lottery in the State will not hold good. If the Government is having the power to withdraw the notification, it also has the power to cancel such decision. That power is traceable under Section 21 of the General Clauses Act, 1897. Further, it is also open for the Mizoram Government to issue a fresh not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred under Section 7 of Lotteries (Regulation) Act therefore, can be exercised only in accordance with the provisions under the Lotteries (Regulation) Act and the State has no power to legislate on such subject on which the Parliament alone has the power to legislate. It is pointed out that self assumed satisfaction of violations by the officials of the Department of Tax can in no way result in initiating action against the petitioners under the Lotteries (Regulation) Act. 24. It is to be noted that Rule 56(20A)(d) refers to satisfaction entered by the authority as to the violations of the Lotteries (Regulation) Act. This Court is of the view that the above Rule has to be struck down as the State has no power to constitute one more authority under the Kerala State GST Rules to enter satisfaction as to the violations of the lottery. The Indian Constitution do not recognise police power as such. Therefore, the police power depend upon source of power to legislate. In Synthetics Chemicals Ltd. v. State of U.P. And others [AIR 1990 SC 1927] the Hon'ble Supreme Court categorically held that concept of police power was not accepted in India as an independent power but was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners apprehend the registration granted to them under the Kerala State GST Act will be cancelled, if the petitioners fail to comply with such demand as made in Ext.P6. It is particularly to be noted that the petitioners were prevented from proceeding further until compliance as demanded in Ext.P26 is ensured. In regard to the first direction that the petitioners should prove that lottery to be held is in compliance with Section 3 4 of the Lotteries (Regulation) Act is beyond the authority of the Deputy Commissioner. The State is apparently making such demand based on its past experience with the State of Sikkim Lottery. The State highlighted that Sikkim Lottery showed the sale of 96 crores in a year as against actual sale of 3500 crores. It appears that the State Government moved the Central Government and the Central Government passed an order under Section 6 of Lotteries (Regulation) Act prohibiting such lottery. In a federal set up, one State cannot frown upon and decide the legitimacy of lottery of other State. Federalism works on mutual co-operation. If there is any violation of Lotteries (Regulation) Act, the State in fact, is raising a complaint against other St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners point out that in the annexure to sub rule 20A of Rule 56, they have been asked to maintain records regarding percentage of distribution of face value for price and commission, tax administration expenses etc. 28. Chapter VII of the Kerala State GST Rules only refers about maintenance of accounts by registered persons. The very object of such records is to complete assessment. The petitioners can highlight practical difficulties in keeping such records. For example, the petitioners highlight their grievances in relation to sub rule 19(g) (i) to Rule 56. The petitioners gave explanation as follows in regard to their inability to maintain records for such requirement: (g) details of the prize winning tickets along with the amount of prize or prizes in respect of each draw, name and address of winners; These details would be maintained by the organizing state as the claims upto ₹ 10000 are lodged by the winners directly with the state and the final count of all the prizes would be available only with the organizing state. So also, the details of the name and address of the winners over ₹ 10000 are only with the organizing stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vexing question to be decided by this Court. The petitioners also challenge Annexure under sub rule 20A of Rule 56 to the extend the petitioners were directed to maintain records showing the percentage of distribution of face value for price and commission, tax, administration expenses etc. 31. Relevant Rules are challenged under the threatened action initiated under Ext.P26. The power is conferred on officials to seize goods articles if evasion of tax is suspected. The exercise of this power is a point to be considered as a consequence of non compliance. This Court, in fact, is considering this issue when the petitioners' activities have come to a halt consequent upon Ext.P26. The State also insisted that the petitioners need to maintain such records for carrying out the activities of sale of lotteries. In those circumstances, this Court has to decide the scope of interference for non compliance of maintaining records. Non compliance would not amount to contravention unless there is breach. Every non compliance is not a breach. There must be a breach that is to say, violation of legal obligation. If rules itself are determinative of such violation, no doubt an action c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying the same. In respect of the other Rules, the petitioners having expressed their willingness to comply the same in the writ petition itself, I need not advert to the consequence and non compliance of such Rules. 33. Point No.V.-- On validity of Ext.P26. In the light of the discussions as above, Ext.P26 will have to be interfered with. Compliance and non compliance of Rules 56(19) and 56(20A) would depend upon the satisfaction to be arrived in appropriate enquiry in assessment or in other proceedings. 34. Therefore, the writ petition is disposed with the following directions: I. Rule 56(20A)(iii)(d) of the Kerala State GST Rules is struck down holding that the State has no legislative competence to formulate such Rule. (II) The challenge to the vires of other Rules is negatived. (III) It is declared that the officials under the Tax Department have no power to enter into satisfaction as to whether the lottery was conducted in compliance with the Lotteries (Regulation) Act or not. (IV) Ext.P26 is quashed to the extent forbearing the petitioners from proceeding further with the sale of lottery. (V) If the petitioners raise an objection before the D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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