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R.H. Zaidi, J.—In these petitions filed under Article 226 of the Constitution of India common questions of law and fact are involved, the reliefs claimed are also identical, they were, therefore, heard together and are being disposed of finally by this common judgment. The Writ Petition No. 3062 (M/B) of 1996 Sugal & Damani v. State of U.P. and others shall be the leading case.
Petitioners, by means of these petitions, pray for appropriate writ, order or direction declaring clause (c1) of subsection (1) of Section 3A of the U.P. Trade Tax Act, 1948 hereinafter referred to as �the Act� inserted by U.P. Act. no. 31 of 1995, as ultra vires. Prayers for a writ, order or direction in the nature of mandamus not to give effect to the notification bearing no. TT22072/II9 (341) 93U.P. Act1548Order96 dated 29.8.1996 and to quash the same have also been made.
Relevant facts of the case giving rise to the present petition are that before enforcement of U.P. Amendment Act No. 31 of 1995, there was no sales tax under the U.P. Sales Tax Act on the sale of lottery tickets. By U.P. Amendment Act No. 31 of 1995, clause (c1) was inserted in subsection (1) of Section 3A of the Act, on 28.9.1994. which runs as follows:
�3A, Rate of tax (1): Except as provided in Section 3D, the tax payable by a declare under this act shall be levied;
X X X
�(C1) On the turnover of lottery tickets as such point and at such rate not exceeding twenty percent as the State Government may, by notification declare;
X X X
�(2) Every notification made under this section shall as soon as may be after it is made be laid before each house of the State legislature, while it is in session, for a total period of not less than one successive sessions, and shall, unless some later date is appointed, take effect from the date of its publication in the Gazette.�
The aforesaid amendment was made on 29th August, 1994 but was not given effect to by the then State Government till 28th August 1996. It has been stated that during the President''s rule, the State Government issued a notification no. TT22072II dated 29.8.1996 declaring that sale of lottery ticket by manufacturer or importer shall be liable to tax @ 20 percent with effect from the date of its publication in U.P. Gazette. The said notification reads as under:
�In exercise of powers under clause (c1) of subsection (1) of Section 3A of U.P. Trade Tax Act, 1948 (U.P. Act No. XV of 1948), the Government is pleased to declare that the sale of lottery tickets with effect from the date of publication of the notification in the gazette in Uttar Pradesh by the manufacturer or importer shall be liable to tax @ 20 percent.�
After enforcement of the aforesaid notification, the sale of lottery tickets became taxable under U.P. Trade Tax Act @ 20 percent, thereafter the petitioner approached this Court and filed the present petition for the above mentioned reliefs. Other petitions connected with this petition, were also filed thereafter for the same reliefs. Petitioner M/s Sugal and Damani are the sole distributors of the State Lotteries of the State of Punjab and Himachal Pradesh, have been carrying on the said business for more than 20 years. They have been carrying on the business in State organised lotteries and not authorised lotteries. They sell, in turn, lotteries to the wholesalers/stockiest who sell to the retailers in their turn. This petition and connections have been filed contending that introduction of clause (c1) in subsection (1) of Section 3A of the Act was void as it delegates essential legislative powers to the State Government to provide and fix percentage of tax from 1 percent to 20 percent without providing any guideline for the same. The power being unguided and unbridled, was illegal and invalied. Reliance has been placed in support of the said submission upon the decision of Apex Court in Rajnarain v. Chairman, Patna Administration reported in AIR 1954 SC 569, M/s. Devidas Gopalkrishan v. State of Punjab reported in AIR 1967 SC 1895, Gwalior Rayons Mills Manufacturing Company Limited v. Assistant Commissioner of Sales Tax, AIR 1974 SC 1660 and ITC Bhadrachalan Paper Board and another v. Mandal Revenue Officer (1996) 6 SCC 634. It has also been alleged that question of fixation of percentage was not concluded by the decision by the Apex Court in H. Anraj''s case reported in AIR 1986 SC 63. According to the petitioner, the impugned amendment and the notifications are null and void, they are therefore liable to be declared as ultra vires the Constitution and are liable to be quashed.
It has also been stated that the notification dated 29.8.1996 was not laid before the two houses of state legislature as provided under Section 3A (2), the same was, therefore, invalid and unenforceable in law. Further, the lottery tickets are not goods within the meaning of the term used under the Act and the rules framed thereunder, therefore, they were not liable to be taxed and alternatively, even if right to participate in draw, is treated as goods, there was no sale of the same, therefore, no tax could be levied upon the same. It has also been asserted that under the Act or the rules, no machinery to enable separation of two components of lottery tickets, i.e., right to participate in the draw and to claim prize, which is actionable claim, has been provided and entire value of the lottery ticket cannot be treated as goods. It has also been pleaded that in any case, prize money has to be paid to the participants (winners) therefore, same cannot be included in the goods and was not liable to trade tax. Legal pleas like arbitrary and excessive taxation, and violation of Article 14, 46, 265, 301, 304A of the Constitution have also been taken.
On behalf of the respondents, a counter affidavit has been filed controverting the facts stated in the writ petition and asserting that the impugned amendment of Section 3A of the Act and the notification dated 28th August, 1996 are quite valid. They did not suffer from vice of excessive delegation and were enforceable in law. The questions raised by the petitioners stand decided and concluded by the decision of the Apex Court in Maha Beech Trading Company v. Union Territory of Pondicherry (1996) 3 SCC 741, Sitaram Bishambar Dayal v. State of U.P. AIR 1972 SC 1168.
It may be noted that after hearing the learned counsel for the parties at admission stage, following interim order was passed by a Division Bench of this Court :
�A submission has been made on behalf of the petitioner that the opposite party on. 2 may be required to decide the question in what manner the assessment and apportionment may be made by the assessing authorities in view of the decision of Hon''ble Supreme Court reported in 1986 (1) SCC414 H. Anraj v. State of Tamilnadu and the case reported in 1986 STC 450 Nimal Agency v. Commercial Tax Officer, Bangalore decided by Karnataka High Court. The opposite party shall consider this aspect of the matter also and in case, opposite party no.2 finds that the matteris covered by Section 35, it may take a decision in the matter after hearing the parties in the meantime.
List on 26.11.1996�.
Dt. 15.10.1996
In the counter affidavit it has been stated that the application filed in compliance of the aforesaid order was dismissed as not maintainable by the Addional Commissioner, Trade Tax, U.P. Headquarter, Lucknow by his judgment and order dated 30.11.1996.
After hearing the learned counsel for the parties, on 10.12.1996 the following order was passed by this Court:
� Perused our earlier order dated 15.10.1996. According to the petitioner, sale of lottery tickets involves the transfer of two kind of things, first one is the right in praesenti to participate in the lottery, which has been held to be transfer of goods and the second is the actionable claim. Reliance has been placed upon a decision of the Hon''ble Supreme Court in the case of H. Anraj v. Government of Tamil Nadu, reported in (1986) 1SCC 414. In the above noted decision of the Hon''ble Supreme Court, it was clearly laid down that only part of the transaction in sale of lottery tickets amounts to sale of goods. The submission, therefore, is that tax could not be levied on the total amount of turn over on the face value of the tickets. Reliance has also been placed upon a decision, reported in (1992) 86 STC 450, Nirmal Agency v. Commercial Tax Officer. It is a Division Bench decision of Karnataka High Court, in which in the light of the judgment of the Hon''ble Supreme Court, the assessment order was set aside since split of the sale price of the lottery tickets was not done; the matter was remanded for making a fresh assessment having regard to the decision rendered by the Court.
While dealing with the matter on one of the last dates, i.e. on 15.10.1996, the Trade Tax Commissioner, U.P. was required to consider the matter under Section 35 of the U.P. Trade Tax Act and take a decision, for the guidance of the assessing authorities. The authority concerned, after hearing the parties held that Section 35 of the U.P. Trade Tax Act would not be applicable since the petitioners were not the dealers. It would have been better if the matter had been dealt with on merits and an appropriate decision had been taken in respect of the manner in which tax was to be levied.
Learned counsel appearing for the State submits that the tax will be leviable on the whole amount of turn over taking into account the facts value of the tickets. We, however, feel prima facie that this would be contrary to the decision of the Hon''ble Supreme Court in the case of H. Anraj (Supra). The apportunity provided to the Head of the Department to take a decision in the matter for the guidance of all the assessing authorities has not been availed of. We, therefore, provide that subject to the decision of the writ petition, the opposite parties shall make assessment on the turn over of the sale of lottery tickets in the light of the decision of the Hon''ble Supreme Court aforesaid, splitting the amount which relates to the right in praesenti for participation in the lotteries and not on the part which relates to transfer of actionable claim, which is also clearly excluded from the definition of the word ''goods'' under clause (d) of Section 2 of the U.P. Trade Tax Act. The parties shall abide by the decision finally.�
In the supplementary affidavit, it has been stated that against the order dated 10.12.1996 referred to above, special leave petition no. 5100 of 1997 was filed in the Supreme Court which was disposed by judgment and order dated 18.3.1997 which is quoted below:
� Upon hearing counsel the Court made the following
ORDER
Learned counsel for the petitioner State submits that in the impugned order, the High Court has rightly referred to the decision of this court in H. Anraj etc. v. Government of Tamil Nadu 1986 (1) SCC 116, but its final direction of splitting the amount and making the same final between the parties is in conflict with the decision in H. Anraj (Supra) itself. In our opionion, it would not be appropriate for us to consider and decide this submission for the reason that it would require consideration of the High Court itself at the final hearing of the writ petition. That being so the direction of the High Court contained in the impugned order dated 10.12.1996, even though not happily worded, has to be so understood. It is made clear that the observations contained in the impugned order not to be treated as final opinion of the High Court or this point and it would be open to the parties to argue the point at the final hearing before the assessing authority on the basis of the decision of this court in H. Anraj; and that the High Court''s order would not be construed as precluding them from doing so. The impugned order of the High Court has to be so understood not merely in the High Court but also by the assessing authority and any other authority concerned while deciding the question covered by the decision of this court in H. Anraj.
The Special Leave Petition is disposed of in these terms.�
On record there is nothing to indicate that after the judgment and order dated 18.3.1997 petitioner or any one of them approached the assessing authority or assessing authority passed any order. However, in view of the order passed by the Supreme Court these petitions are to be decided by this Court on merits.
We have heard Mr. Raja Ram Agrawal, senior Advocate assisted by Mr. S.M.K. Chaudhary, Advocate for the petitioners and Mr. R.P. Goel, Learned Advocate General of Uttar Pradesh assisted by Learned Standing Counsel.
Mr. Raja Ram Agrawal vehemently urged that clause (c1), added in section 3A of the Act by U.P. Act No. 31 of 1995 was invalid as it suffered from the vice of excessive delegation of legislative power to the executive, as the legislature did not provide any guideline, to fix percentage of tax to be levied. According to him, there was a wide gap in one percent to twenty percent, power to fix the percentage was also unguided and unbridled, therefore, the said provision was ultra vires of the Constitution. It was urged that fixation of percentage was not concluded by the decision of H. Anraj''s case reported in AIR 1986 SC 63. It was also urged that actionable claim being non goods, under Indian Sales of Goods Act, 1930 and the U.P. Trade Tax Act, 1948, cannot be taxed as goods and that any attempt to tax an actionable claim shall be beyond legislative competence of the State legislature and the levy would be ultra vires. According to him, Section 2(d) of the U.P. Trade Tax Act, 1948 excludes actionable claim from the definition of goods. In support of his submission, reliance has been placed upon the decision in Nirmal Agency v. Commercial Tax Officer, Bangalore and another 1992 (86)STC 450, a Division Bench decision of High Court of Karnataka. It was also urged that the notification issued by the State Government under Section 3A, clause (c1) having not been placed before the two houses of State legislature, was ineffective and illegal, the same could not be enforced by the respondents and that in any case, prize money has to be paid back to the participants a credit for the same has to be given by the respondents and in view of the provisions of of Rule 44 (b) of the rules framed under the Act.
On the other hand, learned Advocate General vehemently urged that the principle of delegation of essential legislative function has got no application to the facts of the present case. According to him, the policy of the State legislature is clear as the Act itself provides for the levy of trade tax at a rate not exceeding 20 percent on the sale of lottery tickets. Since the legislature itself has provided maximum rate of trade tax which can be imposed on the sale of lottery tickets within the State of U.P., the legislature has enunciated its policy in clear term and no discretion is left with the executive. The legislature itself having fixed the maximum limit of 20 percent, no further guideline was required to be prescribed. In support of the submission, he has placed reliance upon the decision in Sitaram Bishambar Dayal v. State of U.P. AIR 1972 SC 1168. Reliance has also been placed upon the decision in Hira lal Ratanlal v. Sales Tax Officer reported in AIR 1973 SC 1034. In the said case, Apex Court held that it is not possible for the State legislature to select goods which have to be subject to single point of purchase for sales and the details have to be left to the executive. Reference was also made to Maha Beech Trading Company v. Union Territory of Pondicherry reported in (1996) 3 SCC 741 as well as to the decision in Khoday distillery v. State of Karnataka reported in (1996) 10 SCC 304.
The learned counsel for the petitioner in rejoinder, submitted that actually the State Government wanted to stop the sale of lottery tickets of other States within the State of Uttar Pradesh which was legally not permissible. The rate of tax was not only exorbitant and arbitrary but void and nullity as unfettered discretion vested with the executive, without any check and safeguard to impose tex @ 1 percent to 20 percent which amounted to the legislature abdicating its essential legislative function, hence clause (c1) of subsection (1) of Section 3A of the Act was bad, void and ultra vires of the Constitution.
We have considered rival submissions made by the learned counsel for the parties and also carefully perused the records.
During the period when notification was issued, there was Presidential Rule in the State of U.P. Clause (c1) of subsection (1) of Section 3A, of U.P. Act No. 31 of 1995 which provided for tax on lottery not exceeding 20% as State Government by notification declares. Percentage of tax was to be decided by the State Government taking into consideration relevant facts and circumstances. In the case of Sitaram Bishambhar Dayal (Supra) it was ruled by the Apex Court that it is open to the legislature to delegate power of fixing the rate of purchase or sales tax if the legislature prescribes a reasonable upper limit. The Legislature cannot be burdened with prescribing varying rate of tax at different intervals. By prescribing a maximum rate of tax, the legislature indicates its policy and lays down the guidelines. As such there is no delegation of essential legislative function if the legislature prescribes a maximum rate it cannot be said that an unfettered discretion is vested in the executive. We hold that if the legislature prescribes a maximum limit of tax, it indicates its policy and gives a guidance of its intent to the executive and we reject the challenge to the validity of clause (c1) of subsecton (1) of Section 3A of the Act, inserted by U.P. Act No. 31 of 1995 on this ground.
The second question raised by the learned counsel for the petitioner is that lottery tickets are not goods as lottery tickets is only a from of token of the right to participate in a common pool, it is just a mode of evidence to prove the right of the holder. It was contended that a chance to obtain a prize cannot, in any sense of the word, be considered as property. It was argued that the chance to obtain a prize can at best be considered an actionable claim, a chose in action, which is only upon the chance fructifying into a prize that it becomes a chose in possession. At the stage at which it is chose in action it cannot be considered as property. According to the learned Advocate General, this question stands concluded by the decision in Government of Tamil Nadu v. H.Anraj (AIR 1986 SC 63). In the said case it was ruled by the Apex Court as under :
� The issue before us is whether a sale of a lottery ticket, which unquestionably involves the sale of a chance to win a prize is something more and comprises transfer of property in goods and therefore a sale of goods or not, so that a tax could be levied thereon under Entry 54 List II and in order to decide this question the true concepts of ''goods'', ''sale'' and ''movable property'' and immovable property'' would be most material.�
While examining the phrase ''goods'' the Supreme Court has examined the expression ''actionable claim''. In para 23 (AIR) while referring the Section 3 of the Transfer of the Property Act and analyses in Mulla''s Transfer of Property act (at page 805 of the 6the Edition) it noted that ''actionable claim'' comprises two types of claims(a) a claim to unsecured debts (b) a claim to beneficial interest in movable property is not in possession, actual or constructive whether present or future, conditional or contingent. The Supreme Court observed in the same para:
�We would be concerned not with (a), but with (b) in this case and reading(b) it is clear that if the beneficial interest in movable property is not in possession of the claimant it will be an actionable claim.......�
It was further observed :
�...........whether by reason of a sale of a lottery ticket merely a contractual document come into existence or along with the delivery of such a ticket to the purchaser on payment of price by him some rights are transferred to the purchaser must depend upon the intention of the parties, the mode of issuing such ticket and the Rules governing the Raffle Scheme.�
After examining all the relevant aspects of the matter, the Apex Court ultimately ruled:
� In the light of aforesaid discussion my conclusions are that lottery tickets to the extent that they comprise the entitlement to participate in the draw are �goods� properly so called, squarely falling within definition of that expression as given in the Tamil Nadu Act and the Bengal Act and to that extent they are not actionable claims and that in every sale thereof a transfer of property in the goods is involved. In view of these conclusions the impugned Amendments made in the two concerned Acts for levying tax on sale of lottery tickets will have to be upheld as falling within the legislative competence of the concerned State legislature under Entry 54 of List II in the Seventh Schedule.�
The Apex Court thus held that the right to participate in the draw which takes place on the sale of the lottery ticket would be a transfer of beneficial interest in movable property to the purchaser and, therefore, amounts to transfer of goods and to the extent that in involves a transfer of the right to claim a prize depending on a chance it will be an assignment of an actionable claim.
In view of the said decision, the submission made by the learned counsel for the petitioner to the contrary can not be accepted. In our opinion lottery is a scheme for raising money in which there is a chance to receive prize. There are three elements in a lottery namely �consideration�, �prize� and � chance to obtain prize�. A chance to obtain prize is what carries consideration. One of element, i.e., right to participate in a lottery ticket can be regarded as ''goods'' as held in H. Anraj case (Supra). This right has to exist in the granter which granter could transfer in favour of grantee. Even as observed by the Apex Court there is no preexisting right of the State to participate and as such there is no such right to transfer. According to the Apex Court since the lotteries are of the State, the State can create a right for the first time which could be regarded as transfer. For us it is difficult to agree that creation of right in property for the first time in any good can be equivalent to the transfer of property and can be regarded as sale of goods. It this interpretation is accepted then in all cases where any right is created either by the State or the private person in favour of grantee can be taxed valuing that right. As we are bound by the judgment of Apex Court in H. Anraj (Supra). We do not agree with the contention of the counsel for the petitioner that no preexisting right of lottery ticket is transferred. Apparently in the lottery tickets there are two rights, namely a right to participate in the draw and a right to claim a prize depending upon a chance, first is goods, while second is an assignment of an actionable claim. As actionable claim is specifically excluded from the definition to the goods, the element of actionable claim cannot be taxed in a lottery ticket. Entry 54 of List II of the Constitution of India, does not empower the State Legislature, as in the case of Works contract after 46th Constitution Amendment to impose a tax in a contract which consists of goods and nongoods and does not authorise the segregation of the two components in the goods.
At this stage, we think proper to reproduce the definitions of �goods�,actionable claim� and �turn over� occurring the various provisions of the Act and the Constitution.
The expression ''goods'' has been defined in sub clause (12) of Article 366 of the Constitution, which reads as follows:
� 366 (12) ''goods'' includes all materials, commodities and articles.�
The expresion ''goods'' is also defined in Section 2(7) of the Sale of Goods Act, 1930, as follows:
�2(7) �goods� means every kind of moveable property other than actionable claims and money.......�
The expression ''goods'' has also been defind in the U.P. Trade Tax Act under Section 2(d) which reads as follows:
�2(d) ''Goods'' means every kind or class of movable property and includes all materials, commodities and articles involved in the execution of a works contract, and growing crops, grass, trees and things attached to or fastened to anything permanently attached to the earth which, under the contract of sale, are agreed to be severed, but does not include actionable claims, stocks shares, securities or postal stationery sold by the Postal Department.�
The term actionable claim is defined under section 3 of the Transfer of Property Act as under :
�3. ''actionable claim'' means a claim to any debt other than a debt secured by mortgage of immovable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.�
The expression ''Turnover'' is defined in section 2(i) of U.P. Trade Tax Act 1948 and reads as under:
� (i) ''Turnover'' means the aggregate amount for which goods are supplied or distributed by way of sale of are sold, by a dealer either directly or through another, on his account or on account of others whether for cash or deferred payment or other valuable consideration........�
In H. Anraj case (Supra) as stated above it has been held by the Apex Court that the transfer of the right to participate in the draw which takes place on the sale of a lottery ticket would be a transfer of beneficial interest in movable property to the purchaser and, therefore, it amounts to transfer of goods and to that extent it is no transfer of an actionable claim or 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. It was also held that two district rights are transferable to the purchaser of a lottery ticket and it was not possible to accept the contention of two together will constitute a single right. However, question of splitting up two rights which are inextricably linked and manner of assessment of tax was not considered specifically or by implication. We find that even the rules under U.P. Trade Tax Rules do not permit segregation of the part of actionable claim in the Lottery ticket. If the argument of the respondents is accepted than even the element of actionable claim in the lottery ticket would be taxable. This would authorise the respondents to tax nongoods, which is not permissible under the Act or the Constitution. We find merit in the submission of the Counsel for the Petitioner and hold that although right to participate in the draw is goods, the lottery ticket cannot be taxed as it includes an element of actionable claim, which cannot be taxed and the State Legislature is not empowered to impose any tax in respect of the same, without there being a Constitutional amendment authorizing the segregation of such a right. In the works contract also prior to the 46th Constitutional Amendment, the materials were goods but since the contract was indivisible and had an element of labour which could not be segregated, the Apex Court took the view that such a contract is not taxable under Entry 54. We find no reason why this principle will not apply in the case of lottery tickets where there are two elements one goods, and the other nongoods in an indivisible contract and there being no authority to segregate the same under the Constitution, they lottery tickets cannot be taxed.
Although we have held that lottery tickets cannot be taxed without there being a Constitutional Amendment authorizing such taxation, we feel it necessary to deal with the alternative contention raised by the petitioner. While the respondents are seeking to levy tax on the lottery tickets by treating the entire value of the lottery tickets as goods, the petitioners, in the alternative have contended that only the right to the participate in the goods can be brought within the purview of tax in view of the judgment of the Apex Court in H. Anraj (supra).
Strong reliance was placed by the Counsel for the petitioner on the aforesaid judgment of the Apex Court. In para 13, the Apex Court held and observed as under:
�13. In corpus Juris Secundum, Vol. 54 at page 845, the three elements essentail to the existence of a lottery, namely, chance, consideration and prize; if these three elements are present the scheme is a lottery, otherwise it is not.....If an essential element is absent the scheme is not a lottery, regardless of the motive for the omission, and conversely if all the elements are present, the scheme is a lottery regardless of the fact that the purpose of it sponsor is to increase his business.�
In Volume 38, American Jurisprudence 2d, at page 113, the further statement of law in para 6 is:
� In order to comprise a lottery, these three elements or ingredients (mentioned above) must be present; chance alone will not do so, nor will chance even when coupled with consideration. Nor is the combination of consideration and prize sufficient alone.�
In para 26, the Apex Court, interalia, held and observed as under:
�26...In other words, a sale of lottery tickets 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.....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 a 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.�
Further in Para 27, the Apex Court held that when a purchaser purchases a lottery ticket he pays consideration (price) not merely for the right to claim in future a prize in the draw but also for the right in present to participate in the draw. The Apex Court, interalia, held that not one but two distinct rights are transferred to the purchaser of a lottery ticket. In para 33, it was held and observed as under:
� 33. In the light of the aforesaid discussion my conclusions are that tickets to the extent that they comprise the entitlement to participate in the draw are �goods� properly so called....�
In the light of the above judgment of the Apex Court, we are afraid that we cannot accept the arguments of the Counsel for the respondents that the sale price of lottery ticket is consideration only for the right to participate in a draw and there is no consideration for claiming prize if successful in the draw. Such contentions would be contrary to the law laid down by the Apex Court in H. Anraj (supra). The counsel for the petitioner contended that when the Apex court has elearly laid down that there are two rights which flow from the purchase of lottery tickets and spelled out these two rights, then it is not open for the Respondent State to contend that entire consideration is consideration for right to participate and there is no element of assignment of actionable claim.
In Nirmal Agency v. Commercial Tax Officer, reported in (1992) 86 STC 450, A Division Bench of the High Court of Karnataka, interalia, held and observed as under:
�It does not appear from the judgment in Anraj''s case (1986) 61 STC 165 (SC); AIR 1986 SC 63 that the transfer of the right to participate in the draw which takes place on the sale of the lottery ticket amounts to a transfer of goods whereas, to the extent that it involves the transfer of the right to claim a prize, depending on a chance, it is an assignment of an actionable claim. It would appear therefore, that the sale of a lottery ticket is only in part a sale of goods, and the sale price would have to be split accordingly. To the extent that it is a price for transfer of goods it is liable to tax. It would be for the assessing authority to determine in every case the extent of the sale price that is so taxable. It would be possible to come to such conclusion if reference is made to the statistics governing a particular lottery. It is needless to say that it would be obligatory for the dealer to place before the assessing authority such statistics as it may require.
The Counsel for the petitioner contended that an actionable claim being nongoods both under Indian Sale of Goods Act, 1930 and the U.P. Trade Tax Act, 1948 cannot be taxed as ''goods''. Any attempt to tax an actionable claim shall be beyond the legislative competence of the ''State Legislature'' and the levy would be ultravires. Section 2 (d) of U.P. Trade Tax Act, 1948 excludes actionable claim from the definition of ''goods''. Section 2(i) of the Act defines turnover as the aggregate amount for which goods are supplied.....; Section 3A (c1) provides for tax on turnover of lottery tickets.......As right to participate in the draw has been defined as ''goods'' in H. Anraj and turnover being aggregate amount of goods would mean an aggregate amount received by the dealer in respect of right to participate. The amount received by the dealer which could be attributable to the right to participate can, if at all, be taxed under Section 3A (c1) of the Act. An ''actionable claim'' cannot be taxed by State Legislature under Entry 54 of List II of the Seventh Schedule as Entry 54 permits tax on sale or purchase of goods and a chance to obtain a prize being an ''actionable claim'' is not goods. ''Actionable claim'' is specifically excluded from the definition of goods occuring in Section 2(7) of the Sale of Goods Act as well as section 2(d) of the U.P. Trade Tax Act.
It has also been urged by the learned counsel for the petitioner that in any case prize money has to be paid back to the participants and credit for the same has to be given by the respondents. It was urged that as prize has to be returned back to the purchasers in an event of the purchaser being successful in draw, it was submitted that in any case, even under Rule 44 (b) such an amount has to be deducted from the turnover of sales for the purposes of computing the net turnover. It is this net turnover which is liable to suffer tax, if at all, under Section 3A (c1) of the U.P. Trade Tax Act, 1948. Rule 44 of U.P. Trade Tax Rules, 1948, provides for determination of turnover of sales. The said rule provides that all amounts allowed to the purchasers in respect of goods returned or discounts allowed shall be deducted in determining the net turnover of sales. Relevant extract of Rule 44 reads as under:
�44. Determination of turnover of sales : The tax under section 3 and subsection (2) secton 3D shall be computed on the net turnover of sales. In determining the net turnover of sales, the amount specified below shall be deducted if they are included in the gross turnover
(a) all amounts allowed as discount......
(b) subject to the provisions of the Act, all amounts allowed to purchasers in respect of goods returned by them to the dealer within six months from the date of delivery of the goods:
Provided that the accounts show the dates on which the goods were sold and returned and also the date on which and the amounts for which the refund was made or credit was allowed....�
We find force in this contention raised on behalf of the petitioner. In any case, the respondent are bound to give to the petitioner credit in respect of the cost of prizes under Rule 44, if validity of notification dated 29.8.1996, referred to above, is upheld.
So far as the question of compliance of subsection (2) of Section 3A of the Act is concerned, learned counsel for the petitioner, as stated above, submitted that the notification dated 29.8.1996 was never laid before the two houses of the State Legislature, therefore, it cannot be enforced and no tax can be levied on the sale of lottery tickets on the basis of said notification. As on this point the counter affidavit filed on behalf of the respondents was silent, opportunity was afforded to the learned Standing Counsel to produce some relevant documentary evidence to show that notification dated 29.8.1996 was actually laid before the two houses of State Legislature. On behalf of the respondents a supplementary counter affidavit has been filed by one Sri Sunil Tripathi, Assistant Commissioner Trade Tax (High Court Works), Lucknow. In paragraph no. 3 and 4 of the supplementary counter affidavit it was stated as under :
�3. That as per the requirement of section 3A (2) of the Trade Tax Act, the above said notification was placed on 25.4.1997 on the table of both the Houses of the State Legislature, namely the Vidhan Sabha and the Vidhan Parishad. The said facts is self evident from the letter No. 1346/Vi.Sa./Sansadiya/43/San./97 dated August, 1997, issued from the Vidhan Sabha Sachivalaya as well as from the letter no. Sansadiya Anubhag/Vi. Pari.9 (Ni.)/97 dated 10.6.97. The photo stat copies of the letter dated August, 1997 and 10.6.97 are being annexed herewith this supplementary counter affidavit as Annexures No. SCA1 and SCA2, respectively.
That from the Government letter No. Vyapa. Kar2(12) (11)/11979(3)/89 T.C. dated 24.4.97 it is self evident that the laying of the notification No. 2072 (Supra) was in agenda of Vidhan Sabha as well as of the Vidhan Parishad. Photo stat copy of the letter dated 24.4.97 is annexed herewith this Supplementary counter affidavit as Annexure: SCA3.�
In the supplementary affidavit reliance is being placed upon the letters dated August, 1997 and 24.4.1997. Said letters are in the nature of certificate which have been issued by the �Vishesha Karyadhikari and the Deputy Secretary�. In reply of the said affidavit no supplementary counter affidavit was filed. Learned counsel for the petitioner, however, submitted that no counter affidavit was necessary to be filed as no primary evidence of the fact that notification in question was laid before the two houses of State Legislature, while they were in session for the period prescribed, was filed. According to him the primary documentary evidence of the fact that the notification in question was laid before the two houses were the agendas of the two houses of the legislature of the State but they have deliberately been withheld, therefore, no reliance could be placed upon the secondary evidence produced by the respondents along with the supplementary affidavit.
We have considered the submissions made by the learned counsel for the parties.
Subsection (2) of Section 3A of the Act clearly provides that every notification made in exercise of power under Section 3A shall be laid before the two houses of the State legislature when they were in session for consideration and discussion. The respondents have failed to produce the primary evidence i.e. agendas of the two houses from which it could be ascertained that the aforesaid notification was on the agendas of the two houses and was put for consideration and discussion and that no modification or alteration was resolved to be made after discussion on the point. The words � be laid before the said two houses in the State legislature� used in subsection (2) of Section 3A mean the notification was laid before the houses of legislature for consideration and discussion. No item is to be discussed by the State legislature unless the same is on the agenda or is permitted to be discussed by the Speaker. Further, the documents contained in annexures SCA1, SCA2 and SCA3 to the supplementary counter affidavit are not certified copies admissible as such in the form of secondary evidence. These papers documents cannot be taken into evidence in the absence of their being certified copies as contemplated under Section 63 (1) of the Evidence Act. They are Photostat copies without being certified as true copies. They are as such inadmissible in evidence and no reliance can be placed upon the same. Thus, the respondents have failed to produce any primary evidence and to prove that the requirements of subsection (2) of Section 3A of the Act were fulfilled. From the material on record, therefore, it cannot be said that the notification in question was laid before the two houses of the State Legislature, therefore, the said notification cannot be given effect to and enforced and on the basis of the same, tax cannot be imposed against the petitioners on the sale of lotteries in the State.
Here it may also be mentioned that all the lotteries whether of the State of U.P. or other States were banned by the Lotteries (Regulation) Ordinance, 1997 promulgated by the President of India and the order of Governor dated 29.10.1997 issued under Section 5 of the Lotteries (Regulation) Ordinance. The validity of the said Ordinance was challenged in Writ Petition No. 5733 of 1998, M/s Maa Vaishnav Lotteries Agency v. State of U.P. and others. In the said writ petition, the validity of the saidOrdinance was upheld. Subsequenty, the petitioners made an application for review of the said judgment. The review application was also dismissed by judgment and order dated 25.3.1998 (Civil Misc. Review Petition No. 18963 of 1998, M/S Maa Vaishnav Lotteries Agency v. State of U.P. and others (1998 (32) ALR 762). It has been stated at the Bar that the judgment and order passed by this Court in the writ petition and the review petition aforesaid have also been upheld by the Apex Court. Thus, at present business of lotteries is totally banned in the State of U.P.
In view of the aforesaid discussion, these petitions are liable to be allowed in part.
The writ petitions succeed and are allowed in part. Prayer for declaration of clause (C1) of subsection (1) of Section 3A of the Act as ultra vires is rejected. The Notification No. TT22072/II9(341) 93U.P. Act1548Order96 dated 29.8.1996 is hereby quashed and the respondents are restrained from assessing the trade tax on the sale of lottery tickets on the basis of the aforesaid notification Costs on parties.
Copies of this judgment may be placed on the records of the connected petitions.
(Petition allowed partly)