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2025 Supreme(SC) 306

SUPREME COURT OF INDIA
B.V. NAGARATHNA, NONGMEIKAPAM KOTISWAR SINGH, JJ.
Union Of India & Others - Appellant
Versus
Future Gaming Solutions Pvt. Ltd. & ANOTHER ETC. - Respondent
Civil Appeal Nos. 4289-4290 of 2013 With Civil Appeal Nos.9506-9507 of 2013 Civil Appeal Nos. 2172-2173 of 2016 Civil Appeal No.16118 of 2017, Civil Appeal No. of 2025 (Arising out of SLP (C) No.18565 of 2014), Civil Appeal No. of 2025 (Arising out of SLP (C) No.30629 of 2014), Civil Appeal No. of 2025 (Arising out of SLP (C) No.14111 of 2015), Civil Appeal No. of 2025 (Arising out of SLP (C) No.19200 of 2017), Civil Appeal No. of 2025(Arising out of SLP (C) No. 23945 of 2017)
Decided on : 11-02-2025

Advocates appeared:
For the Parties : Mr. V. C. Bharathi, Adv. Mr. Gurmeet Singh Makker, AOR Mr. B. Krishna Prasad, AOR Mr. Raj Bahadur Yadav, AOR Ms. Rohini Musa, AOR Mr. Mukesh Kumar Maroria, AOR Mr. A.R. Madhav Rao, Adv. Mr. Arjun Garg, AOR Ms. Kriti Gupta, Adv. Ms. Sagun Srivastava, Adv. Mr. Saaransh Shukla, Adv. Mr. Mukunda Rao Angara , AOR Mr. A R Madhav Rao, Adv. Mr. Krishna Rao, Adv. Ms. Shiwani Tushir, Adv. Ms. Rohini Musa, AOR M/S. Arputham Aruna And Co, AOR Mr. Sameer Abhyankar, AOR Mr. Aakash Thakur, Adv. Mr. Rahul Kumar, Adv. Ms. Ayushi Bansal, Adv. Mr. Krishna Rastogi, Adv.

The court ruled that lottery distributors operate on a principal to principal basis, exempting them from service tax under the Finance Act, 1994.

Headnote:(A) Finance Act, 1994 - Sections 65 and 66 - Service Tax - The court examined the nature of the relationship between the State of Sikkim and lottery distributors, concluding it to be one of principal to principal rather than principal and agent, thus exempting the distributors from service tax. (Paras 18.1, 18.2, 18.3, 18.4, 18.5, 18.6)

(B) Constitutional Law - Article 246 - The power to levy taxes on lotteries is reserved for the State Legislature under Entry 62 of List II, and cannot be imposed by Parliament under its residuary powers. (Paras 18.4, 18.5)

Facts of the case:
The case involves multiple appeals against the High Court's decision that lottery distributors are not liable for service tax as they operate on a principal to principal basis, purchasing tickets from the State for resale. (Paras 2.1, 3.9)

Findings of Court:
The court upheld the High Court's ruling that the relationship is not one of agency, thus service tax cannot be levied on the distributors. (Paras 18.1, 18.2)

Issues: The primary issue was whether the relationship between the State and lottery distributors constituted an agency relationship, which would impose service tax obligations. (Paras 10a, 10b)

Ratio Decidendi: The court reasoned that the agreements and the nature of transactions indicated a principal to principal relationship, exempting the distributors from service tax. (Paras 18.1, 18.2)

Result: Appeals dismissed; the High Court's decision upheld. (Para 20)

Table of Content
1. batch of cases assailing orders (Para 2)
2. appeals dismissed (Para 20)

JUDGMENT :

NAGARATHNA, J.

INDEX

History of this controversy

2012 Amendment

2015 Amendment

2016 Amendment

Submissions before this Court

Points for Consideration

Relevant constitutional provisions

Relevant Case Law on lotteries

B.R. Enterprises

Sunrise Associates

State of Karnataka

K. Arumugam

Legal Framework

Agreements under consideration

Paper Lotteries

Online Computerised Agreement

Agency

Case Law

Agreements

Controversy between the Parties

Leave granted in SLP (C) No.18565 of 2014; SLP (C) No.30629 of 2014; SLP (C) No.14111 of 2015; SLP (C) No.19200 of 2017 and SLP (C) No.23945 of 2017.

2. This batch of cases assail various orders of the High Court of Sikkim passed in several writ petitions which were filed by the respondent-assesses. The appellant is the Union of India in all these cases except in SLP (C) No.19200 of 2017. For immediate reference, the following table which has been provided by learned counsel for the Union of India would indicate the details:

Sl. No.	Case No(s).	Name of the Assessee(s)	Impugned Judgment & Order Dated	Amendment Year
1	C.A. NOS.4289- 4290/2013	1. Future Gaming Solutions Pvt. Ltd. 2. Summit Online Trade Solutions Pvt. Ltd	29.11.2012	2010
2	C.A.NOS. 9506- 9507/2013	1. Summit Online Trade Solutions Pvt. Ltd. 2. Future Gaming Solutions India Pvt. Ltd.	10.05.2013	2010
3	SLP(C) No. 18565/2014	Future Gaming Solutions India Pvt. Ltd.	24.09.2013	2012
4	SLP(C) No. 30629/2014	Summit Online Trade Solutions Private Limited	13.05.2014	2012
5	SLP(C) No. 14111/2015	Tashi De Lek Gambling Solutions Pvt. Ltd.	15.07.2014	2012
6	C.A. NOS.2172- 2173/2016	1. Future Gaming & Hotel Services Pvt. Ltd. 2. Summit Online Trade Solutions Pvt. Ltd.	14.10.2015	2015
7	SLP(C) No. 19200/2017	Future Gaming & Hotel Services (P) Ltd.	23.03.2017	2016
8	SLP(C) No. 23945/2017	Summit Online Trade Solutions (P) Ltd.	23.03.2017	2016
9	C.A. No. 16118/2017	Future Gaming & Hotel Services (P) Ltd.	23.03.2017	2016

2.1 The petitioners before the High Court (respondents-assessees herein) are companies incorporated as private limited companies under the Companies Act, 1956. The respondents-assessees herein are engaged in the business of the sale of paper and online lottery tickets organised by the Government of Sikkim. They entered into respective agreements with the State of Sikkim.

2.2 Since these cases assail the amendments made to the provisions of the Finance Act, 1994 from time to time commencing from the year 2012, the factual backdrop of these cases shall be in accordance with the amendments made to the Act and shall be stated chronologically.

History of this controversy:

3. The Parliament introduced service tax through the Finance Act, 1994 under Chapter V, which took effect on 01.07.1994. Later, through the Finance Act, 2003, the Finance Act,1994 was amended to include a new category of taxable services, namely "Business Auxiliary Service," under sub-section (19) of Section 65, effective from 01.07.2003. Pursuant to this amendment, the Service Tax Department issued notices to the respondents-assessees herein, under the amended Finance Act in 2007, requiring them to register under the said Act for payment of service tax.

3.1 Being aggrieved, the respondents-assessees herein approached the High Court in W.P. (C) No.19 of 2007, titled Martin Lottery Agencies Ltd. vs. Union of India, challenging the levy of service tax upon the sale of lottery tickets. Vide judgment dated 18.09.2007, the High Court allowed the wr

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2025 Supreme(SC) 306

The court ruled that lottery distributors operate on a principal to principal basis, exempting them from service tax under the Finance Act, 1994.

Cases Referred (14)

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