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2024 Supreme(Online)(SIKK) 32
HIGH COURT OF SIKKIM
Bhaskar Raj Pradhan, J
Future Gaming Solutions India – Appellant
Versus
Union Of India – Respondent
W.P. (C) No. 25 of 2021
For the Appellants/Petitioners: Laxmi Chakraborty
For the Respondents: Sangita Pradhan, Natasha Pradhan, Sittal Balmiki
Lottery tickets are actionable claims and not 'goods' under the Finance Act, 1994; therefore, the sale of lottery tickets does not constitute a taxable 'business auxiliary service' regardless of the 'Explanation' to Section 65(19)(ii) introduced in 2008.
Headnote:The petitioner filed a writ petition under Article 226 and 227 of the Constitution of India challenging the legislative competence of the Parliament to impose service tax on lottery tickets under the Finance Act, 1994, and sought to strike down the 'Explanation' to Section 65(19)(ii) of the Act. The court reviewed the facts and the legal position in light of a binding Supreme Court precedent regarding the nature of lottery tickets as actionable claims versus goods. The core issues framed were whether the activity of selling lottery tickets attracts service tax as a business auxiliary service and whether the 2008 'Explanation' could override statutory definitions. The court relied on the principle that lottery tickets are actionable claims, not goods, and that the relationship between the State and the petitioner was on a principal-to-principal basis, not a service-provider-client relationship. The ratio decidendi established that the mere insertion of an 'Explanation' cannot expand the scope of taxability contrary to the main provisions of the Act. The writ petition was disposed of in terms of the Supreme Court's ruling, granting the petitioner consequential reliefs.
| Table of Content |
|---|
| 1. petitioner challenges service tax on lottery activities citing lack of legislative competence. (Para 1 , 2) |
| 2. lottery tickets as actionable claims are outside the scope of 'service' taxation under the finance act. (Para 3 , 4) |
| 3. court disposes of the petition based on settled supreme court precedent (k. arumugam). (Para 5) |
O R D E R (ORAL)
Bhaskar Raj Pradhan, J.
1. On instructions received by the learned Deputy Solicitor General of India appearing for the respondents submits that the judgment rendered by the Supreme Court in K. Arumugam vs. Union of India & Ors ETC.1 squarely covers the present case and the writ petition may be disposed of in terms of this judgment. This is the stand taken by the learned Counsel for the petitioner as well.
2. The writ petition seeks the following reliefs:-
“(i) Declare that the Parliament in exercise of its residuary power under Entry 97, List I to Seventh Schedule of Constitution of India lacks legislative competence to impose any tax including “service tax” on the activities of the Petitioner under the Explanation to Section 65(19)(ii) of the Finance Act, 1994.
(ii) Strike down the Explanation to Section
65(19)(ii) of the Finance Act, 1992 introduced w.e.f. 16.05.2008 by Finance Act, 2008 as being ultra vires to Entry 62 of List II of the Constitution of India;
(iii) Consequently, set aside the Order-in-
Appeal No.227/SLG-CE/2020-21 dated 31.03.2021 passed by the Commissioner of CGST & Central Excise, Siliguri Appeals, Siliguri and direct refund of Rs.1,00,00,000/- (Rupees One Crore) which was deposited under protest by the
2024 SCC OnLine SC 2278 Petitioner with the Respondent No.2 (vide 2 TR-6 challan bearing nos.01/2009-10 dated 23.06.2009 and 02/2009-10 dated 24.06.2009) alongwith interest as per law.”
3. In K. Arumugam (supra). the Supreme Court had formulated the following questions:-
“1. Whether the activity of the appellants- assessees would attract service tax within the scope and ambit of Section 65(19(ii) read with Section 65(105)(zzb) of the Finance Act, 1994? If not, what relief(s) the appellants are entitled to?
2. What Order?”
4. The questions were answered in the following manner:-
“6.8 On a reading of clause (19) of Section 65 of the Finance Act, 1994 and on analyzing the same, it is evident that tax on a business auxiliary service is relatable to (i) any service concerning promotion or marketing or sale of goods, produced or provided by, or belonging to the client and (ii) promotion or marketing of service provided by the client.
6.9 The definition of goods has also been noted in clause (50) of Section 65 of the Finance Act, 1994 which refers to clause (7) of Section 2 of the Sale of Goods Act, 1930. The expression “goods” under the Sale of Goods Act expressly excludes actionable claims as well as money. This Court in Sunrise Associates has held that lottery tickets are actionable claims. Therefore, as lottery tickets would not come within the meaning of the expression goods under clause (7) of Section 2 of the Sale of Goods Act, 1930, they would also not come within the scope and ambit of clause (50) of Section 65 of the Finance Act, 1994. If that is so, they would also not come within the scope and ambit of clause (19)(i) of Section 65 of the Finance Act, 1994. Lottery tickets being actionable claims and not being goods within the meaning of sub-clause (i) of clause (19) of Section 65 of the Finance Act, 1994, would expressly get excluded from the scope of the said provision. In the circumstances, service tax on the promotion or marketing or sale of lottery tickets which are actionable claims could not have been levied under the said sub-clause.
6.10 In order to remove the doubt whether service tax could be levied on promotion or marketing or sale of lottery tickets under Clause 19(ii) of Section 65 of the Finance Act, 1994, an Explanation was added with effect from 16.05.2008. The Explanation has also been extracted above. Although the Explanation is for the purpose
