2015 (10) TMI 1114 - SIKKIM HIGH COURT

Liability of Service Tax on lottery tickets - Liability of Petitioners vide Notification No.7/2015-ST on reverse charge basis - Sub-Rule (7C) of Rule 6 does not enable charging of tax - whether Direct transaction in regard to an actionable claim would not fall under Clause (44) of Section 65B? - Transactions entered on Principal to Principal basis – Respondent contends that Parliament is duly empowered to enact law in relation to service tax on said services - Lottery ticket is actionable claim; thus goods, lottery is a game; thus service; thus included in negative list - whether Petitioners' activities fall under definition of "lottery distributor" or "selling agent"; Sub-Rule (7C) Rule 6 applicable.

Held That:- There is no change in the circumstances as in the case of Future Gaming [2013 (11) TMI 1002 - SIKKIM HIGH COURT] and Future Gaming 2014[2013 (11) TMI 1003 - SIKKIM HIGH COURT]

The Petitioners in buying and selling the lottery tickets is not rendering service to the State and, therefore, their activity does not fall within the meaning of 'service' as provided under Clauses (31A) and (44) of Section 65B and, therefore, outside the purview of Explanation 2 to the said Section;

In any case, since by the Explanation the scope of Section 66D which is the main provision which is to be expanded, it would be ultra vires the Finance Act, 1994 and is accordingly struck down;

Letters having been issued on an erroneous interpretation of Section 66D of the Finance Act, 1994, as amended by the Finance Act, 2015 requiring the Petitioners to pay tax under the Service Tax Rules, 1994, as amended, in the absence of specific provision in the Finance Act and that Sub-Rule (7C) of Rule 6 of the Service Tax Rules, 1994, only provides an optional composite scheme for payment of tax and, therefore, does not create a charge of service tax and is a Subordinate piece of Legislation, hereby stands quashed. Resultantly, Circular under D.O.F. No.334/5/ 2015-TRU dated 19-05-2015 referred to in the aforesaid letters in the two Writ Petitions also stand quashed; and

The Respondents, their agents, servants, officers and representatives are restrained directly or indirectly, and in any manner whatsoever, from demanding any amounts by way of service tax or enforcing the provisions of the Finance Act, 1994 on the activity of the Petitioners in relation to lottery tickets.

Decided in favour of the Assessee.