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2015 (10) TMI 1114 - SIKKIM HIGH COURT

2015 (10) TMI 1114 - SIKKIM HIGH COURT - 2015 (40) S.T.R. 833 (Sikkim) - 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 relat .....

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etitioners 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 dow .....

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f 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 lo .....

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ngdi, J. 1. These Writ Petitions are taken up together to be disposed off by this common judgment as the facts and circumstances and questions involved for determination are common. 2. Both the Petitioners are Companies incorporated as Private Limited Companies under the Indian Companies Act, 1956, who are engaged in the business of sale of paper and online lottery tickets respectively organised by the Government of Sikkim. Petitioner in WP(C) No.39 of 2015, namely, M/s. Future Gaming Solutions .....

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on 09-05-2005 followed by a Supplementary Agreements dated 25-04- 2008 and 09-11-2015 [Annexure P-1 (collectively)]. Mutual terms and conditions concerning the sale and purchase of lottery tickets between the State Government and the Petitioners are governed and regulated by the contractual stipulations contained in the aforesaid Agreements. 3. The Petitioners are aggrieved by the enforcement of the provision of Finance Act, 1994, as amended by the Finance Act, 2015, upon them with effect from 0 .....

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nforcing provisions of the Finance Act, 1994 as amended by the Finance Act, 2015, upon the Petitioner-Companies with effect from 01-06-2015. 5. As a consequence of the amendment, the Respondents No.2 and 3 issued the impugned letter dated 25-05-2015 to the Petitioner-Company in WP(C) No.39 of 2015 and letters dated 18-05-2015 and 12- 06-2015 to the Petitioner-Company in WP(C) No.40 of 2015 bringing to their notice that service providers in respect of services provided by lottery distributors and .....

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ce Act, 1994 (as amended by the Finance Act, 2015) are illegal and without jurisdiction. 6. It is averred that the activities of the Petitioners involve purchase of lottery tickets in bulk from the State Government and selling them to stockists, resellers, etc., by adding a profit margin. The stockists, resellers, etc., in turn sell these tickets to retailers which in turn sell them to the ultimate participants of the draw. It has been stated that the transaction by which tickets are sold to the .....

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try 34 of which the subject-matter of "betting and gambling" and the subject-matter of "taxes on betting and gambling" under Entry 62, fall within the sole competence of the State Legislature and, therefore, the levy of service tax is ultra vires the Constitution of India. The impugned letter dated 25- 05-2015 in WP(C) No.39 of 2015 and letters dated 18- 05-2015 and 12-06-2015 to the Petitioner-Company in WP(C) No.40 of 2015 and the action of the Respondents to enforce the pr .....

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are not engaged in providing any services but, in buying and selling of tickets from the Petitioners. The liability cast upon the Petitioners vide Notification No.7/2015-ST to discharge service tax on reverse charge basis is not sustainable as the activity of selling or marketing agent is not covered under service tax being an activity pertaining to actionable claims which also amounts to betting, gambling and lottery under the negative list. It is asserted that the activity of the agent to the .....

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t enable charging of service tax if the levy under the main Act fails as held in Future Gaming Solutions India Private Limited vs. Union of India and Others : 2014 (36) STR 733 (Sikkim) (hereinafter referred to as "Future Gaming Case 2014"). It is further stated that the Petitioners obtained service tax registration under the Finance Act, 1994, and opted for payment of service tax under the compounding scheme provided under Sub-Rule (7C) of Rule 6 of the Service Tax Rules, 1994, under .....

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in view of the decision in Mafatlal Industries Ltd. and Others vs. Union of India and Others : (1997) 5 SCC 536. 10. The Petitioners further state that although this Court vide judgment dated 22-06-2015 in WP(C) No.45 of 2015 in the matter Mrs. J. Geetha vs. State of Sikkim and Others, the proceedings undertaken by the State in respect of lottery including the appointment of the distributors who were the Petitioners herein, was set aside, the draws concluded till 22-06-2015 remain unaffected whi .....

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Government had been set aside, service tax liabilities on the Petitioners, on the draws conducted till 12-07-2015 still remained. Further, the Petitioners having obtained centralised registration under service tax in the State of Sikkim in respect of lotteries of the State of Sikkim sold in other States and of others States in the State of Sikkim, it had a valid cause of action to agitate the issue before this Court. 11. It is the contention of the Petitioners that the provisions construed by t .....

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d under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. It is asserted that in the amendments, the collection of service tax on the activities of the Petitioners and their agents have not been validated by the amendments brought to the Finance Act, 1994 vide the Finance Act, 2015. Having regard to the fact that the term "actionable claim" defined under Section 65B of the Finance Act, .....

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in Sunrise Associates vs. Govt. of NCT Delhi and Others : (2006) 5 SCC 603 lottery tickets are actionable claims and this position continues even after the amendments in the Finance Act, 2015. It is further submitted that there is no material difference in the language of the erstwhile definition of "taxable service" as contained in Sub-Clause (zzzzn) of Clause (105) of Section 65 and Clause (44) of Section 65B of the Finance Act, 1994, as amended by the Finance Act, 2015. The words & .....

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rt in Future Gaming Case 2014 (supra) and Future Gaming Case 2015 (supra). 13. The next ground set out to assail the action of the Respondents is that the amendments to the Finance Act, 1994 by the Finance Act, 2015, covers only those parties who are facilitating transaction in actionable claims. It is stated that prior to the amendment, 'service' was defined under Clause (44) of Section 65B to mean any activity carried out by a person for another for consideration and included a declare .....

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able claim". Thus, the amendment contemplates any activity carried out "in relation to" or "for facilitation of" for a consideration, a transaction in actionable claims. In other words, the activity for a consideration has to be in relation to an actionable claim for facilitation of an actionable claim. Thus, relying upon Association of Leasing and Financial Service Companies vs. Union of India and Others : (2011) 2 SCC 352, it was submitted that a direct transaction in .....

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re, even prior to the amendment brought about vide the Finance Act, 2015, while actionable claim was excluded from the definition of service, the services for facilitating an actionable claim or in relation to an actionable claim would be covered in the definition of service. Referring to the case of Hardev Motor Transport vs. State of M.P. and Others : (2006) 8 SCC 613, it was submitted that an explanation, in any view of the matter, cannot enlarge the scope and effect of a provision. 15. The F .....

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per the Petitioners, actionable claims are still excluded from the definition of 'service' in the Finance Act, 1994 even under its amendment under the Finance Act, 2015. It is asserted that what is covered under service is any activity carried out for consideration "in relation to" or "facilitation of" a transaction in actionable claims. Thus, activity of direct buying and selling of lottery tickets as carried out by the Petitioners would obviously not come in the ca .....

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g agents, that is carried out in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner. It is not the mere buying and selling of lottery tickets by a distributor or lottery agent that come under the category of any activity for consideration in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner. Since the activity of the Petitioner .....

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nment to the distributor or selling agents, it cannot be said that there is performance of any activity for consideration in relation to promotion/marketing or in relation to promotion, marketing or organising lottery. Similarly, a distributor is not doing any activity for consideration in relation to selling of lottery. It is re-emphasised that it can never be said that when a person buys or sells the lottery tickets, he is (a) promoting the lottery tickets for consideration or (b) marketing th .....

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for consideration for facilitation of a transaction in actionable claim, then even the State Government which is selling the lottery tickets to the distributors would be liable to pay service tax. 18. It is then contended that in the Future Gaming Case 2015 (supra) it has been held that there is no consideration for any activity of promotion, marketing, organising a lottery or in any other manner assisting in organising lottery. No consideration whatsoever flows from the Government of Sikkim or .....

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efinition of 'service'. The attempt on the part of the Central Government to levy tax on betting and gambling is ultra vires Entries 34 and 62 of List II of the Seventh Schedule of the Constitution of India. That in Future Gaming Case 2015 (supra) and Future Gaming Case 2014 (supra), this Court has already held that the activity of promoting, marketing, organising or in any other manner assisting in organising games of chance including lottery, is an activity falling under the expression .....

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uestion of levying of service tax on the Petitioners does not arise at all. Further, Circular No. 354/59/2006-TRU dated 10-11-2006 has been relied upon by which the Central Board of Excise and Customs (CBEC) has clarified that service tax can be levied only when a consideration is received for the taxable services provided. This Circular, having been issued under Section 37B of the Central Excise Act, 1994, which is applicable to Finance Act, 1994 in terms of Section 83 of that Act, is binding o .....

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d 25-04-2008 and 09-11-2015 in WP(C) No.40 of 2014 entered into between the Petitioners and Respondent-State of Sikkim, that the Petitioners procure the lottery tickets from the Government of Sikkim in bulk quantities at a fixed price. Therefore, the transaction between the Petitioners and the Government of Sikkim is on principal to principal basis and the Petitioners are not agents of the Government of Sikkim. The demand of service tax from the Petitioner is, therefore, without jurisdiction. 20 .....

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ll not include the activity specified in Explanation 2 to clause (44) of Section 65-B." 21. Thus, by insertion of such Explanation, the negative list would cover betting, gambling and lottery. However, under Explanation 2 of Clause (44) of Section 65B, it would not cover activity specified in the Explanation 2 inserted thereunder which reads as follows:- "Explanation 2. - For the purposes of this clause, the expression "transaction in money or actionable claim" shall not incl .....

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, in any other manner. ………………………………………………." 22. The aforesaid newly added provisions seek to charge service tax on an activity for a consideration in relation to or for facilitation of a transaction in actionable claim. It is the case of the Petitioners that since the Petitioners are neither doing any activity for consideration in relation to a transaction in actiona .....

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me Court in Sunrise Associates (supra). It is then contended that under the Finance Act, 2015, the distributor or the selling agent liable to pay service tax in the activities of the selling agent vide Notification No.7/2015-ST by which Notification No.30/2012 dated 20-06-2012 was amended. As a consequence, the distributor or the selling agent to the State Government is additionally liable to pay service tax liability of the agent immediately below him. Such levy is impermissible as the selling .....

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uld not arise. It is asserted that the activity carried out by the agent to the Petitioners (distributors) in any case, is also an activity covered under Entry 34 read with Entry 62 of List II of the Seventh Schedule of the Constitution of India and, therefore, tax on such activity can be levied only by the State Government and not by the Centre. The Petitioners are thus not liable to discharge any service tax in regard to an agent who buys the lottery tickets from the State Government and furth .....

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tution of India, there is categorical delineation of legislative powers between the State Legislature and the Parliament. Since betting and gambling has been held to fall within the meaning of which lottery in B. R. Enterprises vs. State to U. P. and Another : (1999) 9 SCC 700 and, "taxes on betting and gambling" fall under Entries 34 and 62 of List II of the Seventh Schedule of the Constitution of India, power to tax on lotteries would clearly fall within the competence of the State L .....

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nd Others : (2005) 3 SCC 711, Future Gaming Case 2015 (supra) and the Constitutional Bench judgment in M/s. R.M.D.C. (Mysore) Private Ltd. vs. State of Mysore : AIR 1962 SC 594 and State of W. B. vs. Kesoram Industries Ltd. and Others : (2004) 10 SCC 201, it is stated that under Entry 40 of List I, Parliament is competent to enact only in respect of lotteries as a species of betting and gambling and that such law could only be regulatory in nature and nothing beyond that. 26. It is further submi .....

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not extend to make law for imposition of tax on matters listed in List II and List III respectively. Reference in this regard was made to Union of India vs. Shri Harbhajan Singh Dhillon : (1971) 2 SCC 779, Kesoram Industries Ltd. (supra), Future Gaming Case 2015 (supra). It is further stated that Entry 92C of List I to the Seventh Schedule of the Constitution which provides for taxes on services has not been notified till date and, therefore, even under that provision the Parliament has no comp .....

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purchase lottery tickets from the Government of Sikkim, resells them to agents, stockists, resellers, etc., and in such process earn a profit, being the difference between the sale and the purchase price. By the said agreements, the Petitioners are appointed the sole purchasers of the lottery tickets organised by the Government of Sikkim and unsold tickets are returned to Government of Sikkim. The agreements permit the purchaser to take up any kind of publicity, etc., at its own cost and expense .....

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ernment of Sikkim would have no privity of contract with any such stockists, selling agents, etc. 28. Relying upon Sunrise Associates Case (supra), it is submitted that the sale of lottery tickets involves and implies the transfer of property and other rights in the lottery tickets from the Government of Sikkim to the Petitioners at the first stage and thereafter from the Petitioners to the agents, stockists, resellers, etc., and so on, ultimately to the final consumer which is analogous to the .....

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, 16th Edition; Mahindra and Mahindra Limited vs. Union of India and Another : 1984 (16) ELT 76 (Bom), Pioneer Tools and Appliances (P) Ltd. vs. Union of India : 1989 (42) ELT 384 (Bom). 30. It is submitted that when the entirety of transaction as in the present case is on a principal to principal basis, no demand of service tax would arise. Referring to the case of Laghu Udyog Bharati and Another vs. Union of India and Others : (1999) 6 SCC 418 and All India Federation of Tax Practitioners and .....

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of the Finance Act, 1994, which levies service tax would not arise at all. 32. Referring to Bharat Sanchar Nigam Ltd. vs. Union of India : (2006) 3 SCC 1; Imagic Creative (P) Ltd. vs. Commissioner of Commercial Taxes and Others : (2008) 2 SCC 614 and Indian Railways Catering and Tourism Corporation Ltd. vs. Government of NCT of Delhi : 2010 (20) STR 437 (Del), it was urged that sale and service are mutually exclusive and, therefore, a sale transaction is not covered within the ambit of service t .....

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within the purview of service tax. 33. Relying upon the State of Kerala vs. Maharashtra Distilleries : (2005) 1 SCC 1, it is stated that where the State parts with its privilege in trade, what is charged by the State is its privilege price. By purchasing lottery tickets on actual sold basis, the Government of Sikkim is parting with its privilege and the price paid is the consideration paid to the State for parting its privilege as in the case of trade in liquor. The question of service under suc .....

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, therefore, violative of Article 265 of the Constitution of India which prescribes that no tax can be levied or collected except by the authority of law. It is submitted that the Petitioner have been required to pay service tax by their letter dated 25-05-2015 on the basis of the Service Tax Rules, 1994 (as amended) which is a Subordinate Legislation. As per the Petitioners, in the Constitutional Scheme and in terms of Article 265 it is trite that tax cannot be levied by way of Subordinate Legi .....

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s have been required as per the letter to pay service tax under Sub-Rule (7C) of Rule 6 of the Service Tax Rules, 1994 which only provides an optional composition scheme for payment of service tax and does not create a charge of service tax. It is in fact only a piece of Subordinate Legislation being the Rules framed by the Respondents in exercise of its powers under the Finance Act, 1994 and, therefore, cannot go beyond it having regard to the well-settled position that Subordinate Legislation .....

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other vs. Timber and Fuel Corporation : (1973) 2 SCC 292, International Packing Industry vs. Central Board of Excise and Customs, New Delhi and Others : 1987 (32) ELT 317 (AP) and Japan Dyeing Works vs. Commissioner of Central Excise : 1992 (61) ELT 289 (CEGAT, Delhi). 37. The Petitioners next propound that a validating act can cure the statute only if it has the competence to validate the statute in question. It is submitted that the amendment to Clause (44) of Section 65B of the Finance Act, 1 .....

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act of betting and gambling would fall within the exclusive domain of Entry 62 of List II. Relying upon Delhi Cloth & General Mills Co. Ltd. Case (supra), it was submitted that when a Legislature sets out to validate a tax declared by a Court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. Thus, relying upon Future Gaming Solutions Case 2015 (supra) it is sub .....

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4 was to make it explicitly clear that while lottery per se is not subject to service tax, the services by lottery distributor or selling agents in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind in any other manner in relation to lottery, will be taxable. The decision in Future Gaming Case 2014 (supra) was referred to on this wherein similar TRU Circular dated 26-07-2012 fell for consideration by this Court and it had been held .....

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rvice provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent ought to be given judicial consideration in the larger public interest in the light of the Article 268 and Entry 92C in List I of the Seventh Schedule to the Constitution of India. It is stated that this provision would clearly indicate that the Parliament is duly empowered to enact law in relation to service tax in respect of service provided or agreed to be provi .....

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n of India. That the intention of introducing the Finance Act, 2015, by the Parliament is to levy service tax in respect of service provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agents. The power to enact the law is covered by the residual Entry 97 of List I. At the same time, it is also stated that subject of 'lottery' is expressly covered by Item No.40 of Union List (List I) thereby settling the controversy as r .....

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hat lottery ticket is an actionable claim, it is stated that the department does not charge any service tax on lottery ticket, there being difference between "lottery ticket" and 'lottery'. It is the Respondents' case that while lottery ticket is an actionable claim and is thus goods, lottery on the other hand is a game and thus a service and, therefore, has been included in the negative list. It is stated that the department was not charging service tax on lottery but on t .....

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marketing and promoting facilities for sale of lotteries. It is clarified that the State of Sikkim is a seller of lottery tickets and the buyer is the individual who buys the lottery tickets and it is not the Petitioners who are the buyers as claimed by them. Therefore, the function of the Petitioners are that of middlemen and as such their services are chargeable to service tax and would bring them within the definition of 'service' under Clause (44) of Section 65B. It is emphasised tha .....

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ent after retaining their consideration, etc. Apart from this, the Petitioners pay the minimum guarantee amount to the Government of Sikkim for providing proper service is not an advance towards purchase price of lottery tickets. This activity of the Petitioners as per the Respondents is chargeable to service tax. 42. On this, reliance was placed to the case of P. Murleedharan vs. Union of India : 2012 (28) STR 344 (Kerala) whereby it has been held that the distribution and marketing the lottery .....

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he State Government dated 09-11-2012 in WP(C) No.40 of 2015, it is emphasised that the Petitioners are the distributors of the Sikkim State Lotteries within the meaning provided under Section 4(c) of the Lotteries (Regulation) Act, 1998. 43. It is contended that the levy of service tax is not a subject-matter which is covered under List II but under the residuary power of the Parliament under Entry 97 of List I thereby making the Union Parliament competent to pass laws relating to service tax. T .....

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d 19-05-2015. 44. It is asserted that the Petitioners apart from referring to Notification No.25/2012 dated 20-06-2015, have not challenged Notification No.6/ 2015-ST dated 01-03-2015 which came into effect from 01-04-2015 by which Item No.(c), (d), (e) have been omitted and the exemption withdrawn with a view to broaden the tax base. By issuing letters dated 18-05-2015 and 12- 06-2015 being Annexure P3 (collectively) in WP(C) No.40 of 2015, the Respondents have acted as per the due process of l .....

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f 2013 and 19096 of 2013). It is reiterated that the Petitioners are liable to pay service tax because of the nature of the services provided by them. 45. It is asserted that by Explanation added to Section 66D(i), it has been clarified that the expression "betting, gambling or lottery" shall not include the activity specified in Explanation 2 to Clause (44) of Section 65B. Explanation 2 inserted by the Finance Act, 2015 dated 14-05-2015 to Clause (44) of Section 65B, provides that for .....

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the new definition of lottery distributors or selling agents added by Clause (31A) Section 65B of the Finance Act, 2015 defines "lottery distributors" or "selling agent" to mean a person appointed or authorised by the State for the purpose of promoting, marketing, selling or facilitating in organising lottery of any kind in any manner organised by such State in accordance with the provisions of the Lotteries (Regulation) Act, 1998. Therefore, since the Petitioners' activ .....

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uot;distributors or selling agent" shall have the same meaning assigned to them in Clause (c) of Rule 2 of the Lotteries (Regulation) Rules, 2010 notified vide GSR 278(e) dated 01-04-2010 and shall include distributor or selling agent authorised by the lottery organising State. It is re-emphasised that while the Respondents are neither denying nor contending that lottery is an actionable claim as service tax has not been charged or demanded on lottery per se but, is being charged on the ser .....

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ion) Act, 1998 and the Lotteries (Regulation) Rules, 2010. It is asserted that the Parliament has power to make laws with respect to any matter for any part of the territory of India notwithstanding that the matter is one enumerated in the State List. Since levy of service tax is not a subject-matter covered under List II but under the residuary power of the Union Parliament under Entry 97 of List I, the Union Parliament is competent to pass laws relating to service tax in respect of services re .....

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er the statutory provisions in Circular D.O.F. No.334/5/2015-TRU dated 19-05-2015. 48. Mr. A. R. Madhav Rao, Learned Advocate, appearing on behalf of the Petitioner in WP(C) No.39 of 2015, opening his arguments submitted that this Court had examined similar provisions contained in the Finance Act, 2010, as involved in the present case and held that the Petitioners were not rendering any service and that the service tax provisions were hit by Entry 62 of List II of the Seventh Schedule of the Con .....

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Future Gaming Case 2015 (supra) to bring the activity of buying and selling activities of lottery tickets by the Petitioners within the service tax net. Analysing the provisions in question, it is submitted that by introducing an Explanation any activity for consideration in relation to or for facilitation of a transaction in actionable claim is sought to be excluded from actionable claim while actionable itself is excluded from being a service. 49. Referring to the case of Sunrise Associates (s .....

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net. Even going by the decision in Future Gaming Case 2015 (supra), no service is being rendered by the Petitioners to the State Government. The Petitioners are rather buying and selling the tickets as their own commercial venture which would be evident from the various contract clauses in the Agreement entered between the State Government and the Petitioners. The promotion of lottery tickets by way of advertisement is purely at the option and the discretion of the Petitioners devoid of any comp .....

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the Petitioners would not fall under this Clause as it is not doing any activity for consideration in relation to promotion, marketing, organising or selling of lottery or for facilitating in organising lottery of any kind. All that the Petitioners are doing is that they are buying and selling the lottery tickets and, therefore, no service is being rendered. He would submit that the definition of 'service' as doing any activity by a person for another for a consideration as provided unde .....

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dated 19- 05-2015 to charge service tax on the Petitioners which justifies the levy for buying and selling of lottery tickets on the ground that the objective of making the exclusion in charging service tax by the amendment of 2015 is to make it explicitly clear that while lottery per se is not subject to service tax, the services in relation to lottery as mentioned earlier, would be taxable. It is asserted that there are no such services being rendered by the Petitioners in relation to lottery .....

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of lottery tickets in addition to the fee or commission or, as the case may be, the discount received being the difference on the face value of the lottery ticket and the price at which the distributor or selling agent gets such ticket. It is submitted that to take the consideration as discount is clearly misplaced in view of the decision of this Court in Future Gaming Case 2015 (supra) by which this proposition was turned down relying upon the Division Bench decision of the Hon'ble Kerala .....

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r of the lottery tickets was totally unfounded. Mr. Rao drew the attention of this Court to the various portions of the judgment in Future Gaming Case 2015 (supra) to which re-empahsise point more particularly, the following:- "(ah) The facts of the present case are clearly distinguishable as noticed in the earlier part of the discussion. We have opined that the State Government is not paying any consideration to the petitioners nor the petitioners are rendering any service to the State. To .....

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s R.M.D. Chamarbaugwala (supra) has also defined the betting and gambling as an activity. (aj) In T.N. Kalyanamandapam Association's case (supra) the clear view of the Hon'ble Supreme Court is that the predominant activity of the service provider was rendering of service and levy of service tax on 60% of the gross value was upheld and similarly in Assn. of Leasing & Financial Service Companies case levy of service tax on 10% of the gross contract value was upheld being a tax on compo .....

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ultimate consumer, no intermediary will sell the goods unless he gets a discount to meet the expenditure for establishment, logistics and some component of profit. The State Government is unable to sell the tickets to the ultimate buyers and for that purpose the petitioners are appointed as stockists or distributors on payment of full sale consideration on discounted price. Further the sale by the petitioners to their stockists, selling agents etc is on discounted price from MRP after keeping th .....

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sale at their own expense without recovering it from the State Government. In any case service tax is being levied and collected on the gross amount without even isolating the discounted cost of lottery ticket. Thus in the present case there does not seem to be any circumstance where the activity of sale of State organized lottery by the petitioners through its various stockists, agents etc. can be construed to be the service rendered to the State Government so as to enable the Central Governmen .....

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ctivity, though the lottery ticket is a tangible thing which carries with it right to participate in the game of chance. Thus, all the activities right from the publishing of the lottery tickets till participation in the game of chance, declaration of draw and even distribution of prizes to the winner fall within the purview of the expression "betting and gambling". Thus, power to levy tax on organisation, promotion and marketing of lottery ticket being an Act of betting and gambling f .....

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that there is no service being rendered and the State Government is not paying anything for any service. Mr. Rao would submit that even in the later case of Future Gaming Case 2014 (supra), this Court while construing the provisions introduced in 2012, had held that definition of service itself excluded actionable claim which fell outside the purview of the definition of service. Further, a Subordinate Legislation could not bring in the levy by way of Sub-Rule (7C) of Rule 6 of the Service Tax .....

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ence to Section 66F was also turned down. 55. Thus, in view of the aforesaid two decisions of this Court, the activities of the Petitioners of buying and selling cannot be subjected to service tax. The Learned Counsel would submit that if one is to go by Explanation 2 to Clause (44) of Section 65B and the Explanation to Section 66D, then the Petitioners are carrying out activities in actionable claim transaction and, if the same were to be construed "as in relation to" or "in faci .....

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ry" and does not metamorphose into an activity for consideration "in relation to promotion, marketing, organising, selling of lottery or facilitating in organizing lottery of any kind, in any other manner" as provided in Explanation 2 to Clause (44) of Section 65B as introduced by the Finance Act, 2015. 56. Referring to the decision in Delhi Cloth & General Mills Co. Ltd. (supra), it was submitted that by introduction of Explanation in the Finance Act, 2015, the Respondents ca .....

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. It is submitted that in view of B. R. Enterprises (supra) where lottery is nothing but betting and gambling, it would not be permissible to hold otherwise which is what has been the consequence by the introduction of various amendments brought about by the Finance Act, 2015. The recent unreported decision of the Hon'ble Gujarat High Court dated 26-03-2015 in Special Applications No.10903 and 13134/2009 in the matter of Niko Resources Limited vs. Union of India and Others wherein an Explana .....

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tor or marketing agent has been made liable to pay whole of the service tax in respect of the activities of the selling agent to whom tickets are being sold by distributor or selling agent under reverse charge, it was submitted that since selling or marketing agents to the Petitioners are also buying and selling lottery tickets, the relationship which the Petitioners have with the State Government would also subsist between the Petitioners/Distributors and the selling or marketing agents as the .....

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01- 03-2015 cannot be fastened on the Petitioners. It is further submitted that the activity carried out by the agent to the Petitioners/Distributors, in any case, is also an activity covered under Entry 34 read with Entry 62 of List II of the Seventh Schedule to the Constitution of India and, therefore, such tax can be levied only by the State Government and not by the Centre. 58. It is next contended that Notification No.30/2012-ST dated 20-06-2012, as amended by Notification No.7/2015-ST dat .....

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the Finance Act, 2015. This is because under Explanation 2 it is only "any activity carried out for a consideration in relation to, or facilitation of, a transaction in money or actionable claim would not be covered as transaction in money or actionable claim". 59. As already noted, the submission of the Learned Counsel is that the agent to the Petitioners/Distributors is only buying and selling the lottery tickets are had not carrying out any activity for consideration in relation to .....

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to 66D would not apply on the activity of the agent to the Petitioners/Distributors for the reasons aforesaid. Therefore, the reverse charge levied on the Petitioners for the activities of their selling or marketing agents would be unsustainable in law. 60. Mr. Surajit Dutta, Learned Counsel appearing on behalf of the Petitioner in WP(C) No.40 of 2015 while adopting the arguments of Mr. Rao, Learned Counsel for the Petitioner in WP(C) No.39 of 2015, only chose to supplement by submitting as foll .....

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ctivities connected with lottery. (ii) The provisions of Section 4(c) of the Lotteries (Regulation) Act, 1998, that the State Government shall sell tickets either itself or through distributor or selling agents, will have to be understood in the context of the agreement entered between the Petitioner and the State Government. It is, therefore, the agreement that is required to be considered in order to understand as to whether the activity carried on by the Petitioners would fall within the misc .....

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. There is no privity of contract between the State Government and the stockists and the sellers. Thus, there is no element of consideration as set out in Clause (44) of Section 65B of the Finance Act, 2015. (iv) It is further submitted that Section 66D which sets out the negative list is a generic provision the core of which cannot be expanded by an Explanation. The dominant object of Section 66D is to exclude lottery which could not have been set at naught by inserting an Explanation to the co .....

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earing on behalf of the Respondents No.1 to 3, submitted that the Respondents by issuing the impugned letters had only asked the Petitioners to obey and comply with the law to pay service tax on the activities that they were carrying out, which, as per the Respondents, amounted to rendering of service. It is submitted that the power to levy service tax is vested in the Union Parliament under Entry 92C of List I in the Seventh Schedule to the Constitution of India. This considered along with Arti .....

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). 62. It was then submitted that the Lotteries (Regulation) Act, 1998, was enacted to curb the evil attached to it for which harsh measures were felt essential. It is then submitted that it was in the exclusive domain of Parliament alone to enact a law in respect of lottery and no State Legislature under Entry 34 would have the power to do so. He would strongly rely upon H. Anraj and Others Etc. vs. State of Maharashtra : (1984) 2 SCR 440 to impress upon us that it is the Union Parliament under .....

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ays been understood to have included the conduct of lotteries. Quite obviously, the subject 'Lotteries organised by the Government of India or the Government of a State' has been taken out from the legislative field comprised by the expression "Betting and gambling" and is reserved to be dealt with by Parliament. Since the subject 'Lotteries organised by the Government of India or the Government of a State' has been made a subject within the exclusive legislative compet .....

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harashtra. Section 32(b) expressly provides that nothing in the Act shall apply to "a lottery organised by the Central Government or a State Government". This, as we said, is but a recognition of the prevailing situation under the Constitution. The Constitutional position cannot be altered by an act of the State legislature." 63. It was his contention that since the subject "lotteries organised by the Government of India or the Government of a State" has been made a subj .....

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ment of a State." Entry 34 of List II is "betting and gambling." The expression "betting and gambling" has always been understood to include the conduct of lotteries and this was not disputed before me by the learned counsel. There is an apparent overlapping between Entry 40 in List I and Entry 34 in List II. It must follow that out of the field of legislation comprised by the expression "betting and gambling" (including the conduct of lotteries), lotteries org .....

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State Legislature cannot enact a law on taxation of lottery since the subject-matter is not inheres in the concept of gambling in Entry 62 of the State List. Entry 92C in List I having not been enforced taxation on lottery would be covered by the residuary power under Entry 97 of List I because admittedly the power of Parliament to regulate lottery under Entry 40 does not include the power of tax. By referring to the various States Laws on gambling, it was submitted that the activity of gamblin .....

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l, is not mere source of raising money to defray expenses of Government but, is a fiscal tool to achieve fiscal and social objective including reduction in inequalities and the goals laid down in Article 38 of the Constitution of India. Reference in this regard is made to Elel Hotels and Investment Limited and Another vs. Union of India : (1989) 3 SCC 698 and Sri Srinivasa Theatre and Others vs. Government of Tamil Nadu and Others : (1992) 2 SCC 643. 65. Referring to and relying upon R. S. Joshi .....

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dity. The Learned Counsel would remind this Court by relying upon State of Bihar and Others etc. etc. vs. Bihar Distillery Ltd. etc. etc. : AIR 1997 SC 1511 that an Act of Parliament represents the will of the people and cannot be lightly declared as unconstitutional. These are the submissions which can be considered as having some substance in the argument placed by Mr. D. K. Singh, Learned Counsel on behalf of the Respondents No.1 to 3. 66. Upon examining the pleadings, the documents available .....

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been decided earlier in the two rounds of litigation on the subject, the questions that have been raised and urged on behalf of the parties are identical. 67. We have set out the pleadings and the oral submission of the parties in extenso to demonstrate the width of the area that was covered but, the primary question that falls for determination is as to whether by the amendments to these provisions that shall be dealt with in detail later, is as to whether or not the activity of the Petitioner .....

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Union Parliament has the competence to pass a law on service tax on lottery when there is no taxing provision in List I of the Seventh Schedule to the Constitution of India, particularly, when under Entry 62 of List II vests the State Legislature to levy tax on betting and gambling having regard to the fact that betting and gambling would bring within its ambit lotteries also. This was also the question that had fell squarely for consideration in the previous two cases. 68. This Court in Future .....

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ctionable claim" is defined under Section 3 of the Transfer of Property Act, 1882; (iv) That actionable claim is left out from the purview of service tax in the negative list by virtue of Section 66D of the Finance Act, 1994, as amended by the Finance Act, 2010 and the Finance Act, 2012; (v) That lotteries fall within the meaning of "betting and gambling" as provided in Entry 34 of List II following the jurisdiction in R.M.D. Chamarbaugwala Case (supra) and, therefore, by virtue o .....

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of Rule 6 only provides an optional composition scheme for payment of service tax and that unless there is levy of service tax under the statutory provisions, the alternate scheme cannot be extended so as to provide for such levy. 69. The above findings in the two cases of Future Gaming Case 2015 (supra) and Future Gaming Case 2014 (supra) are no doubt under examination of by the Hon'ble Supreme Court in the Special Leave Petitions filed by the Respondents but, there being no order of stay, .....

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ves on this. 70. In our view, the crucial question that would require determination is as to whether there has been any change on the finding of this Court in Future Gaming Case 2015 (supra) and Future Gaming Case 2014 (supra) that the activities of the Petitioners would not constitute 'service' in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind and in any other manner by introduction of the Explanation 2 to Clause (44) o .....

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zing games of chance, including lottery, Bingo or Lotto in whatever form or by whatever name called, whether or not conducted through internet or other electronic networks;" 71. This provision was assailed on the following two grounds: "10. ……………………………………………………….. (A) that the activity being performed by the petitioners does not fall within .....

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tive power under entry 97 of List I, Schedule 7 to the Constitution of India lacks legislative competence to levy any tax in respect to the activity falling under entries 34 and 62 of List II." 72. In Future Gaming Case 2015 (supra) this Court after examining the entire scheme of the Constitution and the various decisions of the Hon'ble Supreme Court concluded as follows:- "(i) In the backdrop of discussion on Ground (A) we have no hesitation to conclude that the activities of the .....

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er Entry 34 and 62 of List II to Seventh Schedule of Constitution of India. (iii) The activity of promotion, marketing, organizing or in any other manner assisting in organising game of chance including lottery being an activity of "betting and gambling" under Entry 62, List II to Seventh Schedule of Constitution of India, the State Legislature alone is competent to levy any tax on such activity under Entry 62. (iv) The Parliament has the competence and jurisdiction to levy taxes on an .....

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Schedule of Constitution of India lacks legislative competence to impose any tax including "service tax" on such activity." 73. Upon such conclusion Sub-Clause (zzzzn) to Clause (105) of Section 65 of the Finance Act, 1994 introduced by Finance Act, 2010 was struck down as being ultra vires the Constitution of India having been enacted in contravention to Entry 97 of List I of the Seventh Schedule read with Article 148 of the Constitution of India. 74. In the next Future Gaming C .....

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lip;…………………… (34) "negative list" means the services which are listed in section 66D; …………………………………………………………… (44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an a .....

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the rate of twelve per cent on the value of all services, another than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Negative list of services. 66D. The negative list shall comprise of the following services, namely:- ………………………………………………& .....

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case was, as noted already, was as to whether or not the activity of the Petitioners of promoting, organising or assisting in arranging the sale of lottery tickets of the Government of Sikkim is a taxable service falling within the purview of the Finance Act, 1994 as amended by the Finance Act, 2015. 76. This question also has been squarely dealt in Future Gaming Case 2015 (supra) which was then considered and followed in Future Gaming Case 2014 (supra). The following portions of the decision i .....

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e issue would be as to whether or not the Petitioner is an agent of the Government of Sikkim in pursuance to the agreement dated 10-08-2009 in respect of the sale of lottery tickets. However, we find that this question which was also directly in issue stands fully answered in the judgment of this Court dated 29-11- 2012 in WP(C) No.36 of 2011 in the matter of M/s. Future Gaming Solutions Pvt. Ltd. (supra) and, therefore, it need not delay us much except to recapitulate hereafter on some of the e .....

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f where the Hon'ble Supreme Court has held lottery tickets to be 'goods' in the wider sense of the term though it is an 'actionable claim' and that it is only on account of the statutory exclusion from the definition of goods in various State Sales Tax Laws that it has been held not to be 'goods'. Decision of this Court in WP(C) No.19 of 2007 in the matter of M/s. Martin Lottery Agencies Limited (supra) has been referred to and notice taken of the conclusion arrived a .....

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at distributor as the purchaser acts as a wholesaler on payment of total sale price, he is a buyer and not an agent. We had also accepted the proposition founded on Pioneer Tools and Appliances (P) Ltd. (supra) that in the light of the terms of the agreement the State Government had no concern with the further sale of the ticket by the Petitioner except for it to comply with the regulatory provisions contained in the Lotteries (Regulation) Act, 1988, and the Rules framed thereunder and that the .....

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ction between agents and purchaser defined in Benjamin's Sale of Goods, 8th Edition and Bowstead & Reynolds on Agency, 16th Edition 1996 (supra) were also taken note of and referred to while considering this question. Decisions in Alwaye Agencies (supra); Gordon Woodroffe (supra); Bharat Sanchar Nigam Ltd. (supra); Imagic Creative (P) Ltd. (supra) and Indian Railways C. & T. Corpn. Ltd. (supra) were also analysed for determination of the very question. Upon consideration of all these .....

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he Respondents was a commission provided to the Petitioner in lieu of the service rendered by them, we had taken note of Mahindra and Mahindra Ltd. (supra); Pioneer Tolls and Appliances (P) Ltd. (supra); Philips India Ltd. vs. Collector of Central Excise, Pune : (1997) 6 SCC 31; Collector of Central Excise, Boroda vs. Besta Cosmetics Ltd. : 2005 (183) ELT 122 (SC); a Division Bench judgment of the Kerala High Court dated 07-04-2004 in the matter of The Commissioner of Income Tax, Thiruvananthapu .....

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of the State Lottery through its various stockists, agents, etc., cannot be construed to be a service rendered to the State Government to fall within the purview of the service tax in the absence of any element of service in such activity. 49. In Martin Lottery Agencies (supra), following the legal proposition that the activity of the lottery is res extra commercium laid down in R.M.D. Chamarbaugwala (supra) and B. R. Enterprises (supra) as being gambling, doubt was expressed "as to how ser .....

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is reproduced below for convenience:- "Whether tax can be deducted or collected at source from the persons who received bulk quantity of lottery tickets at a commission or at a discounted price invoking Section 194 G of the Income Tax Act, 1961 (in short 'the Act') considering the nature of transactions between the petitioners and Government is the question to be decided in this case. ………………………….. 4. …&hel .....

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b agents or they directly sell to to the public is not the Government's look out. Even if bulk tickets purchased by the petitioners remains unsold, Government is not bound to pay anything to them. It is the loss of the petitioners. Sold tickets will not be taken back by the Government. As per the terms in Ext.P1, Government is not responsible for paying anything to the petitioners. Section 194G authorises only the deduction at source if Government is liable to pay any commission or any remun .....

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hellip;……………………………… It is a well-settled principle that in a taxing Statute, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity or presumption as to tax. When Government is not responsible for paying commission or remuneration to the petitioners when it is selling lottery at a reduced price, there is nothing for deduction and paying balance after deducting at s .....

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Hameed's case was dismissed and, therefore, by implication the finding that the Petitioner is not an agent of the Government of Sikkim in the sale, promotion, etc., of its lottery tickets still holds the field. In any case, the finding of M. S. Hameed's case is in consonance with the decision of this Court in WP(C) No.36 of 2011 wherein apart from holding that the Petitioner was not an agent of the Government in relation to the sale of lottery, it has categorically been decided that ther .....

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th the Finance Act, 1994, as amended by the Finance Act, 2015, it would be necessary to examine as to whether the position set out above stands altered. Upon examination of the existing agreements between the Petitioners and the Government of Sikkim, the constitutional scheme and a catena of decisions of the Hon'ble Supreme Court as well as the finding of this Court in the Future Gaming Case 2014 (supra) held as under:- "70. ………………..…&hel .....

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ner comprising of promotions, organising, reselling or any other manner assisting in arranging of lottery tickets of the State Lotteries does not establish the relationship of a principal or an agent but rather that of a buyer and a seller and, on principal to principal basis in view of the nature of the transaction consisting of bulk purchases of lottery tickets by the Petitioner from the State Government on full payment on a discounted price as a natural business transaction and, other related .....

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ed 20-06-2012 and the Service Tax Rules is ultra vires the very provisions of the Finance Act being in excess of the powers vested therein." 78. Based on the above, it was held by us that transaction in lottery tickets are not liable to service tax under the provisions of the Finance Act, 1994 as amended by the Finance Act, 2012, thereby quashing the impugned letters in that case issued by the Respondents. 79. In our view, the primary finding in both the cases is that the activities of the .....

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the Petitioners from the State Government on full payment of price as a natural business transaction and, other related features and there being no privity of contract between the State Government and the Stockists, agents, resellers, etc., under the Petitioners. The question that would arise in the present case is as to whether the primary finding of this Court in the two decisions would also apply in the facts of the present case having regard to the amendment to the Finance Act, 1994 brought .....

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of promoting, marketing, selling or facilitating in organising lottery of any kind, in any manner, organised by such State in accordance with the provisions of the Lotteries (Regulation) Act, 1998 (17 of 1998); …………………………………………………. (44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, bu .....

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on in money or actionable claim" shall not include- ………………………………………………. (ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out- (a) by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilita .....

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tting, gambling or lottery; Explanation.-For the purposes of this clause, the expression "betting, gambling or lottery" shall not include the activity specified in Explanation 2 to clause (44) of section 65. …………………………………………………………. Valuation of taxable services for charging service tax 67. (1) Subject to the provisions of this Chapter .....

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ection,- (a) "consideration" includes- …………………………………………………………. (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket an .....

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hellip;…………..……………………… Your attention is invited to the Circular under D.O.F. No.334/5/2015-TRU dated 19.05.2015, issued by the Tax Research Unit, Department of Revenue, Ministry of Finance, Govt. of India (copy enclosed) in relation to the changes effective from 01.06.2015 in respect of service relating to lottery. An explanation has been added in entry (i) of section 66D to specifically state that " .....

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ill come into effect from 01.06.2015. IN respect of services provided by lottery distributors and selling agents, the service provider has also been allowed to pay service tax at an alternate rate to the conditions as prescribed under Rule 6(7C) of the Service Tax Rules, 1994. This is brought to your notice for favor of your kind information and necessary compliance, please. ………………………………………&h .....

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in money for actionable claim. In order to overcome the finding of this Act in the earlier judgments, Explanation 2 appears to have been inserted to Clause (44) of Section 65B by which the transaction in money or actionable claim as provided under Clause (44) excluded any activity carried on for a consideration in relation to or for facilitation of, a transaction in money or actionable claim, including the activity carried out, inter alia, by a lottery distributor or selling agent in relation to .....

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9;service' that would require examination in order to ascertain as to whether the activity of the Petitioners would fall within the meaning of 'service' and, therefore, liable to levy of service tax under the Finance Act, 1994. 'Service' has been defined under Clause (44) as meaning any activity carried out by a person for another for consideration. Thus, the principal requirement that are embedded in these provisions clearly appears to be (a) that the activity should be carr .....

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al basis there being bulk purchase of lottery tickets by the Petitioners from the State Government on full payment on a discounted price as a natural business transaction and other related features and, of there being no privity of contract between the State Government and the Stockists, agents, sellers, etc., under the Petitioners. In our view, in this case also the very same conclusion would be applicable as the nature of the relationship between the Petitioners and the State Government and th .....

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;. This Agreement is made on this the 24th day of January, 2015 between the Governor of Sikkim, through the Principal Secretary, Finance, Revenue and Expenditure Department, Government of Sikkim (hereinafter referred to as the "Government') which expression shall unless excluded by or repugnant to the context means and includes its successors in office and assigns of the FIRST PART AND M/s. Future Gaming and Hotel Services Private Limited, a company having its registered office at 54, M .....

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lip;………………………………………… WHEREAS M/s. Future Gaming and Hotel Services Limited has agreed to be appointed as the Sole Purchaser/ Distributor to market and sell tickets of such lottery schemes as are allotted to them by the Government. ….………………………………………………&hel .....

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Limited as Sole Purchaser/Distributor, exclusively for paper lottery tickets to market 8 (eight) weekly lottery schemes per day promoted by the State of Sikkim as as permitted by the Government under the Lotteries (Regulation) Act, 1998 and Lotteries (Regulations) Rules, 2010 for a period of 5 (five) years w.e.f. 01-02-2015 to 31-01-2020 (both days inclusive). 2.2 The appointment of the Sole Purchaser/Distributor is not transferable. 2.3 The Sole Purchaser/Distributor on his own terms and at his .....

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#39;s obligation towards the State Government under this Agreement. 2.4 All the relevant Acts, Rules and Regulations of the Government of India and the Government of Sikkim pertaining to lotteries shall be binding on the Sole Purchaser/Distributor. 2.5 It shall be the responsibility to the Sole Purchaser/Distributor to ensure that its Sub/Area Distributor/Promoter, Sub/Area Stockists, Sellers adhere to the provisions of the Act, Rules and all other procedures, regulations etc. ……&h .....

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p;………………………. 13. ADVERTISEMENT AND PROMOTIONS: 13.1 The Sole Purchaser/Distributor may use all necessary advertisement and promotion to create and enhance the image for the lottery schemes of the State of Sikkim. These shall include coverage through press and advertisement and promoting through direct mail and publicity through events like road shows, etc. 13.2 All publicity in respect of the lotteries shall be at the option of the S .....

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…………………." 85. As would appear from the clauses of the agreement extracted above, the Petitioner is in fact a wholesaler as held in Future Gaming Case 2015 (supra) and the relationship between the Petitioner and the Government of Sikkim is on a principal to principal basis. The very words used in the recital that the Petitioner "has agreed to be appointed as the sole Purchaser/Distributor to market and sell tickets of lottery schemes &hel .....

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n of 'service' provided under Clause (44) of Section 65B alluded to earlier. 86. Thus, as we find no change in the circumstance by introduction of the new provisions by the Amendment Act of 2015 from that which existed earlier in Future Gaming Case 2015 (supra) and Future Gaming Case 2014 (supra), we have no hesitation to hold that the finding of this Court in Future Gaming Case 2014 (supra) still continue to hold good. The activity carried out by the Petitioners in relation to promotion .....

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-2006 by which it has been clarified by the Central Board of Excise and Customs that the service tax can be levied only when a consideration is received for taxable services provided. The Circular having been issued in terms of Section 37B of the Central Excise Act, 1994 (as applicable to Finance Act, 1994) in terms of Section 83 of the Finance Act, 1994, would be binding on all field formations of the department in view of the various decisions of the Hon'ble Supreme Court including Rajpuro .....

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onal composition scheme for payment of service tax which by itself does not create a charge of service tax and that this Rule is only a piece of Subordinate Legislation framed under the rule making power provided in the Finance Act, 1994 and, therefore, in view of the position of law that Subordinate Legislation cannot be override the statutory provisions, Sub-Rule (7C) of Rule 6 cannot go beyond the provision of the Finance Act, 1994. While holding this, we have placed reliance upon Tahir Hussa .....

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is Court in the Future Gaming Case 2015 (supra) and Future Gaming Case 2014 (supra) which we have alluded to in detail. We agree with Mr. Rao that it is trite that when a Legislature sets out to validate a tax declared by a Court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before the validation can be said to take place effectively. We may in this regard, refer to the decision of the Hon'ble Supreme Court while .....

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31. The role of an Explanation of a statute is well known. By inserting an Explanation in the Schedule of the Act, the main provisions of the Act cannot be defeated. By reason of an Explanation, even otherwise, the scope and effect of a provision cannot be enlarged. It was so held in S. Sundaram Pillai, etc. v. R. Pattabiraman [(1985) 1 SCC 591] in the following terms: (SCC p.613, para 53) "53. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of a .....

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me gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and intendment of the enactment, ……………...." " Thus, even if we assume that the law has been validly passed, the amendment to the Finance Act, 1994 by the amendment Act, 2015, cannot be held to be valid and, therefore, is liable to be struck down. 92. On .....

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as goods on payment of price leaving the former charged with all the liabilities down the line to the second tier agents it cannot, in our view, be considered as an activity carried out for consideration in relation to or for facilitation of a transaction in money carried out by a lottery distributor or a selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind in any other manner as provided under Explanation 2 to Claus .....

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ine after the second tier. Thus, the levy of reverse service tax vide Notification No.30/2012-ST dated 20-06-2012 as amended by Notification No.7/2015-ST dated 01-03- 2015 is clearly unsustainable and liable to struck down. 93. For these reasons, we are of the considered opinion that the other contention raised by Mr. Rao would be quite redundant and, therefore, not necessary to be dealt with. 94. Insofar as the submission of Mr. D. K. Singh, Learned Counsel for the Respondents No.1 to 3 and the .....

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