9911796707
TMI Blog2018 (10) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... 72 of the State Goods and Service Tax Act, 2017. Learned Senior Advocate appearing for the petitioner has submitted that, a lottery cannot come within the definition of 'goods'. Referring to 1986 Volume 1 Supreme Court 63 (H. Anraj v. Government of Tamil Nadu) he has submitted that, the initial view of the Supreme Court was that, lottery tickets to the extent they comprise the entitlement to participate in the draw, are goods. Such view was reversed in 2005 Volume 5 Supreme Court Cases page 603 (Sunrise Associates v. Government of NCT of Delhi). Both, the Central Goods and Services Tax Act, 2017 (CGST) and the State Goods and Services Tax Act, 2017 (SGST) define 'goods'. Such definition includes actionable claim and excludes money and securities. He has referred to Section 7 read with Schedule III Entry 6 of CGST Act, 2017 in support of his contention. He has referred to the definition of 'goods' in Article 366(12) of the Constitution. He has submitted that, 'goods' as defined therein has to have the characteristics of material, commodities and articles. Referring to Article 366 (29A) of the Constitution, he has submitted that, the definition of 'tax' on the sale or purchase of 'g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court Cases page 1 (Jindal Stainless Ltd. v. State of Haryana) and has submitted that, the power of taxation controlled by Article 265 of the Constitution forbids levy or recovery or any tax except by authority of law. Since lottery is not 'goods' within the meaning of the Constitution, neither Central nor the State Governments can enact any law for the purpose of levying sales tax on the lottery. A lottery is not a commodity in the market which can be bought against consideration, and on payment of the consideration, the property passes to the purchaser. Referring to the provisions of the Act of 1998, he has submitted that, such Act came into being in exercise of powers under List I Entry 40 of the Seventh Schedule of the Constitution. According to him, treating lottery to be a 'goods' would do violence to the provisions of the Act of 1998. The State and the Central legislature therefore have exceeded the Constitutional mandate in bringing lottery within the scope and ambit of the SGST, CGST and IGST. Without prejudice to such contentions, learned Senior Advocate appearing for the petitioner has submitted that, sale of lottery ticket is a trade under Article 301 to 304 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 366(12) of the Constitution of India is an inclusive one. Relying upon 2006 Volume 5 Supreme Court Cases page 603 (Sunrise Associates v. Government of NCT of Delhi) and 1986 Volume 1 Supreme Court Cases page 414 (H. Anraj v. Government of Tamil Nadu), he has submitted that, lottery is an 'actionable claim' and therefore 'goods'. In Sunrise Associates (supra), according to him, since, the State laws excluded 'actionable claim' from the definition of 'goods' explicitly, the Supreme Court held that, lottery would not be subjected to Sales Tax. According to him, Sunrise Associates (supra) should be construed to mean that, lotteries are 'actionable claim' and are included in the definition of 'goods'. However, since the Sales Tax laws excluded 'actionable claim' from its purview, lotteries were also held to be excluded. According to him, CGST and SGST, have included actionable claims within the definition of 'goods', having regard to the ratio laid down in Sunrise Associates (supra). The inclusion of 'actionable claim' in the definition of 'goods' is legislative recognition of judicial pronouncement. Therefore, it cannot be argued that, the Union Parliament or the State Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngal has submitted that, CGST Act and SGST Act have not discriminated between lotteries run by the State Government and the lotteries authorised by the State. The Central and State Governments have issued relevant notifications imposing different rates of taxes for lottery run by the State Government and lottery authorised by the State Government in another State. In case of lottery run by the State Government it is in aggregate 12 per cent, with 6 per cent each been levied under the CGST and SGST. The lottery authorised by the State Government in another State attracts in aggregate 28 per cent, with 14 per cent each under the CGST and SGST. The notifications have been issued pursuant to the recommendations made by the GST Council in its 17th meeting. The rates are not discriminatory and are intended to preserve economic uniformity and the interest of the constituent States. According to him, the tax component is included in the price of the ticket. The end customer which purchased the ticket is not saddled with any additional tax burden. Learned Additional Advocate General appearing for the State of West Bengal has submitted that, the State of Sikkim, Mizoram, Nagaland and Arunac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 925 (Khyerbari Tea Co. Ltd. and Anr. v. State of Assam and Ors.) and submitted that, in tax matters, the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation, if it does so reasonably. He has submitted that, the categorization of sale of lotteries as lotteries organized by States and the lotteries authorised by the State has been approved by the Supreme Court in 1984 Volume 3 Supreme Court Cases page 704 (J.K. Bharati v. State of Maharashtra and Ors.). Therefore, it is open for the Government to treat lottery run by the State Governments and the lottery authorised by the State Governments, for any justifiable and valid reason, to be the same. He has drawn the attention of the Court to Schedule III of Section 7 of the CGST Act, 2017 and Rule 31A of the CGST Rules 2017. He has submitted that, the lottery is included along with activities being gambling, betting and horse racing in Schedule III so as to create a category of case of activity where people indulge in not reaping fruits of their labours. The activities of betting and gambling, such as, by way of horse racing or gambling, attract GST at the rate of 28 per cent. It was with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to be made by the GST Council. H. Anraj (supra) has held that a discriminatory tax on lottery would be violative of Articles 301 and 304. To some extent, H. Anraj (supra) holds the field. He has pointed out that, out of 29 States and 7 Union Territories in India, only 10 States organize lotteries. Out of the States organizing lotteries, only Hill States of North-East are affected. Therefore, the Hill States were outnumbered and outvoted in the GST Council. The Hill States were therefore obliged to apply the rates as decided by the GST Council. Learned Advocate General of the State of Mizoram appearing for the respondent no. 2, has submitted that, the classification of 12/28 percent of tax for lotteries has no functional basis. He has referred to Section 3 of the Lotteries (Regulation) Act, 1998. He has relied upon Rule 2(1)(f) of the GST Rules. He has submitted that, the State of Mizoram supports the petitioner to the extent of differential rate of GST introduced on sale of lotteries. According to him, the tax should be uniform. In reply learned Senior Advocate appearing for the petitioners has submitted that, in TATA Consultancy Services (supra), the Court did not go into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing into effect of the Act of 1998, there is only one type of lottery. Consequently, GST Council does not have any power or authority to bifurcate lotteries, based on entries in the seventh schedule, when the legislature has fixed the type of lottery to be one. Discrimination in the rates of levy between State organized lotteries merely because they are crossing the borders has no rational nexus and is highly discriminatory and violative of Article 14 of the Constitution of India as also Articles 301 to 304 of the Constitution. Consequently, he submits that, the reliefs as prayed for in the writ petition should be granted. The following issues have arisen for consideration:- i) Is lottery a 'goods' or an 'actionable claim'? ii) Can lottery be taxed under Central Goods and Services Tax Act, 2017 and West Bengal Goods and Services Tax Act, 2017? iii) If so, is differential levy of tax permissible? iv) To what reliefs, if any, are the parties entitled to? The petitioners claim that, they sell paper lotteries of the respondent no. 2 and respondent no. 4 to 6 within the State of West Bengal. Apart from the respondent no. 2 and 4 to 6, there are other States which organizes lotteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draw are 'goods' falling within the definition of 'goods' as given in Tamilnadu General Sales Tax Act, 1954 and Bengal Finance (Sales Tax) Act, 1941. Independent of the two state Acts under consideration therein, it has held that, a trade of a lottery ticket confers on the purchaser two rights. In this regard it would be appropriate to refer to paragraph 27 thereof, which is as follows:- "27. It cannot be disputed that in every raffle scheme based on the sale of lottery tickets, similar to the schemes sponsored by each of the two States in this case, every participant is required to purchase a lottery ticket by paying a price therefor ( the face value of the ticket ) and such purchase entitles him not merely to receive or claim a prize in the draw, if successful but before that also to participate in such draw. In other words, a sale of a lottery ticket 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. Both would be beneficial interests in movable property, the former 'in praesenti', the latter 'in futuro' depending on a contingency. Lottery tickets, not as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prize, depending on chance, it was an assignment of an 'actionable claim'. H. Anraj (supra) has pleaded the transaction of sale of lottery ticket into the acquisition of firstly the right to participate in the lottery draw and secondly the right to win the prize, depending on chance. The Supreme Court has reconsidered H. Anraj (supra) in Sunrise Associates (supra). Sunrise Associates (supra) has held that, the distinction drawn in H. Anraj (supra) between the chance to win and the right to participate in the draw was unwarranted. It has held that, a lottery is in essential a chance for a prize, the sale of a lottery ticket can only be a sale of that chance. It has held that, there was no distinction between the two rights. The right to participate being an inseparable part of the chance to win, is therefore part of an 'actionable claim'. It goes on to hold that, the sale of a lottery ticket does not necessarily involve the sale of goods. It is nothing other than a contract of carriage. The actual ticket is merely evidence of the right to transfer. A contract is not a property but only a promise supported by consideration, upon breach of which either a claim for specific perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exclusive power of the Parliament to make laws with respect to Goods and Services Tax where the supply of goods, or of services, or both takes place in course of inter-state trade or commerce. Article 269A deals with levy and collection of Goods and Services Tax in course of inter-state trade or commerce. Essentially, Article 269A recognises the Government of India to collect Goods and Services Tax on supplies in the course of inter-state trade or commerce. It allows the apportionment of the tax levied and collected between the Union and the States as may be provided by Parliament by law. It recognises the authority of the Parliament by law to formulate the principles for determining the place of supply and when a supply of goods or of services or both takes place in the course of inter-state trade or commerce. Article 279A deals with Goods and Services Tax Council. It envisages the Constitution of a Goods and Services Tax Council. It enumerates the powers and functions of such Council, the decision making process therein and the establishment of a mechanism to adjudicate any disputes. Part XIII of the Constitution of India deals with Trade, Commerce and Intercourse within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),-- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. 9. Levy and collection (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person shall be liable to pay tax. Similar provisions appear in the West Bengal Goods and Services Tax Act, 2017. It regulates the levy and collection of tax on intra-State supply of goods or services or both in the State of West Bengal. Legislature enjoys a very wide latitude in classification for taxation is the view expressed in Federation of Hotel and Restaurants Association (supra) as well as Nitdip Textile Processor (supra). The State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it is done reasonably is the view expressed in The Twyford Tea Company (supra). It has not been substantiated that, either the Central or the State Legislatures have exceeded their jurisdiction in promulgating any of the Acts governing goods and services. Binoy Viswam (supra) has held that, a legislation or a provision contained in a statute can be invalidated on two grounds, namely, it is not within the competence of the legislature which passed the law and/or it is in contravention of any of the fundamental rights stipulated in Part III of the Constitution or any other right/provision of the Constitution of India. It goes on to say that, a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Tax Act as well as the West Bengal Goods and Services Tax Act, 2017. The rates imposed by the GST Council are decisions which a Writ Court is slow to examine. The rationale for imposing differential rates appear from the minutes of the 17th meeting of the GST Council. The rationale for the differential rate or the rates by themselves have not been substantiated to be breach of any provision of the Constitution. Keshab Chandra (supra) has held that, the State Government cannot challenge its own notification as unconstitutional as, it has the wherewithal to set the wrong, right. In the present case, the States of Sikkim, Mizoram, Nagaland and Arunachal Pradesh have supported the writ petitioner on the score that the rates of taxes are discriminatory. Such States were present in the GST Council Meetings. The resolution was carried by requisite majority. Article 279A contemplates establishment of a mechanism to adjudicate any dispute between one or more States or between the Government of India and any State or States on one side and one or more States on the other side or between two or more States. However it should not be construed that, the decisions or the resolutions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
