TMI Blog2020 (10) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... eam-11 involving substantial skills is a business activity and not wagering having protection granted by Article 19(1)(g) of the Constitution. The SLP filed by said Varun Gumber against the above judgment was dismissed by the Hon'ble Supreme Court vide its order dated 15.09.2017. The Union of India has neither filed SLP against the said judgment dated 18.04.2017 of the Punjab Haryana High Court nor filed any review of the order dated 15.09.2017 and have thus, accepted the findings contained therein - the issue whether the fantasy games played on the platform of respondent No.5 are or are not gambling/betting activities was thus closed and decided in favour of respondent No.5. We have also considered the submission of the respondent No.5 that the online fantasy games of respondent No.5 are not operating in total regulatory vacuum and on affidavit it has been submitted that they are subject to self-regulation by the industry body known as Federation of Indian Fantasy Sports (FIFS) founded in 2017, of which respondent No.5 is a member. The FIFS is a Section 8 Company incorporated under the Companies Act, 2013 for the purpose of self-regulation and promotion of best practice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tasy game offered by respondent No.5 is a game of mere skill and their business has protection under Article 19(1)(g) of the Constitution of India. Whether Dream-11 is wrongly classifying its virtual online games under wrong entry for GST and is also violating Rule 31A (3) of CGST Rules, 2018 to evade GST is concerned? - HELD THAT:- It is deemed appropriate to leave the said second issue for the GST authorities to consider in accordance with law. Thus, the PIL has been filed without any real public interest, without disclosing the relevant facts and without proper research - the PIL is misconceived - PIL petition dismissed. - D. B. Civil Writ Petition No. 20779/2019 - - - Dated:- 16-10-2020 - HON'BLE THE CHIEF JUSTICE INDRAJIT MAHANTY And HON'BLE MR. JUSTICE MAHENDAR KUMAR GOYAL For the Petitioner : Mr. Punit Singhvi through VC For the Respondent : Mr. Vikram Nankani, Sr.Adv. with Mr. Arvind Lakhawat through VC Mr. H.V. Nandwana through VC Mr. Karan Bharihok through VC Mr. Siddharth Ranka through VC Mr. R.D. Rastogi, ASG through VC Mr. Rajesh Maharshi, AAG through VC JUDGMENT BY THE COURT(PER HON'BLE THE CHIEF JUSTICE): 1. This wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winners and on such sum no GST is paid which, is being paid on the remaining amount retained as Platform Fee i.e. ₹ 20/-. The petitioner also alleges that even on the said actionable claim amount of ₹ 80/- kept in the escrow account and distributed amongst the winners, GST should be payable by the private respondent No.5, that too @ 28%. In substance, the present PIL seeks action against the private respondent No.5 - Dream 11 by raising two issues, namely:- (1) Whether online fantasy sports games offered on Dream 11 platform are gambling/betting ? (2) Whether respondent No.5-Dream 11 is wrongly classifying its virtual online game under the wrong entry for GST and, therefore, violating Rule 31(A) (3) of the CGST Rules, 2018 in order to evade GST? 3. Respondent Nos. 2 3, namely State of Rajasthan and the Additional Chief Secretary, Home Department, Government of Rajasthan have filed a detailed counter affidavit dated 26.08.2020 opposing the PIL stating therein that the PIL petitioner has merely made untenable allegations without any facts and substance. It is further submitted that the Punjab Haryana High Court in the case of Varun Gumber Vs. Union Terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 18.04.2017 passed by the Punjab Haryana High Court in the case of Varun Gumber (Supra), which, after considering in detail the online fantasy games offered by platform of Dream 11 and relying upon the judgment of the Hon'ble Supreme Court, has come to hold that fantasy games were games of mere skill and that the business of Dream-11 had the protection of Article 19 (1) (g) of the Constitution of India and same did not amount to gambling. It was further brought on record that SLP (Diary No.) 27511/2017 filed against the judgment rendered by the Punjab Haryana High Court came to be dismissed by the Hon'ble Supreme Court vide order dated 15.09.2017. Respondents also relied upon the judgment of this Court in the case of Chandresh Sankhla (Supra). It would be relevant to note herein that respondent No.5 pointed in its counter affidavit that in the show cause notice-cum - demand notice dated 27.05.2020, issued by the Commissioner of CGST, it was the contention of the Department that the games offered are games of skill by relying upon the judgment of the Hon'ble Supreme Court in the case of Dr. K.R. Lakshmanan Vs. State of Tamil Nadu, (1996) 2 SCC 226. 5. Shri R.D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d such competitions are business activities entitled to protection guaranteed by Article 19(1) (g) of the Constitution of India. It has been held in para 23 as under:- 23. Applying these principles to the present Act, it will not be questioned that competitions in which success depends to a substantial extent on skill and competitions in which it does not so depend, form two distinct and separate categories. The difference between the two classes of competitions is as clear-cut as that between commercial and wagering contracts...... 10. While deciding the issue pertaining to the fantasy games offered on the platform of respondent No.5, in the case of Varun Gumber (supra), in a reasoned judgment dated 18.04.2017, the Punjab Haryana High Court analyzed the business model of respondent No.5 in detail and held that the same did not amount to gambling because it was a game of mere skill as opposed to a game of chance. The High Court inter-alia noted and favourably considered following important aspect of the fantasy games offered by the respondent No.5 herein:- 5. What is a fantasy sports game . b) Any fantasy sports game offered by them is a game which occurs ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considerable skill, judgment and discretion. The participant has to assess the relative worth of each athlete/sportsperson as against all athletes/sportspersons available for selection. He is required to study the rules and regulations of strength of athlete or player and weakness also. The several factors as indicated above submitted by the respondent-company would definitely affect the result of the game.... 20. The respondent company's website and success in Dream-11's fantasy sports basically arise out of users exercise, superior knowldege, judgment and attention. I am of the further view that the element of skill and pre-dominant influence on the outcome of the Dream-11's fantasy than any other incidents are and therefore, I do not have any hesitation in holding that any sports game to constitute the game of mere skill and not falling within the activity of gambling for the invocation of 1867 Act and thus, the respondent-company, is, therefore, exempt from the application of provisions, including the penal provisions, in view of Section 18 of 1867 Act. Equally so, before I conclude, I must express that gambling is not a trade and thus, is not protected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 30.04.2019, the Bombay High Court was pleased to dismiss the said PIL holding that the online fantasy cricket of respondent No.5 was a game of mere skill, as distinguished from a game of chance. The Dream-11 fantasy game does not involve risking money or playing stakes on the result of a game or an event, hence, the same did not amount to gambling/betting. The Bombay High Court also held that respondent No.5 is correctly paying 18% GST by classifying its services under entry 998439 and is not liable to pay GST @ 28% as applicable to 'online gambling services' under entry 999692 and that Rule 31-A(3) of the CGST Rules, 2018 was not applicable as the said actionable claim as per Schedule III and Section 7(2) of the Act, are not considered as 'supply of goods' or 'supply of services' and, therefore, the authorities have rightly not taken steps against Dream-11. 14. The decision of the Bombay High Court was challenged in four different SLPs. Three SLPs were filed by the parties therein. One SLP was also filed by said Varun Gumber. The SLP filed by PIL petitioner as well as by Varun Gumber were dismissed. In SLP filed by the Union of India, the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l falls within gaming , as distinguished from betting . 19. The Commissioner of CGST, Mumbai has now issued a show cause notice dated 25.07.2020 to respondent No.5 raising certain protective demand of service tax, which is not the subject matter of the present PIL and would be dealt with by the authorities in accordance with law. However, in paragraphs 9.3 and 10 of the said show cause notice, the GST Department has categorically taken a stand by relying on the judgment of the Hon'ble Superme Court in Dr. K.R. Lakshmanan(supra) that the online fantasy game of respondent No.5 is a game of skill. This stand taken by the GST Department is despite referring in paragraph 13.6(i) (ii) of the show cause notice to the order dated 06.03.2020 of the Hon'ble Supreme Court in pending SLP. The submissions fairly advanced by the learned Additional Solicitor General appearing on behalf of respondent-Union of India are also to the effect that the issue of gambling/betting has already been finally decided by the Hon'ble Supreme Court vide order dated 13.12.2019, whereby the only issue kept open is regarding GST, which is pending consideration in the review petition before the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er fantasy players that constitute his/her fantasy team or squad from a single real-world team/squad in a single contest. Any fractional amounts shall be rounded down to the nearest whole number. 1.3.17 Each Member will ensure that only real- world players and athletes are permitted to be drafted for fantasy sports teams. 1.3.18 A winning outcome will not be based on the score, point-spread, or any performances or results or partial results of any single real-world team or any combination of real-world teams. 1.3.19 A winning outcome will not be based on the score, point spread or performance of a single athlete in any single real-world sports match,. 1.3.20 The winning outcome of a contest on an OFSP offered by a Member will not be based on Esports contests or virtual, randomised, simulated or historical sports matches. ........... 1.3.27 Members will not offer gambling services 21. The rules and regulations contained in the said Charter are to ensure that the games run by its members are 'games of skill' and are not in the form of any gambling/betting. The FIFS has also framed Ombudsman Rules, which mandate the Ombudsman to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s than the real-life match to be selected in a Fantasy Sport will not emulate a real life selector, and are not even permitted by FIFS. We are of the view that since respondent No.5 being a Member of FIFS has also submitted its regulations and charter of FIFS, no public interest element survives for the online gaming formats offered by them. Our findings are for the format of online fantasy games offered by Dream-11 being compliant with the Charter of FIFS, and may not be applicable if the stipulations contained in the Charter of FIFS are not followed in letter and spirit. 22. We also agree with the submission of respondent No.5 that the fantasy sports formats like that of Dream-11 are globally recognized as a great tool for fan engagement, as they provide a platform to sports lovers to engage with their favorite sports along with their friends and family. This legitimate business activity having protection under Article 19(1)(g) of the Constitution contributes to Government Revenue not only vide GST and income tax payments, but also by contributing in increased viewership and higher sports fan engagement, thereby simultaneously promoting even the real world games. 23. Certai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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