# SKILL LOTTO SOLUTIONS PVT. LTD v. UNION OF INDIA & ORS

- **Citation:** [2020] 13 S.C.R. 151
- **Court:** Supreme Court of India
- **Decided:** 2020-12-03
- **Bench:** Ashok Bhushan, R. Subhash Reddy, M. R. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/skill-lotto-solutions-pvt-ltd-v-union-of-india-ors-34555
- **Pages:** 47

## Headnote

Constitution of India: Art.32 - Writ petition alleging violation
of Art.14 and impugning the definition of 'goods' under s.2(52) of
the Central Goods and Services Tax, 2017 - Maintainability of -
Held: Maintainable - Writ petition alleging violation of Art.14
specially with respect to a parliamentary Act can be entertained
under Art.32.
Central Goods and Services Tax Act, 2017: s.2(52) - Whether
the inclusion of actionable claim in the definition of goods as given
in s.2(52) of the Act, 2017 is contrary to the legal meaning of goods
and unconstitutional - Held: Art.366(12) defines goods to include
all materials, commodities, and articles - Definition of goods as
occurring in Art.366(12) is inclusive definition and does not
specifically exclude actionable claim from its definition - Whenever
inclusive definition is given of an expression, it always intends to
enlarge the meaning of words or phrases, used in the definition -
The definition of goods as contained in the Sale of Goods Act, 1930
in s.2(7) is every kind of movable property other than actionable
claims and money; whereas definition of goods in s.2(52) in the
Act, 2017 is every kind of movable property other than money and
securities "but includes actionable claim" - Thus, the Constitution
framers were aware of the definition of goods as occurring in the
Sale of Goods Act, 1930 when the Constitution was enforced - By
providing an inclusive definition of goods in Art.366(12), the
Constitution framers never intended to give any restrictive meaning
to the word "goods" - Thus, the definition of goods under s.2(52)
of the Act, 2017 does not violate any constitutional provision nor it
is in conflict with the definition of goods given under Art.366(12) -
Art.366 clause (12) contains an inclusive definition and the
definition given in s.2(52) of Act, 2017 is not in conflict with
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definition given in Art.366(12) - The Parliament by the Constitution
(One Hundred and First Amendment) Act, 2016 inserted Art.246A,
a special provision with respect to goods and services tax - Art.246A
begins with non obstante clause, that is, "Notwithstanding anything
contained in Arts.246 and 254", which confers very wide power to
make laws - The power to make laws as conferred by Art.246A
fully empowers the Parliament to make laws with respect to goods
and services tax and expansive definition of goods given in s.2(52)
cannot be said to be not in accord with the constitutional provisions.
Central Goods and Services Tax Act,2017:Whether the
Constitution Bench in Sunrise Associates in paragraphs 33, 40, 43
and 48 of the judgment has laid down as the proposition of law that
lottery is an actionable claim or the observations made in the
judgment were only an obiter dicta and not declaration of law -
Held: It cannot be said that the question as to whether lottery is a
goods or actionable claim had not arisen in the decision in Sunrise
Associates -When an item was held to be covered by excluded
category, the said conclusion could have been arisen only after
consideration of the definition and the exclusionary clause - Thus,
the submission for the petitioner that the observations of the
Constitution Bench holding lottery as actionable claim was only
obiter dicta and not binding is not correct - The Constitution Bench
in Sunrise Associates categorically held that lottery is actionable
claim after due consideration which is ratio of the judgment.
Central Goods and Services Tax Act, 2017: Art.14 - Whether
exclusion of lottery, betting and gambling from Item No.6 Schedule
III of the Act, 2017 is hostile discrimination and violative of Art.14
of the Constitution of India - Held: When Act, 2017 defines the
goods to include actionable claims and included only three
categories of actionable claims, i.e., lottery, betting and gambling
for purposes of levy of GST, it cannot be said that there was no
rationale for including thes

## Text

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SKILL LOTTO SOLUTIONS PVT. LTD.
v.
 UNION OF INDIA & ORS.
(Writ Peition (Civil) No. 961 of 2018)
DECEMBER 03, 2020
[ASHOK BHUSHAN, R. SUBHASH REDDY AND
M. R. SHAH, JJ.]
Constitution of India: Art.32 - Writ petition alleging violation
of Art.14 and impugning the definition of 'goods' under s.2(52) of
the Central Goods and Services Tax, 2017 - Maintainability of -
Held: Maintainable - Writ petition alleging violation of Art.14
specially with respect to a parliamentary Act can be entertained
under Art.32.
Central Goods and Services Tax Act, 2017: s.2(52) - Whether
the inclusion of actionable claim in the definition of goods as given
in s.2(52) of the Act, 2017 is contrary to the legal meaning of goods
and unconstitutional - Held: Art.366(12) defines goods to include
all materials, commodities, and articles - Definition of goods as
occurring in Art.366(12) is inclusive definition and does not
specifically exclude actionable claim from its definition - Whenever
inclusive definition is given of an expression, it always intends to
enlarge the meaning of words or phrases, used in the definition -
The definition of goods as contained in the Sale of Goods Act, 1930
in s.2(7) is every kind of movable property other than actionable
claims and money; whereas definition of goods in s.2(52) in the
Act, 2017 is every kind of movable property other than money and
securities "but includes actionable claim" - Thus, the Constitution
framers were aware of the definition of goods as occurring in the
Sale of Goods Act, 1930 when the Constitution was enforced - By
providing an inclusive definition of goods in Art.366(12), the
Constitution framers never intended to give any restrictive meaning
to the word "goods" - Thus, the definition of goods under s.2(52)
of the Act, 2017 does not violate any constitutional provision nor it
is in conflict with the definition of goods given under Art.366(12) -
Art.366 clause (12) contains an inclusive definition and the
definition given in s.2(52) of Act, 2017 is not in conflict with
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definition given in Art.366(12) - The Parliament by the Constitution
(One Hundred and First Amendment) Act, 2016 inserted Art.246A,
a special provision with respect to goods and services tax - Art.246A
begins with non obstante clause, that is, "Notwithstanding anything
contained in Arts.246 and 254", which confers very wide power to
make laws - The power to make laws as conferred by Art.246A
fully empowers the Parliament to make laws with respect to goods
and services tax and expansive definition of goods given in s.2(52)
cannot be said to be not in accord with the constitutional provisions.
Central Goods and Services Tax Act,2017:Whether the
Constitution Bench in Sunrise Associates in paragraphs 33, 40, 43
and 48 of the judgment has laid down as the proposition of law that
lottery is an actionable claim or the observations made in the
judgment were only an obiter dicta and not declaration of law -
Held: It cannot be said that the question as to whether lottery is a
goods or actionable claim had not arisen in the decision in Sunrise
Associates -When an item was held to be covered by excluded
category, the said conclusion could have been arisen only after
consideration of the definition and the exclusionary clause - Thus,
the submission for the petitioner that the observations of the
Constitution Bench holding lottery as actionable claim was only
obiter dicta and not binding is not correct - The Constitution Bench
in Sunrise Associates categorically held that lottery is actionable
claim after due consideration which is ratio of the judgment.
Central Goods and Services Tax Act, 2017: Art.14 - Whether
exclusion of lottery, betting and gambling from Item No.6 Schedule
III of the Act, 2017 is hostile discrimination and violative of Art.14
of the Constitution of India - Held: When Act, 2017 defines the
goods to include actionable claims and included only three
categories of actionable claims, i.e., lottery, betting and gambling
for purposes of levy of GST, it cannot be said that there was no
rationale for including these three actionable claims for tax purposes
- Regulation including taxation in one or other form on the activities
namely lottery, betting and gambling has been in existence since
several decades - When the parliament has included these three
for purpose of imposing GST and not taxed other actionable claims,
it cannot be said that there was no rationale or reason for taxing
the three and leaving others - Constitution of India - Art.14.
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Central Goods and Services Tax Act, 2017: s.15 - Whether
while determining the face value of the lottery tickets for levy of
GST, prize money is to be excluded for purposes of levy of GST -
Held: The value of taxable supply is a matter of statutory regulation
and when the value is to be transaction value which is to be
determined as per s.15, it is not permissible to compute the value of
taxable supply by excluding prize which has been contemplated in
the statutory scheme - Central Goods and Services Tax Rules -
r.31A.
Interpretation of statutes: Whenever inclusive definition is
given of an expression it is intended to enlarge the meaning of words
or phrases, used in the definition - Central Goods and Services
Tax, 2017.
Judicial review: Taxation policy - With regard to taxing policy
of the legislature, the Courts have very limited role to play.
Dissmissing of the writ petition, the Court
HELD: 1. Maintainability of Art.32: Article 32 confers a
right to move to Supreme Court for enforcement of the right
conferred by the Part III, which is guaranteed by sub-article (1)
of Article 32 of the Constitution. Article 32 is an important and
integral part of the basic structure of the Constitution. Article 32
is meant to ensure observance of rule of law. Article 32 provides
for the enforcement of the fundamental rights, which is most
potent weapon. By this petition, the petitioner has challenged
the provisions of Central Goods and Services Tax Act, 2017 insofar
as it imposes tax on the lottery. The grounds of challenge include
violation of Article 14 of the Constitution of India. The levy of
GST has been attacked as discriminatory. It is also submitted
that there is a hostile discrimination in taxing only lottery, betting
and gambling whereas leaving all other actionable claims from
the taxing net as is evident by entry 6 of Schedule III of Act,
2017. The writ petition alleging the violation of Article 14 specially
with respect to a parliamentary Act can very well be entertained
under Article 32. [Paras 14, 15, 16][168-B-G]
H. Anraj and Ors. v. State of Maharashtra, (1984) 2
SCC 292 : [1984] 2 SCR 440; H. Anraj v. Government
SKILL LOTTO SOLUTIONS PVT. LTD. v.
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of Tamil Nadu, (1986) 1 SCC 414: [1985] 3 Suppl. SCR
342 - referred to.
Whether the inclusion of actionable claim in the definition
of goods as given in Section 2(52) of Central Goods and Services
Tax Act, 2017 is contrary to the legal meaning of goods and
unconstitutional?
Whether the Constitution Bench judgment of this Court in
Sunrise Associates in paragraphs 33, 40, 43 and 48 of the
judgment has laid down as the proposition of law that lottery is an
actionable claim or the observations made in the judgment were
only an obiter dicta and not declaration of law?
2.1 Article 366 sub-clause (12) defines goods. Goods
includes all materials, commodities, and articles. Definition of
goods as occurring in Article 366(12) is inclusive definition and
does not specifically excludes actionable claim from its definition.
Whenever inclusive definition is given of an expression it always
intended to enlarge the meaning of words or phrases, used in the
definition. The definition of goods as contained in the Sale of Goods
Act, 1930 in Section 2(7) is every kind of movable property other
than actionable claims and money; whereas definition of goods in
Section 2(52) in the Act, 2017 is every kind of movable property
other than money and securities "but includes actionable claim".
The Constitution framers were well aware of the definition of
goods as occurring in the Sale of Goods Act, 1930 when the
Constitution was enforced. By providing an inclusive definition
of goods in Article 366(12), the Constitution framers never
intended to give any restrictive meaning of goods. [Paras 20, 24,
33, 34][169-G-H; 170-A-B; 175-E-F; 170-F-G; 176-C]
Reserve Bank of India v. Peerless General Finance and
Investment co.Ltd. And others, 1987(1) SCC 424: [1987]
2 SCR 1 - followed
State of Madras v. Gannon Dunkerley & Co., (Madras)
Ltd., [1959] SCR 329; M/s Gannon Dunkerley and Co.
and Others v. State of Rajasthan and others, 1993 (1)
SCC 364 : [1992] 3 Suppl. SCR 103 - held
inapplicable
2.2 It cannot be said that the question as to whether lottery
is a goods or actionable claim had not arisen in the decision in
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Sunrise Associates. When an item was covered by excluded
category, the said conclusion could have been arisen only after
consideration of the definition and the exclusionary clause. The
Constitution Bench in Sunrise Associates has categorically held
that lottery is actionable claim after due consideration which is
ratio of the judgment. [Para 48][182-D-F]
Sunrise Associates v. Govt. of NCT of Delhi and Ors.
(2006) 5 SCC 603:[2006] 1 Suppl. SCR 421 -
Explained
2.3 Article 366(12) contains an inclusive definition and the
definition given in Section 2(52) of Act, 2017 is not in conflict
with definition given in Article 366(12). The Parliament by the
Constitution(One Hundred and First Amendment) Act, 2016
inserted Article 246A, a special provision with respect to goods
and services tax. The Parliament was fully empowered to make
laws with respect to goods and services tax. Article 246A begins
with non obstante clause that is "Notwithstanding anything
contained in Articles 246 and 254", which confers very wide power
to make laws. The power to make laws as conferred by Article
246A fully empowers the Parliament to make laws with respect
to goods and services tax and expansive definition of goods given
in Section 2(52) cannot be said to be not in accord with the
constitutional provisions. There has to be a rational connection
between the item taxed but it is well settled that with regard to
taxing policy of the legislature, the Courts have very limited role
to play. Article 246A is a special provision with regard to goods
and services tax w.e.f. 16.09.2016, which special power has to be
liberally construed empowering the Parliament to make laws with
respect to goods and services tax. [Paras 49, 57, 58][182-G-H;
183-A-C; 186-C-D; 186-F-G]
Navnitlal C. Javeri v. K.K. Sen, Appellate, Assistant
Commissioner of Income Tax, [1965] 1 SCR 909; State
of Bombay v. R.M.D. Chamarbaugwala and Anr., AIR
1957 SC 699: [1957] SCR 874 - relied on.
Bhopal Sugar Industries Ltd., M.P. and Anr. v. D.P.
Dube, Sales Tax Officer and Anr., [1964] 1 SCR 481;M/
s. Gannon Dunkerley and co. and others v. State of
Rajasthan and others, 1993 (1) SCC 364:[1992]
3 Suppl. SCR 103 - distinguished.
SKILL LOTTO SOLUTIONS PVT. LTD. v.
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2.4 The Constitution Bench of this Court in Sunrise
Associates has held that actionable claims are includible in the
definition of goods and had actionable claims were not includible,
there was no need for excluding them. In other words, actionable
claims are "goods" but not for the purpose of Sales Tax Acts and
but for this statutory exclusion, an actionable claim would be
"goods" or the subject-matter of ownership". Thus, in view of
what has been said above by the Constitution Bench, the
submission of the petitioner that actionable claims have been
artificially included in the definition of goods cannot be accepted.
The Constitution Bench has clearly laid down that actionable
claims are goods. Thus, Parliament has not exceeded its
jurisdiction in including actionable claims in the definition of
"goods" under Section 2(52). [Paras 58, 59][186-G-H; 187-A-C]
Whether exclusion of lottery, betting and gambling from
Item No.6 Schedule III of Central Goods and Services Tax Act,
2017 is hostile discrimination and violative of Article 14 of the
Constitution of India?
3. Schedule III begins with heading "activities or
transactions which shall be treated neither as supply of goods
nor supply of services. Item No.6 of Schedule III is as follows:-
"Item No.6 - Actionable claims other than lottery, betting and
gambling." Lottery, betting and gambling are well known concepts
and have been in practice in this country since before
independence and were regulated and taxed by different
legislations. When Act, 2017 defines the goods to include
actionable claims and included only three categories of actionable
claims, i.e., lottery, betting and gambling for purposes of levy of
GST, it cannot be said that there was no rationale for including
these three actionable claims for tax purposes. Regulation
including taxation in one or other form on the activities namely
lottery, betting and gambling has been in existence since last
several decades. When the parliament has included above three
for purpose of imposing GST and not taxed other actionable
claims, it cannot be said that there is no rationale or reason for
taxing above three and leaving others. Hence, there is no
violation of Article 14 in Item No. 6 of Schedule III of the Act,
2017. [Paras 63, 70, 71][187-F-G; 191-B-D; 191-G]
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Whether while determining the face value of the lottery
tickets for levy of GST, prize money is to be excluded for purposes
of levy of GST?
4.1 The Rules have been framed, namely, the Central Goods
and Services Tax Rules, 2017 in which Rules by notification dated
23.01.2018 Rule 31A has been inserted dealing with value of
supply in case of lottery, betting, gambling and horse racing. For
determining the value of the lottery, now, there is statutory
provision contained in Section 15 read with Rule 31A. Section 15
of the Act, 2017 by sub-section (2) it is provided what shall be
included in the value of supply. What can be included in the value
is enumerated in sub-clause (a) to (e) of sub-section (2) of Section
15. Further, sub-section (3) of Section 15 provides that what shall
not be included in the value of the supply. When there are specific
statutory provisions enumerating what should be included in the
value of the supply and what shall not be included in the value of
the supply, the submission of the petitioner that prize money is
to be abated for determining the value of taxable supply cannot
be accepted. What is the value of taxable supply is subject to the
statutory provision which clearly regulates, which provision has
to be given its full effect and something which is not required to
be excluded in the value of taxable supply cannot be added by
judicial interpretation. Further, Rule 31A, sub-rule (2) as amended
clearly provides that value of supply shall be deemed to be
100/128 of the face value of ticket or of the prize as notified in
the Official Gazette by the Organising State, whichever is higher.
[Paras 74, 78, 79][194-D-E; 196-A-D; 196-D-E]
4.2 The value of taxable supply is a matter of statutory
regulation and when the value is to be transaction value which is
to be determined as per Section 15, it is not permissible to
compute the value of taxable supply by excluding prize which has
been contemplated in the statutory scheme. When prize paid by
the distributor/agent is not contemplated to be excluded from
the value of taxable supply, the submission of the petitioner that
prize money should be excluded for computing the taxable value
of supply is not accepted. Thus, while determining the taxable
value of supply the prize money is not to be excluded for the
purpose of levy of GST. When the levy of GST, determination of
SKILL LOTTO SOLUTIONS PVT. LTD. v.
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taxable value are governed by the Parliamentary Act in this
country, legislative scheme of other countries may not be relevant
for determining the issue which has been raised. The taxing policy
and the taxing statute of various countries are different which
are in accordance with taxing regime suitable and applicable in
different countries. The issue which has been raised has to be
answered by looking into the statutory provisions of the Act, 2017
and the Rules framed therein which govern the field. Thus, the
petitioner is not entitled to reliefs as claimed in the writ petition.
[Paras 80, 81, 82][196-F-H; 197-A; 197-B-D; 197-D-E]
The State of Madras v. Gannon Dunkerley &
Co.(Madras) Ltd., [1959] SCR 379; Builders'
Association of India v. Union of India, (1989) 2 SCC
645 : [1989] 2 SCR 320; H. Anraj and Ors. v.
Government of Tamil Nadu and Ors. (1986) 1 SCC
424 : [1985] 3 Suppl. SCR 342; Sunrise Associates v.
Govt. of NCT of Delhi and others, 2010 (10) SCC 420:
Vikas Sales Corporation and another v. Commissioner
of Commercial Taxes and another, (1996) 4 SCC 433
[1996] 2 Suppl. SCR 204; Municipal Corporation of
Delhi v. Gurnam Kau, 1989 (1) SCC 101 : [1988] 2
Suppl. SCR 929; Navinchandra Mafatlal Bombay v.
Commissioner of Income Tax, Bombay City, AIR 1955
SC 58:[1955] SCR 829; Sri Krishna Das v. Town Area
Committee, Chirgaon, (1990) 3 SCC 645; State of Uttar
Pradesh and Ors. v. Deepak Fertilizers & Petrochemical
Corporation Ltd., (2007) 10 SCC 342 : [2007] 6 SCR
525; Union of India and Ors. v. Martin Lottery Agencies
Limited, (2009) 12 SCC 209 : [2009] 7 SCR 946;
Ayurveda Pharmacy and Anr. v. State of Tamil Nadu,
(1989) 2 SCC 285: [1989] 2 SCR 37 - referred to
Case Law Reference
[1959] SCR 329
held inapplicable
Para 4
[1984] 2 SCR 440
referred to
Para 16
[1985] 3 Suppl. SCR 342
referred to
Para 16
[1959] SCR 379
held inapplicable
Para 25
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159
[1992] 3 Suppl. SCR 103
distinguished
Para 32
[1989] 2 SCR 320
referred to
Para 32
[1987] 2 SCR 1
followed
Para 33
[2006] 1 Suppl. SCR 421
explained
Para 38
[1985] 3 Suppl. SCR 342
referred to
Para 38
(2010) 10 SCC 420
referred to
Para 38
[1996] 2 Suppl. SCR 204
referred to
Para 41
[1988] 2 Suppl. SCR 929
referred to
Para 47
[1964] 1 SCR 481
distinguished
Para 50
[1955] SCR 829
referred to
Para 53
[1965] 1 SCR 909
relied on
Para 55
(1990) 3 SCC 645
referred to
Para 57
[1989] 2 SCR 37
referred to
Para 64
[2007] 6 SCR 525
referred to
Para 65
[1957] SCR 874
relied on
Para 68
[2009] 7 SCR 946
referred to
Para 69
[1992] 3 Suppl. SCR 103
held inapplicable
Para 72
CIVIL ORIGINAL JURISDICTION: Writ Retition (Civil) No.
961 OF 2018
Vikramjit Banerjee, ASG, Ravindra Shrivastava, C.A. Sundaram,
Sr. Advs., Arjun Garg, Aakash Nandolia, Ms. Garima Tiwari, Arpit Jain,
Ms. Nisha Bagchi, Ms. Shirin Khajuria, Bhuvan Mishra, B. Krishna
Prasad, Karan Bharihoke, Rahul Chitnis, Sachin Patil, Geo Joseph, Ms.
Madhumita Bhattacharjee, Ms. Rohini Musa, Abhishek Gupta, Zaffar
Inayat, Advs. for the appearing parties.
The Judgment of the Court was delivered by
ASHOK BHUSHAN, J.
The petitioner, an authorized agent, for sale and distribution of
lotteries organized by State of Punjab has filed this writ petition impugning
SKILL LOTTO SOLUTIONS PVT. LTD. v.
UNION OF INDIA & ORS. [ASHOK BHUSHAN, J.]
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the definition of goods under Section 2(52) of Central Goods and Services
Tax Act, 2017 and consequential notifications to the extent it levies tax
on lotteries. The petitioner seeks declaration that the levy of tax on lottery
is discriminatory and violative of Articles 14, 19(1)(g), 301 and 304 of
the Constitution of India.
2. We need to notice certain background facts which has given
rise to this writ petition.
2.1 The Parliament enacted the Lotteries (Regulation) Act, 1998
to regulate the lotteries and to provide for matters connected therewith
and incidental thereto. Section 2(b) of the Act defines lottery which
provides that "lottery" means a scheme, in whatever form and by
whatever name called, for distribution of prizes by lot or chance to those
persons participating in the chances of a prize by purchasing tickets.
Section 4 provides that a State Government may organise, conduct or
promote the lottery subject to conditions enumerate therein. Different
States have been organizing and conducting lotteries in accordance with
the aforesaid Act. It is to be noted that prior to parliamentary enactment
for regulating the lotteries, different States have enacted legislation
regulating the lotteries which were the legislations even prior to the
enforcement of the Constitution, levying tax on the sale of lottery tickets.
Reference is made to Bengal Finance Sales Tax Act, 1941 and Madras
General Sales Tax Act, 1939. Another Statute to be noticed is Bombay
Lotteries (Control and Tax) and Prize Competitions (Tax) Act, 1958.
2.2 There has been a series of litigation regarding taxability of
lottery tickets and this Court had occasion to deliver several judgments
on the subject which we shall notice hereinafter. Service tax was levied
on lottery tickets by Finance Act, 1994. A Circular dated 14/21.2.2017
was also issued providing for mode of determination of the amount of
service tax. Rules were also framed namely Lotteries (Regulation) Rules,
2010 by the Central Government containing a set of rules for regulation
of the lotteries organized by the States.
2.3 By Constitution (One Hundred and First Amendment) Act,
2016, Article 246A was inserted in the Constitution containing special
provisions with respect to Goods and Services Tax. Article 269A and
Article 279A were also inserted by same constitutional amendment.
Article 279A provided for constitution of Goods and Services Tax Council.
The Parliament enacted the Central Goods and Services Tax Act, 2017
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(Act No.12 of 2017) to make provisions for levy and collection of tax on
intra-State supply of goods or services or both by the Central Government
and for matters connected therewith or incidental thereto. The Act came
into force w.e.f. 12.04.2017. The Parliament also enacted the Integrated
Goods and Services Tax Act, 2017 (Act No.13 of 2017), the Union
Territory Goods and Services Tax Act, 2017 (Act No.14 of 2017) and
the Goods and Services Tax (compensation to States) Act, 2017 (Act
No.15 of 2017).
2.4 Under Section 2(52) of Central Goods and Services Tax Act,
2017, the term "goods" has been defined which provides that "goods"
means every kind of movable property other than money and securities
but includes actionable claim................ Chapter III of the Act provides
for levy and collection of tax. Section 15 deals with value of taxable
supply. After the enactment of Act No.12 of 2017, Notification was
issued by Government of India dated 28.06.2017 in exercise of power
conferred by sub-section (1) of Section 9 notifying the rate of the
integrated tax. By the notification dated 28.06.2017 with regard to lottery
run by the State Government, value of supply of lottery was deemed to
be 100/112 of the face value of the ticket or the prize as notified in the
official gazette of the organising State, whichever is higher. With regard
to lotteries authorised by the State Government value of supply of lottery
was deemed to be 100/128.
2.5 The writ petitioner, an authorised agent for the state of Punjab
for sale and distribution of lotteries organised by State of Punjab aggrieved
by the provisions of Act No.12 of 2017 as well as notifications issued
therein filed the present writ petition praying for following reliefs:-
"a)
By appropriate writ, order or direction, quash and set aside
the definition of 'Goods' under Section 2(52) of the Central
Goods and Services Tax Act, 2017 [Annexure P-18 (Pg.141
to 143)], Impugned Notifications 01/2017 Central Tax
(Rate), 01/2017 [Annexure P-19 (Pg.144 to 148)], Integrated
Tax (Rate), 01/201 [Annexure P-20 (Pg. 149 to 154)], and
the State rate Notifications of the Respondent State of
Punjab [Annexure P-21(Pg.155 to 157)] to the extent it
levies tax on Lottery by declaring the same to be
discriminatory and violative of Article 49, (19)(1)(g), 301,
304 of the Constitution of India and of the CGST, SGST
and IGST Act.
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b)
In the Alternative, by appropriate writ, order or direction
quash and set aside the impugned Notifications 01/2017
Central Tax (Rate), 01/2017 Integrated Tax (Rate) 01/2017
and the State rate Notification of the Respondent State of
Punjab to the extent it levies tax on the face value of the
lottery ticket without abating the prize money Component
of the lottery ticket when the said amount never forms part
of the income of the Petitioner or the lottery trade.
c)
In the Alternative, by appropriate writ, order or direction
quash and set aside the Impugned Notifications 01/2017
Central Tax (Rate), 01/2017 Integrated Tax (Rate) 01/2017
and the State rate Notification of the Respondent State of
Punjab to the extent it levies two different rates on tax on
the face value of the lottery ticket and declare that the
Respondents can levy an uniform rate of 12% Tax on Lottery
irrespective of place where it is being sold, and after
adjusting the prize money component from the face value
of lottery tickets."
3. We have heard Shri Ravindra Shrivastava, learned senior counsel
for the petitioner and Shri Vikramjit Banerjee, learned Additional Solicitor
General for the Union of India. We have also heard Shri C.A. Sundaram,
learned senior counsel for the intervenor.
4. Shri Shrivastava submits that lottery is not a goods and under
the Central Goods and Services Tax Act, 2017, GST is levied only on
goods, hence levy of GST on lottery is ultra vires to the Constitution. It
is further submitted that the Constitution Article 366 sub-article (12)
define goods to include all materials, commodities and articles.The
definition in the Constitution exclude actionable claims since it only refers
to materials, commodities and articles. The definition of goods given in
Section 2(52) of Central Goods and Services Tax Act, 2017 (hereinafter
referred to as "Act, 2017") is unconstitutional. It is further submitted
that Constitution Bench of this Court in Sunrise Associates vs. Govt.
of NCT of Delhi and Ors., (2006) 5 SCC 603 has categorically held
that lottery is not a good. When Constitution Bench has held that lottery
is not a good, the provisions of Act, 2017 treating the lottery as goods is
contrary to the judgement of Constitution Bench in Sunrise Associates
(supra). The lottery is not an actionable claim as is now sought to be
included in the definition of goods given in Section 2(52). The provisions
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of Act, 2017 are self-contradictory in as much as the definition of
actionable claim is as per definition of Transfer of Property Act, which
is only the claim and not the goods. Further, under the definition of goods,
actionable claims have been included as goods under
Section 2(52). It is further submitted that GST is being levied on the
face value of the lottery tickets which is impermissible since the face
value of the tickets also includes prize money to be reimbursed to the
winners of the lottery tickets. Learned senior Counsel submits that
meaning of goods as occurring in the Constitution of India has to be
taken in its legal sense. The definition of goods as occurring in Sale of
Goods Act, 1930 clearly excludes actionable claims from the definition
of goods, which definition has been held to be definition of goods under
the Constitution by this Court in State of Madras vs. Gannon
Dunkerley & Co., (Madras) Ltd., (1959) SCR 329. The attempt of
including the actionable claim within the meaning of goods seems to be
deliberate attempt to make the lottery fall within the scope of GST which
would render the definition of goods contrary to the meaning ascribed to
it by the Constitution of India as held by Gannon Dunkerley (supra).
The words defined in the Constitution of India will have to be ascribed
their legal meaning and not the popular meaning.
5. Shri Shrivastava further submits that the Parliament does not
enjoy an absolute power to make an inclusive definition of something to
be taxed which is not taxable otherwise. There is no absolute power
with the legislature to define something. If such definition has no rationale,
such artificial definition cannot be treated only for the purpose of assuming
taxation power. Shri Shrivastava further submits that taxing actionable
claim only is discriminatory since all actionable claims are not being
taxed. Shri Shrivastava submits that according to Schedule III to the
Act, 2017 under Item No.6 actionable claims other than lottery, betting
and gambling have been treated neither as supply of goods nor supply of
services. There is a clear hostile discrimination in taxing only lottery,
betting and gambling whereas all other actionable claims have been left
out of the taxing net. Shri Shrivastava has further submitted that the
observations made in the judgment of Constitution Bench in Sunrise
Associates (supra) that lotteries are actionable claims are only obiter
dicta and cannot be treated to be ratio of the judgment.
6. Shri Vikramjit Banerjee, learned Additional Solicitor General
refuting the submissions of learned senior counsel for the petitioner at
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the very outset submits that the writ petition filed by the writ petitioner
under Article 32 is not maintainable. It is submitted that lottery is "res
extra commercium" and no right under Article 19(1)(g) and
Article 301 can be claimed by the petitioner with regard to lottery. The
transaction of lottery tickets cannot be raised to the status of trade,
commerce or intercourse. There is no right with the petitioner which
can be enforced by writ petition filed under article 32 of the Constitution,
hence, the writ petition being not maintainable deserves to be dismissed.
Mr. Banerjee further submits that the laws relating to economic activity
need to be viewed with greater latitude than laws touching civil rights.
He further submits that courts are loath to interfere with taxing policies
of the States. The fact of not levying tax on other actionable claims
apart from lottery, betting and gambling cannot be said to be
discriminatory. It is submitted that Constitution Bench of this court in
Sunrise Associates (supra) has held that an actionable claim is a
movable property and goods in the wider sense. The definition of goods
given in Section 2(52) of Act 2017 is in accord with the Constitution
Bench judgment of this court in Sunrise Associates (supra) and the
argument that definition of goods given in Section 2(52) is contrary to
above Constitution Bench judgment in Sunrise Associates (supra) is
misplaced. The definition of goods given under Article 366(12) of the
Constitution is an inclusive definition. Article 366 (12A) defines goods
and services tax to mean tax on supply of goods or services or both
except taxes on the supply of alcoholic liquor for human consumption.
Lottery having been judicially held to be an actionable claim is covered
within the meaning of term goods under section 2(52). The Union
Parliament has the competence to levy GST on lotteries under article
246A of the Constitution. Under Article 279A the GST Council has
approved the levy of GST on lottery tickets, hence, the inclusion of
actionable claims in the definition of goods under section 2(52) is in
keeping with the legislative and taxing policy. It is well settled that courts
would not review the wisdom or advisability or expediency of a tax.
The levy on face value is authorised by section 15(1) read with section
15(5) of the Act, 2017 and Rule 31(A) of the Central Goods and Services
Tax Rules, 2017. The levy of 28% tax on face value is neither
discriminatory nor beyond the taxing policy/powers of the State.
7. Shri Banerjee further submits that during pendency of the writ
petition, Rule 31A has been amended vide notification dated 02.03.2020
merging earlier two separate rates, i.e., regarding value of supply of
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lottery run by the State Government, which was earlier 100/112 and
value of supply of lottery authorised by the State Government, which
was 100/128 has been made uniform and by virtue of Rule 31A
sub-rule(2), value of supply of lottery is one and the same, i.e., 100/128
of the face value of the ticket or prize as notified by the organising State,
whichever is higher. He submits that in view of the above amendment
dated 02.03.2020, which is not challenged in the present writ petition,
the argument on the ground of discrimination in the rate of tax is no
longer available to the petitioner. Shri Banerjee further submits that
judgment of this Court in State of Madras Vs. Gannon Dunkerley
(supra) relied by learned senior counsel for the petitioner is not attracted
in the facts of the present case. It is submitted that the above decision
dealt with the definition of term "sale" and was not concerned with the
interpretation of "goods".
8. Shri Sundaram appearing for the intervenor submits that the
Constitution permits tax on goods and actionable claims being not taxed
under the Constitution, the Parliament cannot have the power of taxing
lottery. The taxing power of legislature is traceable to the Constitution
alone. It is not open to the legislature to enlarge its taxing power. The
word "goods" is not a new word and is a concept well known in the
Constitution. Legislature cannot tax something which is constitutionally
not goods. The Act, 2017 cannot include something that was not part of
the definition as provided for in the Constitution. The definition of goods
under the GST Act would necessarily have to be guided by the definition
of goods given under the Constitution. Shri Sundaram further submits
that in any event, the prize money in a lottery deducted from a lottery
claim ought not to be taxed at all and the tax, if at all ought to be levied
only on the invoice value, i.e., the transaction value of the lottery ticket
or the lottery scheme after deducting the prize money. The lottery ticket
has a zero value and is only a chance, which cannot be taxed. Shri
Sundaram submits that lottery ticket is not even an actionable claim but
only a chance, which is treated as an actionable claim by ratio of
Constitution Bench judgment in Sunrise Associates (supra), which
will not be a good within the meaning of Article 366 (12) of the
Constitution. He submits that since it is not a good under the Constitution,
Union and the States had no right to tax. A Statute cannot bring in a
definition something as good, which Constitution itself excludes. Exclusion
of all actionable claims from levy of GST except three, i.e., lottery, betting
and gambling is nothing but hostile discrimination. Shri Sundaram submits
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that when the lottery is being permitted by the States, it is a commercial
activity. When the State itself organise a lottery, it is not pernicious. No
reason is forthcoming as to why only three actionable claims are taxed
leaving all others out of tax net.
9. Shri Ravindra Shrivastava in his rejoinder submits that he is not
claiming any violation of right under Article 19(1)(g) or Article 301. He
submits that writ petition is fully maintainable under Article 32 of the
Constitution. A Parliamentary enactment on ground of violation of Article
14 is sought to be challenged in the writ petition, which writ petition is
fully maintainable. Shri Shrivastava questions the legislative competence
of Parliament to tax lottery as goods. Shri Shrivastava submits that he
has placed reliance on the principle, which has been laid down by this
Court in Gannon Dunkerley (supra). This court in Gannon Dunkerley
(supra) laid down that definition of goods has to be taken as it is meant
under the Sale of Goods Act, 1930, which definition is also to be taken
for the purposes of Article 366(12) of the Constitution. Goods has to be
interpreted in its legal sense. Goods cannot be defined in an artificial
manner as has been done by the Parliament in Section 2(52). Shri
Shrivastava submits that inclusive definition cannot be expansive and
unrealistic. He submits that there is no similarity in goods and actionable
claims. There cannot be artificial expansion of definition of goods. He
submits that lottery acquires property only when prize is declared. A
ticket is only a chance and GST is levied on every sale of lottery ticket,
which is not permissible since it is not an actionable claim.
10. He reiterated his challenge on the ground of hostile
discrimination with regard to only three categories of actionable claims,
i.e., lottery, betting and gambling whereas all other actionable claims are
not being taxed under Act, 2017. He submits that taxing only three items
has no nexus with the object sought to be achieved. No rationale has
been provided by the respondent. If actionable claim is a homogeneous
clause, why only three have been picked out. Lottery is not something
pernicious. Relying on earlier circular dated 14.02.2017, Shri Shrivastava
submits that prize money has to be excluded from face value. Shri
Shrivastava further submits that lottery is held all across the world and
in other countries, GST is levied by excluding the prize money. Shri
Shrivastava has lastly submitted that notification, which has been issued
during pendency of the writ petition now providing a uniform rate of
lotteries organised by the States or authorised by the State having not
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been challenged in this writ petition, hence, petitioner reserve its right to
challenge the notification dated 21.02.2020/02.03.2020 separately in
appropriate proceedings.
11. We have considered the submissions of the learned counsel
for the parties and have perused the records.
12. From the submissions of the learned counsel for the parties
and materials on the record, following are the questions which arise for
consideration in this writ petition:-
(I)
Whether the writ petition is not maintainable under Article
32 of the Constitution of India since the writ petition relates
to lottery, which is res extra commercium and the petitioner
cannot claim protection under Article 19(1)(g)?
(II)
Whether the inclusion of actionable claim in the definition
of goods as given in Section 2(52) of Central Goods and
Services Tax Act, 2017 is contrary to the legal meaning of
goods and unconstitutional?
(III)
Whether the Constitution Bench judgment of this Court in
Sunrise Associates (supra) in paragraphs 33, 40, 43 and
48 of the judgment has laid down as the proposition of law
that lottery is an actionable claim or the observations made
in the judgment were only an obiter dicta and not declaration
of law?
(IV) Whether exclusion of lottery, betting and gambling from
Item No.6 Schedule III of Central Goods and Services Tax
Act, 2017 is hostile discrimination and violative of Article
14 of the Constitution of India?
(V)
Whether while determining the face value of the lottery
tickets for levy of GST, prize money is to be excluded for
purposes of levy of GST?
Question No. I
13.