2015 (9) TMI 536 - HC - Service Tax

Waiver of pre-deposit - Challenge to the Explanation to clause (ii) of Section 65(19) of the Finance Act, 1994 - promotion or marketing of games of chance, organised, conducted or promoted by the client - Held that - It has been inter alia, held by the Sikkim High Court 2013 (11) TMI 1002 - SIKKIM HIGH COURT that the activity of promotion, marketing, organising or in any other manner assisting in organising games of chance, including lotteries is an activity falling under betting and gambling which is the subject matter of Entry 62, List II of the Seventh Schedule to the Constitution of India. Consequently, it has been held that the State Legislature alone is competent to levy any tax on such activity under the said Entry 62, List II of the Seventh Schedule to the Constitution of India. It has been stated by the learned counsel for the petitioner that the explanation which has been impugned was earlier operating as part of the business auxiliary service till 30.062010 when it was deleted and new Section 65 (105) (zzzzn) was introduced as a specific service. - explanation which operated as a part of the business auxiliary service and is in pari materia with Section 65 (105)(zzzzn) is also liable to the struck down as being ultra vires the Constitution and beyond the legislative competence of Parliament - Notice issued. In the meanwhile, no coercive measures be taken. Also, non-compliance with the interim direction given by the Tribunal with regard to the pre-deposit would not, ipso facto, render the appeal filed by the petitioner liable to the dismissed by the Tribunal.

Summary

Issues: Challenge to the Explanation to clause (ii) of Section 65(19) of the Finance Act, 1994 as ultra vires the Constitution of India and beyond legislative competence of Parliament.

Analysis:
In this writ petition, the petitioner challenges the Explanation to clause (ii) of Section 65(19) of the Finance Act, 1994, arguing that it is ultra vires the Constitution of India and exceeds the legislative competence of Parliament. The petitioner asserts that Section 65(105)(zzzzn), similar to the impugned explanation, has been previously invalidated for the same reasons. Citing the case of Future Gaming solutions Pvt. Ltd. v. Union of India and Ors, where the Sikkim High Court held that activities related to games of chance fall under "betting and gambling," a subject within the exclusive jurisdiction of State Legislatures under Entry 62, List II of the Seventh Schedule to the Constitution of India. The petitioner contends that the impugned explanation, previously part of the business auxiliary service, should also be struck down on the same grounds as Section 65(105)(zzzzn) due to its lack of constitutional validity and parliamentary competence.

The Court has issued notice to the respondents, which has been accepted by their respective counsels. The respondents are directed to file their counter affidavits within four weeks, with the petitioner allowed to file rejoinder affidavits if necessary within four weeks thereafter. The case is set to be renotified on 11.12.2015. During this period, no coercive measures are to be taken, and non-compliance with interim directions from the Tribunal regarding pre-deposits will not automatically lead to the dismissal of the petitioner's appeal by the Tribunal. The Court has ordered for the necessary documents to be provided under the signature of the Court Master for further proceedings.