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TMI Blog2013 (11) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... from the State Government on full payment on a discounted price as a natural business transaction and, other related features like there being no privity of contract between the State Government and the stockists, agents, resellers under the Petitioner. The impugned letter C. No.V(3)7/ST/FGSIPvt Ltd/GTK/2009/295 dated 06-07-2012 does not have the sanction and authority of either the Constitution or the law as there is no provision anywhere for imposing of service tax on ‘lottery’ and the action of the Respondents to impose such tax on the Petitioner on the basis of Notification No.36/2012-ST dated 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. Transactions in lottery tickets are not liable to service tax under the provisions of the Finance Act, 1994, as amended by the Finance Act, 2012. - Decided in favor of assessee. - WP(C) No. 32 of 2012 - - - Dated:- 24-9-2013 - CJ Pius Chakkalayil Kuriakose And S. P. Wangdi,JJ. For the Petitioner : Mr. A. R. Madhav Rao, Advocate with Mrs. Laxmi Chakraborty, Mr. Tarun Jain and Mrs. Manju Rai, Advocates. For the Respondents : Mr. B. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ists, resellers, etc., in turn sell these tickets to retailers who in turn sell them to the ultimate participants of the draw. As the tickets are sold to the Petitioner by the Government of Sikkim, the transaction is one of sale and purchase of lottery ticket and not one of rendering of any service. Thus, it is submitted that the Petitioner is not involved in rendering any taxable service . 5. It is further submitted that lottery tickets are outside the purview of service tax by name under the negative list provided under Section 66D of the Finance Act, 1994 and also excluded from the ambit of the expression service which excludes transaction in actionable claim . That lottery is an actionable claim has been settled by a decision of a Constitution Bench of the Supreme Court of India in Sunrise Associates vs. Govt. of NCT of Delhi and Others : (2006) 5 SCC 603. 6. The next plank of attack is on the question of legislative competence of the Parliament to pass a law on lottery tickets in view of List II to Seventh Schedule of the Constitution of India which under Entry 34 and Entry 62 vests the subject-matter of Betting and gambling and Taxes on luxuries, including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of draw, which shall then be destroyed after verification. The whole sale price of the tickets sold shall be determined by the Government on the basis of the prize amount, cost of paper, cost of printing, draw expenses, transportation charges and the Government share of revenue as fixed under clause 4: Provided that the prices of the tickets may be changed under the following circumstances, namely: (i) Change in the price structure of lottery schemes, (ii) Change in paper cost, printing charges and freight, and (iii) Market conditions. 15. That the full payment of the tickets resold by the sole purchaser shall be realized by the Government from the sole purchaser at wholesale rates as per clause 14 above. 19. The draws shall be held at Gangtok by the Government under the supervision of the Director, Sikkim State lotteries or any other officer authorized by him. The draws shall be held in public in the presence of judges appointed by the Government. 24. The taxable prizes shall be disbursed by the Government directly to the winners/claimants of the tickets after deducting income tax at source as per law. 9. It is thus submitted that in reality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity in payment of service tax vide the impugned letter is well justified in law as well as the Constitution. 13. In order to appreciate the issues involved in the Writ Petition, it would be convenient to set out the development of service tax laws vis- -vis the activities of lottery. In this regard it is relevant to note that the fundamental issue raised in the present case as regards the nature of the activity of the Petitioner was also subject-matter of two earlier Writ Petitions decided by a common judgment of a Division Bench of this Court in the matter of M/s. Future Gaming Solutions Pvt. Ltd. and Another vs. Union of India and Others of which one of us (Wangdi, J.) was a party. While disposing of those Writ Petitions being WP(C) Nos.36 and 23 of 2011, in our judgment dated 29-11-2012, we have traced the history as regards the law on service tax so far as it is relevant to lottery activities. 14. Under Chapter V of the Finance Act, 1994 passed on 01-07-1994 the Parliament for the first time introduced a new form of tax, namely, service tax . Again by an amendment to the Finance Act, 1994, introduced by the Finance Act, 2003, a new category of taxable service called bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court, the Finance Act, 1994, once again came to be amended by which the Explanation to Section 65(19)(ii) impugned Section 65(19)(ii) was deleted and a new category of taxable service introduced vide Clause (zzzzn) to Sub-Section (105) of Section 65 vide Finance Act, 2010 with effect from 01-07- 2010. The relevant amendments were as under: (105) taxable service means any service provided or to be provided, (zzzzn) to any person, by any other person, for promotion, marketing organising or in any other manner assisting in organising 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; 17. This provision was also challenged before this Court by the Petitioner in WP(C) No.36 of 2011 in the matter of M/s. Future Gaming Solutions Pvt. Ltd. (supra) on various grounds bulwark of which was that as the activities of lottery distributors like the Petitioner, did not constitute service it was beyond the purview of taxable service as defined under the impugned Clause (zzzzn) of Sub-Section (105) of Section 65 of the Finance Act, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-2012 (Annexure P4 to the Writ Petition) stating that in view of the change in the legal position the Petitioner would not be paying service tax with effect from 01-07-2012. We may extract the relevant portions of the said letter below:- .. 2. As per legal advice received by us, in terms of the aforesaid notifications, with effect from 1st July, 2012 the provisions of Section 65 and 66 shall cease to operate. Therefore no question arises of payment of service tax under these provisions, which levy service tax under games of chance service with effect from 1st July, 2012. Further, in terms of these notifications service tax will be levied only on services which are not notified under the negative list defined in Section 66D of the Finance Act, 1994 (as amended by Finance Act, 2012). This legal position comes into force with effect from 1st July, 2012. 3. The said negative list covers betting, gambling or lottery . Further, the definition of service [under Section 65B(44)] excludes a transaction in money or actionable claim . A Constitutional Bench of the Hon ble Supreme Court in Sunrise Associates [2006 (5) SCC 603] has declared that lot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, when such adjournment was sought for again for four weeks, we had posted the case on 11-09- 2013 peremptorily. On the date of hearing so fixed, i.e., 11-09-2013, instead of the Additional Solicitor General appearing, as was informed to us earlier, Mr. B. K. Gupta, Advocate, the standing counsel for the Department, rose to argue the case himself. Upon our enquiry, we were informed by him that he had been instructed to make the submissions on behalf of the Respondents No.1 to 3. We accordingly allowed him to do so. 23. Mr. A. R. Madhav Rao, Learned Counsel, appearing on behalf of the Petitioner, placed his submissions in support of the Writ Petition on several grounds with his usual characteristic clarity and articulation. The first ground of attack assailing the action of the Respondents under the new law was that the provisions of the Finance Act, 2012, are not applicable on lottery as lottery tickets are actionable claims and, therefore, excluded from the ambit of the very definition of service under the Finance Act, 1994. He submits that Sub-Section (44) of Section 65B of the Finance Act, 1994, defines service to mean any activity carried out by a person for ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Seventh Schedule vesting the subject-matter of taxes on betting and gambling and betting and gambling upon the State Legislature. The Act is in excess of and in colourable exercise of power in as much as it has gone beyond the scope of Entry 40 of List I that vests the Parliament to legislate on a law conferring a general power of regulation which is quite different from a substantive power to tax. It is submitted that in terms of the well-settled principles laid down in M/s. R.M.D.C. (Mysore) Private Ltd. vs. State of Mysore : AIR 1962 SC 594 (Constitution Bench); State of W.B. vs. Kesoram Industries Ltd. and Others : (2004) 10 SCC 201 (Constitution Bench); and State of W.B. and Others vs. Purvi Communication (P) Ltd. and Others : (2005) 3 SCC 711, there is a clear distinction between general power of regulation and power to tax. It is further submitted that even in view of the settled position that lottery is pernicious in character and in the nature of betting and gambling , it inescapably would fall within the purview of Entry 34 and, therefore, under Entry 62 of List II to Seventh Schedule of the Constitution of India. Mr. Rao submits that the Hon ble Supreme Court, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own accord as an effort to boost its sale to further its own business of earning. Therefore, there being no service being rendered the demand of service tax upon the Petitioner is without jurisdiction. 28. Taking his submission further Mr. Rao urges that at each stage of the transaction, i.e., from the Government of Sikkim to the Petitioner and then from the Petitioner to stockists, resellers, etc., it involves transfer of property in the lottery tickets akin to sale of goods as the sale of lottery tickets involves by implication transfer of property and other rights in the tickets at those stages. That before the decision in Sunrise Associates (supra) sales tax was being charged upon sale of lottery tickets under various State Legislations. But the position stands changed with the exclusion of sale of lottery tickets from the definition of goods as it is found to have been an actionable claim . Relying upon the decision of the Hon ble Supreme Court in Laghu Udyog Bharati and Another vs. Union of India and Others : (1999) 6 SCC 418 and All-India Federation of Tax Practitioners and Others vs. Union of India and Others : (2007) 7 SCC 527, Mr. Rao would submit that a transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not exist any element of service in the organisation of lottery by the Government of Sikkim and, therefore, levy of service tax would not apply on the transaction between the Petitioner and the State Government involving the sale of lottery tickets by the Petitioner of lottery organised by the State Government. 31. Mr. Rao would further submit that organisation of lottery having been declared to be res extra commercium and not a business or trade in R.M.D. Chamarbaugwala (supra) and B. R. Enterprises (supra), the Government of Sikkim is not rendering any service by organising lottery. The entire gamut of sale of lottery activity being in the form of a scheme or a draw which determine the quantum of lottery tickets that are to be sold for the day, week or month, etc., assumes a form of gambling and, therefore, is kept under the regulation/control of the State under the Lotteries (Regulation) Act, 1998, and, therefore, there is no service involved in the running of such lotteries. 32. It is next contended that by selling lottery tickets to the Petitioner on actual sold basis the Government of Sikkim is parting with its privilege and the price paid is the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged by Mr. Rao is that the levy and collection of service tax on the activity of lotteries is without the authority and sanction of law and violative of Article 265 of the Constitution of India. It is stated that in terms of Article 265 no tax can be levied or collected except by the authority of Law. The demand of the Respondents upon the Petitioner to pay service tax vide their impugned letter dated 06-07-2012 being on the basis of Service Tax Rules, 1994, as amended, i.e., on the strength of a subordinate legislation, it cannot be sustained in law. That it is a settled law that tax cannot be levied by way of subordinate legislations in terms of Article 265. On this, Mr. Rao placed reliance on various decisions, some of which are reproduced below: (a) State of Kerala vs. Madras Rubber Factory Ltd. : (1998) 1 SCC 616 20. It is no doubt true that Section 12(1) does not specifically state that the taxable person is a producer or the grower of the rubber. It is, however, not possible to accept the contention that the Rules alone are to be looked at in order to fix the liability of payment of cess. Sections 12(1) and 12(2) have to be read together. Excise duty being a levy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction. 36. Finally, it is submitted that since the impugned letter dated 06-07-2012 has not adverted to any of the points raised in the Petitioner s letter dated 28-06-2012 and is bereft of any reason as to how those were incorrect, it is liable to be quashed as being a non-speaking one. It is stated that Rule 6(7C) of the Service Tax (Second Amendment) Rules, 2012, which the letter quotes as one of the reasons for the demand, is only an optional composite scheme for payment of service tax provided to the taxpayers and that it does not create a charge of service as the said Rule is only a piece of subordinate legislation framed in exercise of powers conferred under the Finance Act, 1994. Therefore, the Rule 6(7C) cannot go beyond the provisions of Finance Act in view of the settled position of law that subordinate legislation cannot override statutory provisions. On this, Mr. Rao cited reliance on the following:- (a) Tahir Hussain vs. The District Board, Muzaffarpur : AIR 1954 SC 630; (b) Hukam Chand Etc. vs. Union of India and Others : (1972) 2 SCC 601; (c) Jagat Talkies Distributors vs. Deputy Commissioner of Police : (2010) 170 DLT 659 (Delhi); and (d) Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales-tax in respect of the sales effected by it as from April 1, 1959 to November 2, 1962 (both days inclusive). On the basis of this notification, it is contended that the assessee became retrospectively liable to pay sales tax in respect of the sales effected by it. The question is whether the exemption given to the forest department creates a fresh levy on the assessee with retrospective effect. As mentioned earlier, when the taxing events took place, the assessee was not liable to be taxed. Its liability has to be determined as on those dates. Once we come to the conclusion that it was not liable to pay any sales-tax when the sales took place, the fact that the forest department was retrospectively exempted from paying tax from an earlier date cannot make the assessee liable to pay tax which he was otherwise not liable to pay. The Government had no power to levy tax either prospectively or retrospectively. The power of the Government was merely to exempt one or more dealers from paying tax. That power cannot be used directly or indirectly to retrospectively levy tax on someone else. Hence, we see no substance in any of the contentions advanced on behalf of the appellant. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in definition of term manufacture cannot be substituted or entered in the Tariff entry or in the Notification. Since we have taken the view that calendering was not specified in the Tariff Entry and any other process does not include process of calendering and, as such, calendering does not amount to manufacture. We do not feel it necessary to go into other issues raised by both sides. 39. The decision for the Hon ble Supreme Court in Tata Sky Ltd. vs. State of Madhya Pradesh : (2013) 4 SCC 656 was also brought to our notice by Mr. Rao to buttress his submission that Notification cannot be enlarged the provisions of the Statute and emphasises on the following paragraph:- 33. Coming now to the notification dated 5-5-2008, it is elementary that a notification issued in exercise of powers under the Act cannot amend the Act. Moreover, the notification merely prescribes the rate of entertainment duty at 20 per cent in respect of every payment for admission to an entertainment other than cinema, video cassette recorder and cable service. The notification cannot enlarge either the charging section or amend the provision of collection under Section 4 of the Act read with the 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 read with Rule 6(7C) of the Service Tax Rules, 1994 (as amended) (erroneously mentioned as Finance Act, 1994), requires the distributors or the selling agents to pay service tax at the rate specified for the taxable service of promoting, organising or in any other manner assisting in arranging sale of lottery tickets on the commission received by them as calculated on the numbers/value of tickets. (ii) Although, the agreement mentions the Petitioner ostensibly as the sole purchaser of lottery tickets for the Government of Sikkim it does not constitute a relationship of purchaser and buyer in view of the conditions mentioned in the agreement conferring vital rights upon the Government of Sikkim. Mr. Gupta reiterates what have been set out in the counter-affidavit by referring to clauses 10, 14, 15, 19 and 24 of the agreement. It is stated that the State Government under Clause 10 of the agreement enjoys exclusive right to add or delete the number of lotteries. Clause 14 stipulates that the wholesale price of the tickets is to be determined by the Government of Sikkim on the basis of the prize amount, cost of paper, cost of printing, draw expenses, transport charges, Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activities of the person/ party/institution providing any service for promoting, organising or assisting in arranging sale in respect of lottery outside the purview of service tax. (vi) That the Petitioner is liable to pay service tax as the nature of the service provided by the it is against the sole consideration of payment of commission by the Respondent No.4, the Government of Sikkim, calculated on the number of sold lottery tickets and, that the service tax is being levied on this which is a commercial activity, i.e., activities as service comprising of promoting, organising or assisting in arranging sale of lottery tickets received from the Government of Sikkim on payment of commission. (vii) That as per legal advice received by the Respondent No.2 from the Technical Officer, Tax Research Unit, New Delhi, vide letter dated 26-07-2012, it was conveyed by way of clarification that any service provided or to be provided to any person, by any other person, for promotion, marketing, organising or in any other manner assisting in organising games of choice, including lottery, Bingo or Lotto in whatever form or by whatever name called, whether or not conducted through int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench of the Kerala High Court in a batch of cases in P. Muraleedharan, Managing Partner vs. Union of India : 2011 (4) KLJ 808, it has been held that the activities like that of the Petitioner is a service in the marketing of lottery as would be apparent from the following portion of the judgment:- 7. .. We are unable to accept this contention because admittedly lottery tickets are purchased by the petitioners at discounted price and they in turn sell the same by sharing the discount availed by them to retail dealers. Discount or commission received by the petitioners as well as the retailers for marketing the lottery tickets is nothing but consideration for service rendered to the promoter or organiser of the lottery. Obviously without the service rendered by the distributors namely, the petitioners and down line dealers, the lottery tickets will not reach the ultimate customers who are the participants in the draw. So much so, in our view, the whole scheme of the lottery, printing and distribution of tickets and the conduct of draw involve service from various agencies and the most important service rendered by petitioners is as distributors. So much so, we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging 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, 2012. The cognate question that would then arise in the determination of this question would be as to whether there is an element of service in the activity of the Petitioner. In order to answer these questions, however, we deem it essential to traverse the various issues projected on the question by the Learned Counsel. It would be unfair not to do so. 44. However, before entering into the merits of the case, it would be appropriate to deal with the question of lack of territorial jurisdiction of this Court in entertaining the Writ Petition, an objection that was raised on behalf of the Respondents. The objection, in our view, has no merit in view of the admitted position that the questioned agreement between the Petitioner and the Respondent No.4 dated 10-08-2009 was entered into at Gangtok in respect of the lottery of the Government of Sikkim, Respondent No.4. The draws of the lottery are held at Gangtok and the prize of the winning lottery tickets are also disbursed at Gangtok. The Respondent No.3 has his Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor can constitute an agency, we have accepted the argument that 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 State Government was not concerned with the amount of discount or margin or profit left by the Petitioner for their stockists or selling agents. That clause 30 of the agreement made this all the more clear while unambiguously stipulating that the State Government shall have no privity of the contract with the stockists, selling agents or the ultimate purchaser of lottery tickets in the street making it the sole responsibility and liability of the purchaser in case of any dispute or claim. Distinction between agents and purchaser defined in Benjamin s Sale of Goods, 8th Edition and Bowstead Reynolds on Agency, 16th Edition 1996 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision in P. Muraleedharan (supra) relied upon on behalf of Respondents No.1 to 3 no doubt rejected the contention that the Petitioner were not rendering any service in relation to marketing of lottery in the portion of the judgment extracted earlier. However, we find this in conflict with an earlier decision dated 07-04-2004 in M. S. Hameed (supra), also of a Division Bench of that very Court, the relevant portion of which 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. Here, State is not responsible for paying any amount to lottery agents. Lottery ticket is sold at a reduced price to bulk purchasers depending upon the offtake as mentioned in Ext.P4. Anybody is entitled to purchase it in bulk at that rate. Therefore, petitioners are not agents strictly. On payment of sale price, ticket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as categorically been decided that there is no element of service in such activity 51. Following from the above, we are of the view that the basis upon which the Respondents No.1 to 3 are seeking to impose service tax upon the Petitioner under the Amendment Act of 2012 to the Finance Act, 1994, on the erroneous premises that the Petitioner is a service provider engaged in assisting in arranging sale of lottery ticket for the Government of Sikkim is clearly unsustainable. 52. The next limb of the argument in assailing the jurisdiction of the Respondents in issuing the impugned letter is that the service tax is being sought to be collected on the activity of the Petitioner without the authority and sanction of law and, therefore, violative of Article 265 of the Constitution and that Rule 6(7C) of the Service Tax Rules, 1994 (wrongly quoted as Finance Act, 1994) being a subordinate piece of legislation, cannot go beyond the provision of the Finance Act in view of the settled position of law that subordinate legislation cannot overrule statutory provisions. We are inclined to agree with this as the position of law is well-established. 53. We find substance in the submission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t portion of the decision in Timber Fuel Corporation (supra) wherein this proposition stands well-settled. Therefore, it can undoubtedly be held that the stand of the Respondents that service tax is payable in view of the provisions of Service Tax Rules, 1994 and Notification No.36/2012-ST dated 20-06-2012 is grossly erroneous, invalid and unsustainable in law in view of the specific provisions of the Finance Act, 1994, as amended by Finance Act, 2012. 55. The next crucial aspect that requires consideration is the interpretation of the newly inserted provisions by the Finance Act, 2012, which we have already reproduced earlier. Sub-Section (1) of Section 65B has defined actionable claim as having the same meaning assigned to it in Section 3 of the Transfer of Property Act. Sub-Section (44) as we have seen defined service inter alia to mean any activity carried out by a person for another for consideration but not to include amongst others a transaction in money or actionable claim. 56. We have already noted that in Sunrise Associates (supra) lotteries have been held to be nothing but a transfer of actionable claim. Therefore, from the very provisions introduced by the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw is a part of the composite right of the chance to win and it does not feature separately in the definition of the word lottery . It is an implicit part of the chance to win. It is not a different right. The separation is specious since neither of the rights can stand without the other. A draw without a chance to win is meaningless and one cannot claim a prize without participating in the draw. In fact the transfer of the chance to win assumes participation in the draw. .. [emphasis supplied] Therefore, on a combined reading of the ratio laid down in Sunrise Associates (supra), Sub-Sections (1) and (44) of Section 65B of the Finance Act, 2012, we most unhesitatingly hold that lottery is not a service being an activity falling within the meaning of actionable claim and, therefore, stands excluded from the taxable service under the Service Tax Laws introduced under the Finance Act, 2012. 59. This also negates the reliance being placed on behalf of the Respondents to Section 66F to invoke the principle of bundled services notwithstanding the fact that nothing was placed before us on behalf of the Respondents as to how the activity of the Petitioner can be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51. So, now we proceed to examine what is lottery , what would be the ingredients in the sale of lottery tickets and then to equate with other forms of contract pertaining to trade and commerce. Whether there is any striking difference between the two. Lottery is defined as: In Words and Phrases (Permanent Edn.), Vol. 25-A at p. 439: A lottery is a species of gambling. At p. 444: The lottery statutes were enacted to suppress the widespread evil of gambling in lotteries and to allay and curb the gambling spirit of the public and thus prevent waste of money needed for more substantial purposes, the term lottery as popularly and generally used referring to a gambling scheme in which chances are sold or disposed of for value and the sums thus paid are hazarded in the hope of winning a much larger sum, a scheme for the distribution of prizes by chance. At p. 445: The term lottery in law is of wide signification. In Horner v. United States [13 S.Ct 409, 147 US 449 : 37 L Ed 237 (1983)] Mr. Justice Blatchford discussed various definitions of lottery, and among others approved that found in Webster's Dictionary, in which it is defined to be game of haza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts as has been found noted above. Lottery has been defined inter alia as a scheme for distributing prizes by lot or chance (Words and Phrases, Butterworths, 3rd Edition at p. 70), a distribution of prizes by lot or chance (Webster's Dictionary), a chance for a prize for a price. A scheme for the distribution of prize or prizes by law or chance, the number and value of which is determined by the operator of lottery (Black's Law Dictionary, 6th Edn., at p. 947). These ingredients or elements that consolidate to form lottery cannot be said to fall within the meaning of bundled of services as none of those characteristics is a service . This is notwithstanding our opinion that there is no element of service in the activity of the Petitioner in promoting, assisting or reselling lottery of the Government of Sikkim and also for the reasons that would follow hereafter. 62. The next provision that we have been found introduced are Sub-Section (34) to Section 65B which defines negative list as meaning those services listed in Section 66D. While Section 66B which is the charging Section, excludes all services specified in the negative list from the purview of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and Parliament both can simultaneously impose taxes on the conduct of lottery by the State Government under entry 62 of List II and entry 97 of List I to Schedule 7, if so, under what circumstances; and (v) whether such circumstances exist in the case in hand? 65. The same questions also arise in the present proceedings in relation to the new provisions introduced by the Finance Act, 2012. This Court while dealing with the first limb under serial no.(i), has held lottery to be an act of betting and gambling by relying upon B. R. Enterprises (supra) and Martin Lottery Agencies (supra). On the questions no.(ii) and (iii) set out above this Court after examining the constitutional schemes under Entry 40 to List I and Entry 34 of List II to Seventh Schedule, Articles 246 and 254 of the Constitution of India and the ratio laid down in Purvi Communication (P) Ltd. (supra), Union of India vs. Shri Harbhajan Singh Dhillon : (1971) 2 SCC 779; Kesoram Industries Ltd. (supra); N. V. Marketing Pvt. Ltd. vs. State of Maharashtra Others : 2009 (III) (8) BLR 3397; Godfrey Phillips India Ltd. and Another vs. State of U.P. and Others : (2005) 2 SCC 515; Express Hotels Private Ltd. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word tax includes all kinds of taxation present or future that may be thought of by the competent legislative body. Thus the argument of Mr. Razzak that service tax does not find mention in entry 62 and thus is beyond its purview cannot be accepted or appreciated. Any kind of tax that may be envisaged and can be legally conceptualized by the legislative body falls within the purview of tax in view of all embracing definition of expressions tax (taxation) under clause (28) of Article 366. Service tax though a new regime, it would be antithesis of the term tax if considered to be a category of tax not envisaged by any of the entries in Seventh Schedule empowering to levy tax. Applying the principle of pith and substance, the power to levy tax on lottery being a game of chance and included in the expressions betting and gambling in entry 62 List II, the State Legislature has the exclusive legislative competence and jurisdiction of Parliament to levy such a tax in exercise of its residuary power under entry 97 of the List I read with Article 248 of the Constitution stand excluded. There is another important aspect; entry 92C Taxes on services was also incorporated in List I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construed as a service rendered to the State Government in order to be liable under the Service Tax Laws. 70. In view of the facts and circumstances and the discussions, our conclusions are as under:- (i) In the light of Sub-Section (1) to Section 65B read with Sub-Section (44) thereof lottery is excluded from the definition of service being actionable claim ; (ii) Even under Sub-Section (34) of Section 65B read with Sections 66B and 66D lottery stands excluded from the purview of service tax under the Finance Act, 2012 as being one in the negative list ; (iii) The activity of the Petitioner 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 features like there being no privity of contract between the State Government and the ..... 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