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TMI Blog2010 (7) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... service provided in relation to an activity which though may not be service or which may be res extra commercium, but a legal and permissible activity. Appeal dismissed. - Writ Petition (C) Nos. 21, 30,36 of 2009 - - - Dated:- 30-7-2010 - BARIN GHOSH C.J. For the Appellant : Indranil Nandi, Debashish Kundu, Satyakam Chakraborty, Ms. Manita Pradhan, E.R. Kumar, Arjun Garg, Ashim Chhetri, Dhurba Tewari, A.R. Madhav Rao, Mrs. L. Chakraborty, A. Krishna Rao and Mrs. Manju Rai For the Respondents : A. Moulik, Senior Advocate with Ms. K.D. Bhutia, Karma Thinlay Namgyal, Government Advocate and S.K. Chettri, Assistant Government Advocate, BARIN GHOSH C.J.- In a notice dated April 30, 2007 issued to Martin Lottery Agencies Ltd., it was held out by the Central Revenue that the nature of the transactions between the State Government and distributors in relation to lottery tickets is not in the nature of sale, but the activity of the distributors are that of promotion or marketing of lottery tickets for their client, i.e., the State Government, and as such, the Board of Revenue has decided that the service of distributors falls under the category of business auxiliary se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding before the honourable Supreme Court, by the Finance Act, 2008, which came into force on or about May 16, 2008, an Explanation to the effect as follows was inserted after clause (ii) of subsection (19) of section 65 of the Finance Act, 1994: EXPLANATION.-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, 'service in relation to promotion or marketing of service provided by the client' includes any service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo; It was contended before the honourable Supreme Court in Union of India v. Martin Lottery Agencies Ltd. reported in [2009] 24 VST 1 (SC); [2009] 12 SCC 209, that where the State Government involves itself in an illegal activity it cannot render a service, as dealing in lottery is illegal being res extra commercium, no services can be rendered. The honourable Supreme Court expressly held that it does not intend to go into the said issue. It, however, observed that the said issue is a complex one and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said judgment and that lottery ticket is a kind of actionable claim. It was submitted that if lottery is goods, then it cannot be service. In terms of sub-section (50) of section 65 of the Act goods , in relation to the Act, has the same meaning assigned to it in the Sale of Goods Act, 1930. Therefore, in terms of the said Act, actionable claim including lottery ticket is excluded from the meaning of goods . It was submitted that sub-section (105) of section 65 of the Act defines taxable services . It was contended that although sub-section (105) of section 65 of the Act categorizes different kinds of activities as service provided, but it has not been provided there that dealing with actionable claims or organizing lottery is a service provided and that would be a taxable service. It was contended that if the activity of organizing lottery is service provided then having regard to the fact that the State Government is organizing lotteries should be held to be liable to pay service tax, but no provision has been made in the Act in that regard. It was stated that until date no State Government has been asked to pay service tax on lotteries. It was submitted that in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, but such excitement being in connection with a vice cannot be taken in a civilized society either as amusement or as entertainment. Accordingly, an activity in organizing such an excitement cannot be treated as service. Amongst various observations made in Union of India v. Martin Lottery Agencies Ltd. reported in [2009] 24 VST 1 (SC); [2009] 12 SCC 209, there is an observation that activity that of lottery may be brought within the purview of entertainment or amusement . This observation was made taking note of certain portion of UN-CPC. It was not brought to the notice of the honourable Supreme Court that the said part of UN-CPC was not accepted by this country, documentary proof thereof is on the record of these cases. In the circumstances, the Explanation must be deemed to be a substantive law introduced thereby and that is also the conclusion of the honourable Supreme Court in the case of Union of India v. Martin Lottery Agencies Ltd. [2009] 24 VST 1 (SC); [2009] 12 SCC 209. In other words, the Explanation should not be looked at in connection with service provided by the client as mentioned in clause (ii) of sub-section (19) of section 65 of the Act. At this junct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not render any service to any one, except to itself by generating revenue, but it cannot be contended that the action is illegal, particularly, having regard to law applicable to the Indian society guided by the Constitution of India, inasmuch as entry 40 of List I of the Seventh Schedule to the Constitution of India specifically empowers the Parliament to make laws pertaining to lotteries organized by the Government of India or the Government of a State. Organization of lotteries by a State is, thus, a permissible activity of the State. The learned counsel appearing on behalf of the petitioners also accept that organizing or conducting or promoting games of chance as that of lottery by the State Government is not illegal. It was submitted by placing reliance on the judgment of the honourable Supreme Court rendered in the case of All India Federation of Tax Practitioners v. Union of India reported in [2007] 9 VST 126 (SC); [2007] 293 ITR 406 (SC); [2007] 7 STR 625 (SC), that service which can be said to be a taxable service must add value to the product or the service. To that there cannot be any dispute. However, I think, if the Explanation is read, as it should be read, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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