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TMI Blog2018 (10) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a lottery ticket does not necessarily involve the sale of goods. It is nothing other than a contract of carriage. The actual ticket is merely evidence of the right to transfer. A contract is not a property but only a promise supported by consideration, upon breach of which either a claim for specific performance or damages would lie. Like railway tickets, a ticket to see a cinema or a pawnbroker’s ticket are memoranda or contracts between the vendors of the ticket and the purchasers. Tickets are themselves normally evidence of and in some cases the contract between the buyer of the ticket and its seller. A lottery ticket can be held to be goods if at all only because it evidences the transfer of a right. It has examined the question as to what right a lottery ticket represents. It has held that, on purchasing a lottery ticket, the purchaser would have a claim to a conditional interest in the prize money which is not in the purchaser’s possession. The right would fall squarely within the definition of ‘actionable claim’ and, would therefore be excluded from the definition of goods under the Sale of Goods Act and the sales tax statute. It has held that, lotteries being action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Differential rate of tax was introduced in the 17th Goods and Services Tax Council Meeting held on June 18, 2017. The States before the Court were present in such meeting. It was after extensive deliberations that, the GST Council had approved the rates as presently obtaining in respect of lottery. It is within the domain of such Council to decide the rate of tax - differential levy of tax is permissible. To what reliefs, if any, are the parties entitled to? - Held that:- No relief can be granted to the petitioners, in the facts of the present case. Petition dismissed. - W.P. No. 18424 (W) of 2017 - - - Dated:- 10-10-2018 - DEBANGSU BASAK, J. For the Petitioners: Mr. Joydeep Kar, Sr. Advocate Mr. Ayan Banerjee, Advocate Ms. Debarshee Dhamali, Advocate For Union of India: Mr. Kaushik Chanda Ld. A.S.G. Mr. T.M. Siddiqui, Advocate Mr. Avra Mazumder, Advocate Mr. Somnath Ganguly, Advocate Mr. Bhaskar Prosad Banerjee, Advocate Mr. Rajashree Veneet Kundalia, Advocate Mr. Nripendra Nath Mondal, Advocate For the Respondent No. 2: Mr. Biswajit Deb, Ld. A.A.G. Mr. Sandip Kumar, Advocate Mr. Sayeed Khan, Advocate For the Respondent No. 4: Mr. Sandip Kr. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing tickets. According to him, ticket holder has a right to participate in the chance of getting a prize. The ticket holder, has a contingent interest in the prize money, which he may or may not get in the future, but does not get to possess any benefit for such payment in return. The sale of lottery ticket is, therefore, a sale of chance. Consideration is paid for the chance to win. The sale of lottery ticket therefore does not entail transfer of any goods or even beneficial interest in a movable property. Therefore, the person who sells the lottery ticket is not selling any goods nor is the purchaser buying any goods . Viewed from such perspective, lottery cannot come within the definition of goods under the CGST Act, 2017 or any of the SGST Acts. Learned Senior Advocate appearing for the petitioner has referred to the preamble of CGST Act, 2017 and submitted that, the CGST Act, 2017 came into being to make provision for levy and collection of tax on inter-state supply of goods or services or both by the Central Government and the matters connected therewith or incidental thereto. According to him, for levy of tax, the subject of tax has to be goods . He has also ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same percentage of tax is required to be levied. Otherwise it would violate the constitutional mandate. He has relied upon Jindal Stainless Ltd. (supra) in support of such contentions. Learned Additional Advocate General appearing for the State of West Bengal, the Respondent No. 3 herein, has submitted that, Goods and Service Tax Act, 2017 was enacted in order to simplify the regime of indirect taxation by bringing it under one umbrella. It has come into being by virtue of Constitutional Amendments, Central and State Legislations. He has drawn the attention of the Court to Articles 269A, 279A and 286 of the Constitution of India. He has also draws the attention of the Court to the deletion of entries in the Union and the State list and the incorporation of entries in the Union and the State list. He has submitted that, the Central Goods and Services Tax Act, 2017 came into effect on July 1, 2017. Section 2(52) of the CGST defines goods . Section 2(1) of the CGST defines actionable claim . He has referred to Section 3 of the Transfer of Property Act, 1882 which defines actionable claim . He has also referred to Article 366(12) of the Constitution which defines goods to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Supreme Court Cases page 634 (Federation of Hotel and Restaurants Association v. Union of India) and 2012 Volume 1 Supreme Court Cases page 67 (Union of India v. Nitdip Textile Processor) in support of such contention. Relying upon 2017 Volume 7 Supreme Court Cases page 59 (Binoy Viswam v. Union of India) learned Additional Advocate General appearing for the State of West Bengal has submitted that, a legislation or a provision contained in statute can be invalidated if, it is not within the competence of the legislature which passed the law, or it is contravention of any of the fundamental rights stipulated in Part III of the Constitution of India or any other right or provision of the Constitution of India. A statute cannot be declared unconstitutional solely on the ground that, it is unreasonable or arbitrary. He has pointed out that, the legislative competence to enact CGST Act and SGST Act and subjecting lottery to CGST and SGST have not been questioned. Learned Additional Advocate General appearing for the State of West Bengal has submitted that, the business of lottery partakes the character of betting and gambling. There exists no constitutional right to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved and resolved that, sale of lottery ticket will attract GST. The rates were also agreed upon. Therefore, the States should not be permitted to contend contrary to the resolution adopted by the GST Council in its meeting held on June 18, 2017. Learned Additional Solicitor General appearing for the Union of India has submitted that, the Union Government promulgated the CGST Act, 2017 and the respective State Governments enacted the SGST Act to tax intra-state supply of goods or services or both. The Union Government formulated the IGST Act, 2017 to tax the interstate supply of goods and services or both. Subsequently, notifications have been issued under those acts notifying the tax rates of different goods and services as recommended by the Council. He has submitted that, since lottery tickets are sold at the price printed on them as inclusive price, that is, inclusive of all taxes, the value or supply of lottery under Section 15(5) of the GST Act has been deemed to be 100/112 and 100/128 of the face value of ticket or of the price as notified in the Official Gazette by the organizing State, whichever is higher, for lottery run by State Governments and lottery authorised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned Senior Advocate appearing for the respondent no. 5, the State of Nagaland, has submitted that, the State of Nagaland in the 17th GST meeting held on June 18, 2017 objected against imposition of high rates of GST on lottery. Nagaland has very limited sources of revenue. It does not have a lottery market of its own. It is largely dependent on bigger markets in other States of West Bengal, Maharashtra, Punjab and others. The proposal of Government of Nagaland of 5 per cent GST was supported by many States in such meeting. However, the criteria of State run lotteries and State authorised lotteries were conceived of and introduced in such meeting on the basis of which differential rates were recommended. He has drawn the attention of the Court to J.K. Bharati (supra) and 1994 Volume 4 Supreme Court Cases page 217 (State of Haryana v. Suman Enterprises and Ors.) in which the concept of lottery run by the State and lottery authorised by the State were discussed. According to him, both such judgments were rendered during the period when the Lotteries (Regulation) Act, 1998 was not enacted. With the Lotteries (Regulation) Act, 1998 coming into effect, the States were confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although it has held that, there was no fundamental right to carry on trade of lottery tickets, it has also noticed the ingredients in the sale of lottery tickets. According to him, the activity of holding lottery by a State under the Lottery (Regulation) Act, 1998 would come under Article 298 of the Constitution. If a State exercises powers under Section 5 of the Act of 1998 then, such State must also stop its own business of lottery in order to stop other States from selling lotteries within its territorial jurisdiction. According to him, lottery cannot be goods but is to be treated as business of contract. He has contended that, even if it is assumed that, sale of lottery ticket does not come within the meaning of Article 301 to 304, the same makes no difference as it is an activity covered under Article 298 of the Constitution, and is uniformly applicable to all States. The GST Act accepts lottery as actionable claim but treats it as goods along with other goods which comes under Article 301 to 304. GST Act does not make any distinction between an actionable claim being treated as goods and other goods coming under the same definition. According to him, the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale; Actionable claim is defined in Section 3 of the Transfer of Property Act, 1882 to mean - a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognised as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. The definition of goods in the Constitution is an inclusive definition. It has a very wide sweep. All materials, commodities and articles are included in the definition. The definition, to my reading, is not limited to tangible materials, commodities and articles. An intangible product such as a software would come within the definition of goods appearing in Article 366(12) of the Constitution of India. Whether lottery tickets can be goods was considered in H. Anraj (supra). Such issue was considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents which arise on the purchase of a lottery ticket are of a different character, inasmuch as the right to participate arises in praesenti, that is to say it is a choate or perfected right in the purchaser on the strength of which he can enforce the holding of the draw, while the other is inchoate right which is to materialise in future as and when the draw takes place depending upon his being successful in such draw. Moreover, on the date of the purchase of the ticket, the entitlement to participate in the draw can be said to have been delivered unto the possession of the purchaser who would be enjoying it from the time he has purchased the ticket and as such it would be a chose in possession while the other would be an actionable claim or a chose in action as has been held in Jones v. Carter and King v. Connare on which counsel for the dealers relied. It is thus clear that a transfer of the right to participate in the draw which takes place on the sale of a lottery ticket would be a transfer of beneficial interest in movable property to the purchaser and therefore, amounts to transfer of goods and to that extent it is no transfer of an actionable claim; to the extent that it inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not in the purchaser s possession. The right would fall squarely within the definition of actionable claim and, would therefore be excluded from the definition of goods under the Sale of Goods Act and the sales tax statute. It has held that, lotteries being actionable claims are generally speaking goods or moveable property. On the strength of Sunrise Associates (supra) therefore, the first issue has to be answered by holding that, a lottery is an actionable claim and goods or moveable property. The first issue is answered accordingly. The Constitution (One hundred and first Amendment) Act, 2016 introduced the Goods and Services Tax regime in India. It sought to replace all indirect taxes levied on goods and services by the Union as well as the State Governments. It came to be a comprehensive indirect tax levy on manufacture, sale or consumption of goods and services. The Act of 2016 inserted Article 246A, 269A and 279A to the Constitution of India. It amended the provisions of Article 286 of the Constitution. It deleted Entry 92 and 92C of List I of the Seventh Schedule and inserted Entry 84 of List I and Entry 54 of the List II of the Seventh Schedule. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islative power of the Union and the States with regard to Trade and Commerce. Therefore, Trade, Commerce and Intercourse throughout the territory of India are not absolutely free. They are subject to reasonable restrictions as may be imposed by a State Legislature or by the Parliament in public interest. Article 303(2) allows the Parliament to make non-discriminatory laws if it is necessary to deal with scarcity of goods in any part of India. Relevant provisions of the Central Goods and Services Tax Act, 2017 are as follows:- 2. Definitions In this Act, unless the context otherwise requires, (1) actionable claim shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882); 2(52). goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; 2(98). reverse charge means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouncil. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Integrated Goods and Services Tax Act, 2017 makes provisions for levy and collection of tax on inter-state Supply of Goods or Services or both by the Central Government. It defines Import of Goods in Section 2(10) and Import of Services in Section 2(11) of the Act of 2017. By Import of Goods, it means Import of Goods from a place outside India. By Import of Services, it means the supply of any service where the supplier of services located outside in India, the recipient of services located in India and the place of supply of service is in India. Schedule III under Section 7 of the CGST Act, 2017 deals with activities or transactions which shall be treated neither as a supply of goods nor as a supply of services. Entry 6 of Schedule III of CGST Act, 2017 takes out actionable claims other than lottery, betting and gambling from the scope of such Act. Consequently, since lotteries are generally speaking goods and come within the definition of actionable claims , and since, lotteries are kept out of the purview of actionable claims which do not attract the CGST Act, 2017, lottery can therefore be charged to tax under the CGST Act, 2017. On the parity of the same re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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