Lottery tickets as goods and trade discrimination: SC upheld sales tax on draw rights but struck down discriminatory exemption.

Lottery tickets were treated as goods to the extent they confer a transferable right to participate in the draw, while only the contingent right to claim prize money remained an actionable claim; on that basis, State sales tax could be levied on the sale of that aspect of the ticket. The SC also held that a Tamil Nadu notification giving local lottery tickets a tax advantage, while imported lottery tickets remained burdened, was discriminatory and offended article 301 read with article 304(a). The levy on lottery tickets was therefore sustained, but the discriminatory exemption notification was invalidated.

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Issues: (i) Whether lottery tickets, to the extent they confer the right to participate in the draw, are "goods" and not actionable claims so that sales tax can be levied on their sale under the State sales tax entries; (ii) whether the Tamil Nadu notification that effectively exempted Tamil Nadu lottery tickets from passing on the tax burden, while imported lottery tickets remained taxable, was violative of article 301 read with article 304(a) of the Constitution.

Issue (i): Whether lottery tickets, to the extent they confer the right to participate in the draw, are "goods" and not actionable claims so that sales tax can be levied on their sale under the State sales tax entries.

Analysis: The relevant charging provisions proceeded on a sale of goods. The concept of "goods" under the sales tax laws and the Sale of Goods Act embraced movable property, while actionable claims were excluded. A lottery ticket conferred two distinct rights on the purchaser: a present right to participate in the draw and a contingent right to claim a prize if successful. The first was a beneficial interest in movable property and constituted merchandise capable of being bought and sold. Only the contingent right to prize money answered to the nature of an actionable claim. The right to participate in the draw, which remained valuable until the draw took place, could therefore be transferred as goods.

Conclusion: Yes. Lottery tickets, to the extent they embody the right to participate in the draw, are goods and not actionable claims, and the State Legislatures had competence to levy sales tax on that aspect of the transaction.

Issue (ii): Whether the Tamil Nadu notification that effectively exempted Tamil Nadu lottery tickets from passing on the tax burden, while imported lottery tickets remained taxable, was violative of article 301 read with article 304(a) of the Constitution.

Analysis: The notification produced a direct commercial disadvantage to lottery tickets brought from other States, because identical goods issued by Tamil Nadu were sold at face value while imported tickets bore the tax burden. A tax arrangement that discriminates between imported goods and similar indigenous goods, and thereby hampers the free flow of trade, commerce and intercourse, offends article 304(a). The distinction drawn by the State did not remove the discriminatory impact.

Conclusion: Yes. The notification was unconstitutional as it discriminated against imported lottery tickets and violated article 301 read with article 304(a).

Final Conclusion: The levy on lottery tickets under the concerned State enactments was sustained, but the Tamil Nadu exemption notification was struck down for discrimination against imported goods, resulting in only partial relief to the challengers.

Ratio Decidendi: A lottery ticket is goods to the extent it carries the transferable right to participate in the draw, but a state tax scheme that burdens imported goods differently from identical local goods is invalid under article 304(a).

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