Lottery tickets as actionable claims exclude sales tax; levy under the Kerala law is unconstitutional and unenforceable.

Lottery tickets are treated as actionable claims, not goods, because a ticket gives only a conditional right to participate in a draw and is excluded from the statutory definition of goods. On that footing, sales tax under the Kerala General Sales Tax Act cannot be levied on their sale, since the taxing power under Entry 54 of List II and article 366(29A) extends only to sales or purchases of goods. Section 5BA, which sought to support a levy of licence fee or tax on lottery ticket sales, is therefore unconstitutional and ultra vires. Notices and proceedings against lottery dealers for such levy cannot be sustained.

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Issues: Whether lottery tickets are actionable claims and outside the definition of goods under the Kerala General Sales Tax Act, and whether section 5BA of the Act enabling levy of licence fee or tax on their sale is unconstitutional.

Analysis: The definition of goods under section 2(xii) of the Kerala General Sales Tax Act expressly excludes actionable claims, while sale under section 2(xxi) is confined to transfer of property in goods. Entry 54 of List II and article 366(29A) of the Constitution permit taxation only on sale or purchase of goods. In light of the authoritative pronouncement that a lottery ticket represents only a conditional right to participate in a draw and is therefore an actionable claim, the sale of lottery tickets does not fall within the taxing power for sales tax purposes. The prior ruling treating lottery tickets as goods was overruled prospectively, and the subsequent direction of the Supreme Court clarified that no further tax could be collected even for the period prior to that judgment. Section 5BA therefore could not sustain the impugned levy.

Conclusion: Lottery tickets are actionable claims and not goods for the purpose of sales tax, and section 5BA of the Kerala General Sales Tax Act is unconstitutional and ultra vires. The notices and proceedings seeking tax or licence fee from dealers of lottery tickets could not be sustained.

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