2006 (4) TMI 118 - SC - Service Tax

Lottery tickets are movable actionable claims, not 'goods' under Sales Tax Acts; transfers not taxable sales; prior ruling overruled prospectively

SC held that lottery tickets are movable property in a broad sense but constitute actionable claims, not 'goods' within State Sales Tax Acts; therefore ... Nature of lottery tickets - considered 'goods' for the purposes of sales tax under the Constitution and State Sales Tax Laws - concept of sale - correctness of the decision in H. Anraj v. Government of Tamil Nadu [1985 (10) TMI 258 - SUPREME COURT] - Held that:- The word 'goods' for the purposes of imposition of sales tax has been uniformly defined in the various sales tax laws as meaning all kinds of moveable property. The word 'property' may denote the nature of the interest in goods and when used in this sense means title or ownership in a thing. The word may also be used to describe the thing itself. The two concepts are distinct, a distinction which must be kept in mind when considering the use of the word in connection with the sale of goods. We have noted earlier that all the statutory definitions of the word 'goods' in the State Sales Tax Laws have uniformly excluded, inter alia, actionable claims from the definition for the purposes of the Act. Were actionable claims etc., not otherwise includible in the definition of 'goods' there was no need for excluding them. In other words, actionable claims are 'goods' but not for the purposes of the Sales Tax Acts and but for this statutory exclusion, an actionable claim would be 'goods' or the subject matter of ownership. Consequently an actionable claim is movable property and 'goods' in the wider sense of the term but a sale of an actionable claim would not be subject to the sales tax laws. We are therefore of the view that the decision in H. Anraj [1985 (10) TMI 258 - SUPREME COURT] incorrectly held that a sale of a lottery ticket involved a sale of goods. There was no sale of goods within the meaning of Sales Tax Acts of the different States but at the highest a transfer of an actionable claim. The decision to the extent that it held otherwise is accordingly overruled though prospectively with effect from the date of this judgment. there was no sale of goods within the meaning of Sales Tax Acts of the different States but at the highest a transfer of an actionable claim. Issues Involved:1. Whether lottery tickets are considered 'goods' for the purposes of sales tax under the Constitution and State Sales Tax Laws.2. The correctness of the decision in H. Anraj v. Government of Tamil Nadu regarding the nature of lottery tickets as goods.3. The interpretation and implications of the decision in Vikas Sales Corporation v. Commissioner of Commercial Taxes on the classification of lottery tickets.Detailed Analysis:1. Whether lottery tickets are considered 'goods' for the purposes of sales tax under the Constitution and State Sales Tax Laws:The core issue addressed is whether lottery tickets qualify as 'goods' under Article 366 (29-A)(d) of the Constitution and various State Sales Tax Acts. The Court examined the definitions of 'goods' and 'sale' in the context of the Constitution and Sales Tax Acts, noting that 'goods' include all kinds of movable property except actionable claims. The Court concluded that lottery tickets are not 'goods' but rather actionable claims, as they represent a right to a conditional benefit (winning a prize) that is not in the purchaser's possession.2. The correctness of the decision in H. Anraj v. Government of Tamil Nadu regarding the nature of lottery tickets as goods:The Court re-evaluated the decision in H. Anraj, which had bifurcated the rights conferred by a lottery ticket into:- The right to participate in the draw (considered a transfer of beneficial interest in movable property and thus 'goods').- The right to win the prize (considered an actionable claim and not 'goods').The Court found this bifurcation artificial and unwarranted, as the primary value of a lottery ticket lies in the chance to win a prize, making it an actionable claim. The Court clarified that the right to participate in the draw is inseparable from the chance to win and both constitute a single actionable claim, not 'goods.'3. The interpretation and implications of the decision in Vikas Sales Corporation v. Commissioner of Commercial Taxes on the classification of lottery tickets:The decision in Vikas Sales Corporation, which held that REP licenses are 'goods' for sales tax purposes, was considered but not directly addressed, as the referral was limited to the classification of lottery tickets. The Court noted that the reasoning in Vikas Sales Corporation was based on the free transferability of REP licenses, which was not applicable to lottery tickets. The Court reaffirmed that actionable claims, including lottery tickets, are not 'goods' for sales tax purposes, thus overruling the relevant part of H. Anraj.Conclusion:The Supreme Court concluded that the sale of lottery tickets does not involve the sale of 'goods' but rather the transfer of an actionable claim. The decision in H. Anraj was overruled to the extent it held otherwise, with the ruling applied prospectively from the date of the judgment. The matter was referred to an appropriate Bench for disposal of the several appeals on merits in light of this judgment.