Lottery tickets are actionable claims excluded from goods definition under Section 65, following SC precedent

The HC disposed of a petition regarding service tax levy on lottery tickets under Entry 97, List I of the Constitution. Following the SC decision in K. Arumugam v. Union of India, the court held that lottery tickets are actionable claims excluded from the definition of goods under Section 65 of the Act. The SC had determined that lottery ticket sales by the State constitute privileged activity rather than rendering of service. The petitioner was granted relief to the extent permissible under the SC judgment, with the petition being disposed of accordingly.

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Issues:
Challenge to the imposition of service tax under Entry 97, List I of the Constitution of India.
Validity of the Explanation to Section 65 (19) (ii) of the Finance Act, 1994.
Refund of taxes deposited under protest.
Applicability of the judgment in K. Arumugam vs. Union of India & Ors ETC. 2024 SCC OnLine SC 2278.

Analysis:

The petitioner sought relief challenging the imposition of service tax under Entry 97, List I of the Constitution of India and the validity of the Explanation to Section 65 (19) (ii) of the Finance Act, 1994. The Supreme Court judgment in K. Arumugam vs. Union of India & Ors ETC. 2024 SCC OnLine SC 2278 was cited as relevant to the case, with both parties agreeing to dispose of the writ petition in line with this judgment. The petitioner's claims for relief included a declaration on legislative competence, striking down the Explanation to the Finance Act, 1994, and seeking a refund of taxes deposited under protest.

In the referenced Supreme Court case, the court addressed whether the activity of the appellants would attract service tax under the Finance Act, 1994. The court analyzed the definitions of goods under the Sale of Goods Act, 1930, and the Finance Act, 1994, particularly in relation to lottery tickets as actionable claims. It was concluded that lottery tickets, being actionable claims and not goods, were not within the scope of the relevant provisions of the Finance Act, 1994. The court also scrutinized the Explanation added to the Act in 2008, emphasizing that the sale of lottery tickets did not constitute a service in relation to promotion or marketing under the Act. The court held that the Explanation could not expand the scope of taxable services beyond the main provisions of the Act. Consequently, the court allowed the appeals of the assessees, setting aside the judgments of the High Courts of Sikkim and Kerala.

Given the alignment of the issues raised by the petitioner with the findings of the Supreme Court in K. Arumugam, the High Court disposed of the writ petition accordingly. The court acknowledged that the Supreme Court judgment covered the petitioner's concerns, leading to the entitlement of relief in line with the principles established in the referenced case. Therefore, the Writ Petition was disposed of, along with any related interim applications, based on the precedents set by the Supreme Court judgment.

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