TaxTMI 
TaxTMI 
2011 (8) TMI 653
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....are distributors or agents of lotteries organised by various State Governments or their authorised agencies engaged in sale of lottery tickets in Kerala. The tickets sold are of lotteries organised or authorised by States of Kerala, Sikkim and also Bhutan Government. The petitioners have approached this Court challenging notices issued demanding details and documents pertaining to the charges received for the service rendered in relation to lotteries, which is obviously for levy of service tax under the head "Business Auxiliary Service" covered by Section 65(19) of Finance Act, 1994. 2. We have heard Shri.A.R. Madhav Rao and Shri.George Poonthottam learned counsel appearing for the petitioners and various Standing Counsel for the Department appearing for the respondents. Even though learned Standing Counsel for the respondents submitted that the Additional Solicitor General from Delhi wants to argue the matter for the respondents, we requested them to argue the case because one outside counsel for the petitioners came and started arguments yesterday itself. Further on hearing the petitioners' counsel, we are not convinced on the merits of the case in favour of the petitioner....
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....sider it. However, the Supreme Court observed that if at all the explanation to Section 65(19)(ii) serves as a substantive provision for charging of tax on service in relation to lottery, it can be only prospective. It is this amendment that is under challenge in all the Writ Petitions. 4. Before proceeding to consider the arguments, it is to be noted that the above provision that is under challenge in the WP(C)s remained in the statute only from 16/05/2008 to 30/06/2010 and thereafter a separate charging provision was introduced by Finance Act, 2010 w.e.f. 01/07/2010. We are told that the amended provision that came into force from 01/07/2010 is not under challenge and the tax at compounded rates are being paid by lottery organisers/promoters. 5. During the arguments, the petitioners' advocate Shri.Madhav Rao referred to the judgment of the Supreme Court above referred and submitted that all the infirmities based on which the Supreme Court confirmed the judgment of the Sikkim High Court remained as such, or in other words, the amendment does not authorise levy of tax on the service rendered in relation to lottery. He has also relied on several other decisions of the Supr....
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....n relation to lottery based on the amendment stated above vide judgment in Writ Petition(C) No.21/2009 referred above. 7. The main ground advanced by several counsel appearing for the petitioners is that lottery being an actionable claim answers the description of "goods" as defined under Section 65(50) of the Act which in turn is adopted from the definition contained in Section 2(7) of the Sale of Goods Act. The petitioners have heavily relied on the decision of the Supreme Court in SUNRISE ASSOCIATES case referred above wherein the Supreme Court has held that an actionable claim also answers the description of "goods" and exemption from sales tax is available only because of the exclusion clause contained in the definition of "goods" under the Sale of Goods Act. Relying on this judgment, the contention advanced by the petitioners is that lottery being actionable claim answers the description of "goods" under Section 2(7) of the Sale of goods Act and Section 65(50) of the Finance Act, 1994 and so much so, service tax, if any, payable in relation to the same can be and has to be considered only as "business auxiliary service" falling under sub-clause (i) of sub-section (19) of S....
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...."goods", sub-section (i) obviously has no application. The Supreme Court has in SUNRISE ASSOCIATES case clearly held that lottery ticket is actionable claim and it is only by virtue of the exclusion clause in the above definition in the Sale of Goods Act it is outside the scope of "goods". So much so the petitioners' contention that liability for service tax in relation to lottery should be considered by keeping in mind the legal position that lottery tickets are goods, cannot be accepted. The remaining question to be considered is only whether the amendment introduced through the Explanation above stated serve the purpose of introducing tax on service in relation to promotion and marketing of lottery. In this context the main objection raised by the petitioners is that they are not rendering any service in the purchase and sale of lottery tickets. We are unable to accept this contention because admittedly lottery tickets are purchased by the petitioners at discounted price and they in turn sell the same by sharing the discount availed by them to retail dealers. Discount or commission received by the petitioners as well as the retailers for marketing the lottery tickets is noth....