TaxTMI 
TaxTMI 
2010 (7) TMI 947
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....t the service of distributors falls under the category of "business auxiliary service" and therefore, are chargeable to service tax. The said notice was challenged by Martin Lottery Agencies Ltd. in a writ petition filed in this court, registered as W.P. (C) No. 19 of 2007. Central Revenue, despite opportunity given, did not file counter to the writ petition. On September 18, 2007, this court noticing the judgment of the Constitution Bench of the honourable Supreme Court rendered in Sunrise Associates v. Government of NCT of Delhi reported in [2006] 3 VST 151 (SC); [2006] 145 STC 576 (SC); [2006] 6 RC 488; [2006] 5 SCC 603, where it was held that lottery tickets are actionable claims, held that lottery tickets would not be "goods" within the meaning of the definition clause in the Sale of Goods Act and if lottery tickets are not goods, writ petitioner, i.e., Martin Lottery Agencies Ltd., cannot be said to be rendering any service in relation to the promotion of their client's goods, or marketing of their client's goods, or sale of their client's goods (See Martin Lottery Agencies v. Union of India [2009] 24 VST 24 (Sikkim) [Appx.]). There is no dispute that liability....
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....the said issue. It, however, observed that the said issue is a complex one and that the honourable Supreme Court at that stage was primarily required to consider the effect of the said Explanation. It held that while the State raises its revenue by controlling dealing in liquor and/or by transferring its privilege to manufacture, distribute, sale, etc., as envisaged under entry 8 of List II of the Seventh Schedule to the Constitution of India, thereby it does not render any service to the society. It also held that service tax purports to impose tax on service on two grounds (1) service provided to a consumer, and (2) service provided to a service provider and service provided in respect of the matters envisaged under sub-section (19) of section 65 of the Act must be construed strictly and before tax is found to be leviable, it must come within the domain of legitimate business and/or trade. The honourable Supreme Court ultimately proceeded to declare that the above Explanation thus inserted brought about a change effectively in the existing law and thereby introduced a substantive law and the liability if any accrued thereon would accrue with effect from May, 2008 and not with ret....
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....nt has been asked to pay service tax on lotteries. It was submitted that in terms of clause (zzb) of sub-section (105) of section 65 of the Act, service provided to a client by any person in relation to business auxiliary service would be deemed to be taxable service and at the same time in terms of clause (ii) of sub-section (19) of section 65 of the Act any service in relation to promotion or marketing of service provided by the client would be deemed to be business auxiliary service. Therefore, it is the client who has to render service and in relation to such service if any service is provided to promote or market the same, the later service would come within the meaning of business auxiliary service. It was contended that if the client is not providing any service there is no question of rendering any service in relation thereto. It was also contended that the true meaning of the judgment of the honourable Supreme Court in the case of Union of India v. Martin Lottery Agencies Ltd. [2009] 24 VST 1 (SC); [2009] 12 SCC 209, is that no service is provided by the State in relation to lottery and accordingly providing any service in relation to promotion or marking of the same does ....
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....ed in clause (ii) of sub-section (19) of section 65 of the Act. At this juncture, it would be appropriate to remember that the honourable Supreme Court in the case of Union of India v. Martin Lottery Agencies Ltd. [2009] 24 VST 1 (SC); [2009] 12 SCC 209, has held that the expression like "for the removal of doubts" is not conclusive. In other words, the Explanation which has effectively changed the existing law may be read as a substantive law without reading the expression "for the removal of doubts". In the Explanation it has been declared "service in relation to promotion or marketing of service provided by the client includes any service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client . . ." In other words, games of chance, organized, conducted or promoted by the client have not been declared as service. What has been declared as service is any service provided in relation to promotion or marketing thereof. The concept of service in the Explanation is totally alien to the concept of service in clause (ii) of sub-section (19) of section 65 of the Act. In other words, while the service rendered in promotion or m....
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.... dispute. However, I think, if the Explanation is read, as it should be read, independently then the value addition, if any, by rendering service to the action of the client in organizing or conducting or promoting games of chance as that of lottery would be taxable service. It was contended that tickets are priced by State Government at Rs. 1 each, which are purchased by the petitioner at Rs. 0.70. It was submitted that the price of the activity is paid at the discounted rate and accordingly there is no question of value addition. The fact remains that lottery tickets are purchased not for their consumption but for the purpose of marketing the same. In order to market lottery tickets the petitioner is required, in terms of the agreement it has with the State Government, to put up and the petitioner in fact puts up advertisements. It thereby entices the ultimate buyer of lottery tickets to purchase the same. It thus promotes the activity of its client, the State Government, in organizing lottery. In the matter of enabling its client to sale a lottery ticket worth Rs. 1 at Rs. 1 to the ultimate buyer of lottery tickets the petitioner renders service thus. The value of lottery ticket....