Skill Lotto Solutions Pvt. Ltd. vs Union of India & Ors.

Central Goods and Services Tax Act, 2017: s.2(52) – Whether the inclusion of actionable claim in the definition of goods as given in s.2(52) of the Act, 2017 is contrary to the legal meaning of goods and unconstitutional – Held: Art.366(12) defines goods to include all materials, commodities, and articles – Definition of goods as occurring in Art.366(12) is inclusive definition and does not specifically exclude actionable claim from its definition – Whenever inclusive definition is given of an expression, it always intends to enlarge the meaning of words or phrases, used in the definition – The definition of goods as contained in the Sale of Goods Act, 1930 in s.2(7) is every kind of movable property other than actionable claims and money; whereas definition of goods in s.2(52) in the Act, 2017 is every kind of movable property other than money and securities “but includes actionable claim” – Thus, the Constitution framers were aware of the definition of goods as occurring in the Sale of Goods Act, 1930 when the Constitution was enforced – By providing an inclusive definition of goods in Art.366(12), the Constitution framers never intended to give any restrictive meaning to the word “goods” – Thus, the definition of goods under s.2(52) of the Act, 2017 does not violate any constitutional provision nor it is in conflict with the definition of goods given under Art.366(12) – Art.366 clause (12) contains an inclusive definition and the definition given in s.2(52) of Act, 2017 is not in conflict with definition given in Art.366(12) – The Parliament by the Constitution (One Hundred and First Amendment) Act, 2016 inserted Art.246A, a special provision with respect to goods and services tax – Art.246A begins with non obstante clause, that is, “Notwithstanding anything contained in Arts.246 and 254”, which confers very wide power to make laws – The power to make laws as conferred by Art.246A fully empowers the Parliament to make laws with respect to goods and services tax and expansive definition of goods given in s.2(52) cannot be said to be not in accord with the constitutional provisions. Central Goods and Services Tax Act,2017:Whether the Constitution Bench in Sunrise Associates in paragraphs 33, 40, 43 and 48 of the judgment has laid down as the proposition of law that lottery is an actionable claim or the observations made in the judgment were only an obiter dicta and not declaration of law – Held: It cannot be said that the question as to whether lottery is a goods or actionable claim had not arisen in the decision in Sunrise Associates –When an item was held to be covered by excluded category, the said conclusion could have been arisen only after consideration of the definition and the exclusionary clause – Thus, the submission for the petitioner that the observations of the Constitution Bench holding lottery as actionable claim was only obiter dicta and not binding is not correct – The Constitution Bench in Sunrise Associates categorically held that lottery is actionable claim after due consideration which is ratio of the judgment. Central Goods and Services Tax Act, 2017: Art.14 – Whether exclusion of lottery, betting and gambling from Item No.6 Schedule III of the Act, 2017 is hostile discrimination and violative of Art.14 of the Constitution of India – Held: When Act, 2017 defines the goods to include actionable claims and included only three categories of actionable claims, i.e., lottery, betting and gambling for purposes of levy of GST, it cannot be said that there was no rationale for including these three actionable claims for tax purposes – Regulation including taxation in one or other form on the activities namely lottery, betting and gambling has been in existence since several decades – When the parliament has included these three for purpose of imposing GST and not taxed other actionable claims, it cannot be said that there was no rationale or reason for taxing the three and leaving others – Constitution of India – Art.14. Central Goods and Services Tax Act, 2017: s.15 – Whether while determining the face value of the lottery tickets for levy of GST, prize money is to be excluded for purposes of levy of GST – Held: The value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per s.15, it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme – Central Goods and Services Tax Rules – r.31A.

Interpretation of statutes: Whenever inclusive definition is given of an expression it is intended to enlarge the meaning of words or phrases, used in the definition – Central Goods and Services Tax, 2017.

Judicial review: Taxation policy – With regard to taxing policy of the legislature, the Courts have very limited role to play. Dissmissing of the writ petition, the Court

HELD: 1. Maintainability of Art.32: Article 32 confers a right to move to Supreme Court for enforcement of the right conferred by the Part III, which is guaranteed by sub-article (1) of Article 32 of the Constitution. Article 32 is an important and integral part of the basic structure of the Constitution. Article 32 is meant to ensure observance of rule of law. Article 32 provides for the enforcement of the fundamental rights, which is most potent weapon. By this petition, the petitioner has challenged the provisions of Central Goods and Services Tax Act, 2017 insofar as it imposes tax on the lottery. The grounds of challenge include violation of Article 14 of the Constitution of India. The levy of GST has been attacked as discriminatory. It is also submitted that there is a hostile discrimination in taxing only lottery, betting and gambling whereas leaving all other actionable claims from the taxing net as is evident by entry 6 of Schedule III of Act, 2017. The writ petition alleging the violation of Article 14 specially with respect to a parliamentary Act can very well be entertained under Article 32. [Paras 14, 15, 16][168-B-G]

H. Anraj and Ors. v. State of Maharashtra, (1984) 2 SCC 292 : [1984] 2 SCR 440; H. Anraj v. Government of Tamil Nadu, (1986) 1 SCC 414: [1985] 3 Suppl. SCR

342 – referred to.

Whether the inclusion of actionable claim in the definition of goods as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is contrary to the legal meaning of goods and unconstitutional?

Whether the Constitution Bench judgment of this Court in Sunrise Associates in paragraphs 33, 40, 43 and 48 of the judgment has laid down as the proposition of law that lottery is an actionable claim or the observations made in the judgment were only an obiter dicta and not declaration of law?

2.1 Article 366 sub-clause (12) defines goods. Goods includes all materials, commodities, and articles. Definition of goods as occurring in Article 366(12) is inclusive definition and does not specifically excludes actionable claim from its definition. Whenever inclusive definition is given of an expression it always intended to enlarge the meaning of words or phrases, used in the definition. The definition of goods as contained in the Sale of Goods Act, 1930 in Section 2(7) is every kind of movable property other than actionable claims and money; whereas definition of goods in Section 2(52) in the Act, 2017 is every kind of movable property other than money and securities “but includes actionable claim”. The Constitution framers were well aware of the definition of goods as occurring in the Sale of Goods Act, 1930 when the Constitution was enforced. By providing an inclusive definition of goods in Article 366(12), the Constitution framers never intended to give any restrictive meaning of goods. [Paras 20, 24, 33, 34][169-G-H; 170-A-B; 175-E-F; 170-F-G; 176-C] Reserve Bank of India v. Peerless General Finance and Investment co.Ltd. And others, 1987(1) SCC 424: [1987]

2 SCR 1 – followed

State of Madras v. Gannon Dunkerley & Co., (Madras) Ltd., [1959] SCR 329; M/s Gannon Dunkerley and Co. and Others v. State of Rajasthan and others, 1993 (1) SCC 364 : [1992] 3 Suppl. SCR 103 – held

inapplicable

2.2 It cannot be said that the question as to whether lottery is a goods or actionable claim had not arisen in the decision in Sunrise Associates. When an item was covered by excluded category, the said conclusion could have been arisen only after consideration of the definition and the exclusionary clause. The Constitution Bench in Sunrise Associates has categorically held that lottery is actionable claim after due consideration which is ratio of the judgment. [Para 48][182-D-F]

Sunrise Associates v. Govt. of NCT of Delhi and Ors. (2006) 5 SCC 603:[2006] 1 Suppl. SCR 421 –

Explained

2.3 Article 366(12) contains an inclusive definition and the definition given in Section 2(52) of Act, 2017 is not in conflict with definition given in Article 366(12). The Parliament by the Constitution(One Hundred and First Amendment) Act, 2016 inserted Article 246A, a special provision with respect to goods and services tax. The Parliament was fully empowered to make laws with respect to goods and services tax. Article 246A begins with non obstante clause that is “Notwithstanding anything contained in Articles 246 and 254”, which confers very wide power to make laws. The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws with respect to goods and services tax and expansive definition of goods given in Section 2(52) cannot be said to be not in accord with the constitutional provisions. There has to be a rational connection between the item taxed but it is well settled that with regard to taxing policy of the legislature, the Courts have very limited role to play. Article 246A is a special provision with regard to goods and services tax w.e.f. 16.09.2016, which special power has to be liberally construed empowering the Parliament to make laws with respect to goods and services tax. [Paras 49, 57, 58][182-G-H; 183-A-C; 186-C-D; 186-F-G]

Navnitlal C. Javeri v. K.K. Sen, Appellate, Assistant Commissioner of Income Tax, [1965] 1 SCR 909; State of Bombay v. R.M.D. Chamarbaugwala and Anr., AIR 1957 SC 699: [1957] SCR 874 – relied on.

Bhopal Sugar Industries Ltd., M.P. and Anr. v. D.P. Dube, Sales Tax Officer and Anr., [1964] 1 SCR 481;M/s. Gannon Dunkerley and co. and others v. State of Rajasthan and others, 1993 (1) SCC 364:[1992]

3 Suppl. SCR 103 – distinguished.

2.4 The Constitution Bench of this Court in Sunrise Associates has held that actionable claims are includible in the definition of goods and had actionable claims were not includible, there was no need for excluding them. In other words, actionable claims are “goods” but not for the purpose of Sales Tax Acts and but for this statutory exclusion, an actionable claim would be “goods” or the subject-matter of ownership”. Thus, in view of what has been said above by the Constitution Bench, the submission of the petitioner that actionable claims have been artificially included in the definition of goods cannot be accepted. The Constitution Bench has clearly laid down that actionable claims are goods. Thus, Parliament has not exceeded its jurisdiction in including actionable claims in the definition of “goods” under Section 2(52). [Paras 58, 59][186-G-H; 187-A-C] Whether exclusion of lottery, betting and gambling from Item No.6 Schedule III of Central Goods and Services Tax Act, 2017 is hostile discrimination and violative of Article 14 of the Constitution of India?

3. Schedule III begins with heading “activities or transactions which shall be treated neither as supply of goods nor supply of services. Item No.6 of Schedule III is as follows:”Item No.6 – Actionable claims other than lottery, betting and gambling.” Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations. When Act, 2017 defines the goods to include actionable claims and included only three categories of actionable claims, i.e., lottery, betting and gambling for purposes of levy of GST, it cannot be said that there was no rationale for including these three actionable claims for tax purposes. Regulation including taxation in one or other form on the activities namely lottery, betting and gambling has been in existence since last several decades. When the parliament has included above three for purpose of imposing GST and not taxed other actionable claims, it cannot be said that there is no rationale or reason for taxing above three and leaving others. Hence, there is no violation of Article 14 in Item No. 6 of Schedule III of the Act, 2017. [Paras 63, 70, 71][187-F-G; 191-B-D; 191-G] Whether while determining the face value of the lottery tickets for levy of GST, prize money is to be excluded for purposes of levy of GST?

4.1 The Rules have been framed, namely, the Central Goods and Services Tax Rules, 2017 in which Rules by notification dated 23.01.2018 Rule 31A has been inserted dealing with value of supply in case of lottery, betting, gambling and horse racing. For determining the value of the lottery, now, there is statutory provision contained in Section 15 read with Rule 31A. Section 15 of the Act, 2017 by sub-section (2) it is provided what shall be included in the value of supply. What can be included in the value is enumerated in sub-clause (a) to (e) of sub-section (2) of Section

15. Further, sub-section (3) of Section 15 provides that what shall not be included in the value of the supply. When there are specific statutory provisions enumerating what should be included in the value of the supply and what shall not be included in the value of the supply, the submission of the petitioner that prize money is to be abated for determining the value of taxable supply cannot be accepted. What is the value of taxable supply is subject to the statutory provision which clearly regulates, which provision has to be given its full effect and something which is not required to be excluded in the value of taxable supply cannot be added by judicial interpretation. Further, Rule 31A, sub-rule (2) as amended clearly provides that value of supply shall be deemed to be 100/128 of the face value of ticket or of the prize as notified in the Official Gazette by the Organising State, whichever is higher. [Paras 74, 78, 79][194-D-E; 196-A-D; 196-D-E]

4.2 The value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per Section 15, it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme. When prize paid by the distributor/agent is not contemplated to be excluded from the value of taxable supply, the submission of the petitioner that prize money should be excluded for computing the taxable value of supply is not accepted. Thus, while determining the taxable value of supply the prize money is not to be excluded for the purpose of levy of GST. When the levy of GST, determination of taxable value are governed by the Parliamentary Act in this country, legislative scheme of other countries may not be relevant for determining the issue which has been raised. The taxing policy and the taxing statute of various countries are different which are in accordance with taxing regime suitable and applicable in different countries. The issue which has been raised has to be answered by looking into the statutory provisions of the Act, 2017 and the Rules framed therein which govern the field. Thus, the petitioner is not entitled to reliefs as claimed in the writ petition. [Paras 80, 81, 82][196-F-H; 197-A; 197-B-D; 197-D-E] The State of Madras v. Gannon Dunkerley &

Co.(Madras) Ltd., [1959] SCR 379; Builders’

Association of India v. Union of India, (1989) 2 SCC

645 : [1989] 2 SCR 320; H. Anraj and Ors. v.

Government of Tamil Nadu and Ors. (1986) 1 SCC

424 : [1985] 3 Suppl. SCR 342; Sunrise Associates v. Govt. of NCT of Delhi and others, 2010 (10) SCC 420: Vikas Sales Corporation and another v. Commissioner of Commercial Taxes and another, (1996) 4 SCC 433 [1996] 2 Suppl. SCR 204; Municipal Corporation of Delhi v. Gurnam Kau, 1989 (1) SCC 101 : [1988] 2 Suppl. SCR 929; Navinchandra Mafatlal Bombay v. Commissioner of Income Tax, Bombay City, AIR 1955 SC 58:[1955] SCR 829; Sri Krishna Das v. Town Area Committee, Chirgaon, (1990) 3 SCC 645; State of Uttar Pradesh and Ors. v. Deepak Fertilizers & Petrochemical Corporation Ltd., (2007) 10 SCC 342 : [2007] 6 SCR 525; Union of India and Ors. v. Martin Lottery Agencies Limited, (2009) 12 SCC 209 : [2009] 7 SCR 946; Ayurveda Pharmacy and Anr. v. State of Tamil Nadu, (1989) 2 SCC 285: [1989] 2 SCR 37 – referred to