Teesta Distributors & Ors. Versus Union of India & Ors.
GST
2018 (10) TMI 941 – CALCUTTA HIGH COURT – [2018] 59 G S.T.R. 35 (Cal), 2018 (19) G. S. T. L. 29 (Cal.)
CALCUTTA HIGH COURT – HC
Dated:- 10-10-2018
W. P. No. 18424 (W) of 2017
GST
DEBANGSU BASAK, J.
For the Petitioners: Mr. Joydeep Kar, Sr. Advocate Mr. Ayan Banerjee, Advocate Ms. Debarshee Dhamali, Advocate
For Union of India: Mr. Kaushik Chanda Ld. A.S.G. Mr. T.M. Siddiqui, Advocate Mr. Avra Mazumder, Advocate Mr. Somnath Ganguly, Advocate Mr. Bhaskar Prosad Banerjee, Advocate Mr. Rajashree Veneet Kundalia, Advocate Mr. Nripendra Nath Mondal, Advocate
For the Respondent No. 2: Mr. Biswajit Deb, Ld. A.A.G. Mr. Sandip Kumar, Advocate Mr. Sayeed Khan, Advocate
For the Respondent No. 4: Mr. Sandip Kr. De
For the Respondent No. 5: Mr. Indraneel Chowdhury, Advocate Mr. Arijit Bhowmick, Advocate Mr. Angan Baruah, Advocate
For the Respondent No. 6: Mr. Ayanabha Raha, Advocate
The petitioners have sought a
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le III Entry 6 of CGST Act, 2017 in support of his contention. He has referred to the definition of 'goods' in Article 366(12) of the Constitution. He has submitted that, 'goods' as defined therein has to have the characteristics of material, commodities and articles. Referring to Article 366 (29A) of the Constitution, he has submitted that, the definition of 'tax' on the sale or purchase of 'goods' is an inclusive definition. However, there has to be a transfer of property. Therefore, according to him, 'goods' as defined in the Constitution has to be something which can be transferred for cash, deferred payment or other valuable consideration. According to him, it should be possible to transfer at least the beneficial interest in the movable property for it to be 'goods'.
It has to be something which is actually transferable either in the physical form or at least a beneficial interest therein. Referring to Lotteries (Regulation) Act, 1998, he has submitted that, lottery has been def
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has referred to the preamble of CGST Act, 2017 and submitted that, the CGST Act, 2017 came into being to make provision for levy and collection of tax on inter-state supply of goods or services or both by the Central Government and the matters connected therewith or incidental thereto. According to him, for levy of tax, the subject of tax has to be 'goods'. He has also referred to the preamble to the Integrated Goods and Services Tax Act, 2017. Since lottery is neither 'goods' nor 'service', no levy under the Integrated Goods and Services Tax Act, 2017 can be made.
Learned Senior Advocate appearing for the petitioner has submitted that, when CGST, 2017 and IGST, 2017 propose to tax a lottery, it goes beyond the constitutional definition of 'goods'. He has relied upon 2017 Volume 12 Supreme Court Cases page 1 (Jindal Stainless Ltd. v. State of Haryana) and has submitted that, the power of taxation controlled by Article 265 of the Constitution forbids levy or recovery or any tax except
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Constitution. He has referred to the preamble to the GST Act and has submitted that, the Act is for levy and collection of intra and inter-state supply of goods or services or both. Under the GST Act, sale of lottery tickets are taken as both intra and inter-state supply of goods and services. Sale of lottery ticket is treated as a trade or commerce under Article 246A (2) and 269A of the Constitution of India. He has submitted that, differential rates of tax cannot be fixed for lottery tickets imported from other States and lottery tickets produced in the States. The discrimination in rates varies between 12 and 28 per cent. It is per se unsustainable and is required to be stuck down. All lottery tickets organized by the States have to be treated at par. The same percentage of tax is required to be levied. Otherwise it would violate the constitutional mandate. He has relied upon Jindal Stainless Ltd. (supra) in support of such contentions.
Learned Additional Advocate General appearing
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rticles. According to him, lotteries are 'goods'. He has referred to 2005 Volume 1 Supreme Court Cases page 308 (TATA Consultancy Services v. State of A.P.) and has submitted that, the term 'goods' used in Article 366(12) of the Constitution of India is very wide and includes all types of movable properties whether those properties are tangible or intangible. The definition of 'goods' under Article 366(12) of the Constitution of India is an inclusive one. Relying upon 2006 Volume 5 Supreme Court Cases page 603 (Sunrise Associates v. Government of NCT of Delhi) and 1986 Volume 1 Supreme Court Cases page 414 (H. Anraj v. Government of Tamil Nadu), he has submitted that, lottery is an 'actionable claim' and therefore 'goods'. In Sunrise Associates (supra), according to him, since, the State laws excluded 'actionable claim' from the definition of 'goods' explicitly, the Supreme Court held that, lottery would not be subjected to Sales Tax. According to him, Sunrise Associates (supra) should
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ed upon 1970 Volume 1 Supreme Court Cases page 189 (The Twyford Tea Company v. State of Kerala). The State is allowed to pick and choose districts, objects, persons, methods and rates of taxation, if the State, does so reasonably. The Legislature enjoys a very wide latitude in classification for taxation. He has relied upon 1989 Volume 3 Supreme Court Cases page 634 (Federation of Hotel and Restaurants Association v. Union of India) and 2012 Volume 1 Supreme Court Cases page 67 (Union of India v. Nitdip Textile Processor) in support of such contention.
Relying upon 2017 Volume 7 Supreme Court Cases page 59 (Binoy Viswam v. Union of India) learned Additional Advocate General appearing for the State of West Bengal has submitted that, a legislation or a provision contained in statute can be invalidated if, it is not within the competence of the legislature which passed the law, or it is contravention of any of the fundamental rights stipulated in Part III of the Constitution of India or
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l has submitted that, CGST Act and SGST Act have not discriminated between lotteries run by the State Government and the lotteries authorised by the State. The Central and State Governments have issued relevant notifications imposing different rates of taxes for lottery run by the State Government and lottery authorised by the State Government in another State. In case of lottery run by the State Government it is in aggregate 12 per cent, with 6 per cent each been levied under the CGST and SGST. The lottery authorised by the State Government in another State attracts in aggregate 28 per cent, with 14 per cent each under the CGST and SGST. The notifications have been issued pursuant to the recommendations made by the GST Council in its 17th meeting. The rates are not discriminatory and are intended to preserve economic uniformity and the interest of the constituent States. According to him, the tax component is included in the price of the ticket. The end customer which purchased the ti
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also agreed upon. Therefore, the States should not be permitted to contend contrary to the resolution adopted by the GST Council in its meeting held on June 18, 2017.
Learned Additional Solicitor General appearing for the Union of India has submitted that, the Union Government promulgated the CGST Act, 2017 and the respective State Governments enacted the SGST Act to tax intra-state supply of goods or services or both. The Union Government formulated the IGST Act, 2017 to tax the interstate supply of goods and services or both. Subsequently, notifications have been issued under those acts notifying the tax rates of different goods and services as recommended by the Council. He has submitted that, since lottery tickets are sold at the price printed on them as inclusive price, that is, inclusive of all taxes, the value or supply of lottery under Section 15(5) of the GST Act has been deemed to be 100/112 and 100/128 of the face value of ticket or of the price as notified in the Official
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eme Court in 1984 Volume 3 Supreme Court Cases page 704 (J.K. Bharati v. State of Maharashtra and Ors.). Therefore, it is open for the Government to treat lottery run by the State Governments and the lottery authorised by the State Governments, for any justifiable and valid reason, to be the same. He has drawn the attention of the Court to Schedule III of Section 7 of the CGST Act, 2017 and Rule 31A of the CGST Rules 2017. He has submitted that, the lottery is included along with activities being gambling, betting and horse racing in Schedule III so as to create a category of case of activity where people indulge in not reaping fruits of their labours. The activities of betting and gambling, such as, by way of horse racing or gambling, attract GST at the rate of 28 per cent. It was within the competence of GST Council to impose 28 per cent rate for lotteries authorised by State Governments.
However, taking into account the views expressed by the north-east States and the other States
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States in such meeting. However, the criteria of State run lotteries and State authorised lotteries were conceived of and introduced in such meeting on the basis of which differential rates were recommended. He has drawn the attention of the Court to J.K. Bharati (supra) and 1994 Volume 4 Supreme Court Cases page 217 (State of Haryana v. Suman Enterprises and Ors.) in which the concept of lottery run by the State and lottery authorised by the State were discussed.
According to him, both such judgments were rendered during the period when the Lotteries (Regulation) Act, 1998 was not enacted.
With the Lotteries (Regulation) Act, 1998 coming into effect, the States were conferred with the power to authorise private parties to organize lotteries. Consequently, there is only one kind of lottery, that is, lotteries organized/run by the State. Therefore, in such context, the rates of GST are unequal and discriminatory.
Learned Senior Advocate appearing for the State of Nagaland has submit
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Act, 1998. He has relied upon Rule 2(1)(f) of the GST Rules. He has submitted that, the State of Mizoram supports the petitioner to the extent of differential rate of GST introduced on sale of lotteries. According to him, the tax should be uniform.
In reply learned Senior Advocate appearing for the petitioners has submitted that, in TATA Consultancy Services (supra), the Court did not go into the issue as to, whether the definition of 'goods' would include tangible or intangible properties or not. It was concerned with intellectual property being sold in floppies, discs, CD/Roms and in other modes. According to him, the ratio laid down therein does not support the contentions of the State of West Bengal.
A lottery ticket does not partake the character of movable property at any stage. Unlike floppies and disk, it is not a commodity in the market which can be bought against consideration and on payment of consideration the property passes to the purchaser. Referring to Suman Enterpri
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claim' but treats it as goods along with other goods which comes under Article 301 to 304. GST Act does not make any distinction between an 'actionable claim' being treated as 'goods' and other 'goods' coming under the same definition.
According to him, the contention that, lottery though an 'actionable claim' coming under the definition of 'goods' but should be treated not as inter-state trade or commerce under Part XIII is unacceptable and has no basis.
Referring to the minutes of the 17th GST Council meeting held on June 18, 2017, learned Senior Advocate for the petitioner has submitted that, the GST Council took notice of J.K. Bharati (supra). Such judgment was rendered in a situation prevailing prior to the coming into effect of the Lotteries (Regulation) Act, 1998. With the coming into effect of the Act of 1998, there is only one type of lottery. Consequently, GST Council does not have any power or authority to bifurcate lotteries, based on entries in the seventh schedule, whe
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Lotteries are regulated by the Lotteries (Regulation) Act, 1998. Lottery is defined in Section 2(b) of the Act of 1998 as follows:-
“lottery means a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chance of a prize by purchasing tickets;
'Goods' is defined in Article 366(12) of the Constitution of India as follows:-
'Goods' includes all materials, commodities and articles; Sale of Goods Act, 1930 defines 'goods' in Section 2(7) as follows:- 'goods' means every kind of movable property other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;”
'Actionable claim' is defined in Section 3 of the Transfer of Property Act, 1882 to mean –
“a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or p
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rendered on October 4, 1985. The Lotteries (Regulation) Act, 1998 came into effect much later. H. Anraj (supra) had considered the issue as to whether a lottery ticket can be 'goods' or not in the context of the Tamilnadu General Sales Tax Act, 1959 and Bengal Finance (Sales Tax) Act, 1941. It has held that, lottery tickets to the extent that they comprise the entitlement to participate in the draw are 'goods' falling within the definition of 'goods' as given in Tamilnadu General Sales Tax Act, 1954 and Bengal Finance (Sales Tax) Act, 1941. Independent of the two state Acts under consideration therein, it has held that, a trade of a lottery ticket confers on the purchaser two rights. In this regard it would be appropriate to refer to paragraph 27 thereof, which is as follows:-
“27. It cannot be disputed that in every raffle scheme based on the sale of lottery tickets, similar to the schemes sponsored by each of the two States in this case, every participant is required to purchase a
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ed in two parts, namely, a right to participate and a right to receive the prize but the two together constitute one single right. It is not possible to accept this contention for the simple reason that the two entitlements which arise on the purchase of a lottery ticket are of a different character, inasmuch as the right to participate arises in praesenti, that is to say it is a choate or perfected right in the purchaser on the strength of which he can enforce the holding of the draw, while the other is inchoate right which is to materialise in future as and when the draw takes place depending upon his being successful in such draw. Moreover, on the date of the purchase of the ticket, the entitlement to participate in the draw can be said to have been delivered unto the possession of the purchaser who would be enjoying it from the time he has purchased the ticket and as such it would be a chose in possession while the other would be an actionable claim or a chose in action as has been
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prize, depending on chance, it was an assignment of an 'actionable claim'. H. Anraj (supra) has pleaded the transaction of sale of lottery ticket into the acquisition of firstly the right to participate in the lottery draw and secondly the right to win the prize, depending on chance. The Supreme Court has reconsidered H. Anraj (supra) in Sunrise Associates (supra).
Sunrise Associates (supra) has held that, the distinction drawn in H. Anraj (supra) between the chance to win and the right to participate in the draw was unwarranted. It has held that, a lottery is in essential a chance for a prize, the sale of a lottery ticket can only be a sale of that chance. It has held that, there was no distinction between the two rights. The right to participate being an inseparable part of the chance to win, is therefore part of an 'actionable claim'. It goes on to hold that, the sale of a lottery ticket does not necessarily involve the sale of goods. It is nothing other than a contract of carriage
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er the Sale of Goods Act and the sales tax statute. It has held that, lotteries being actionable claims are generally speaking “goods” or moveable property.
On the strength of Sunrise Associates (supra) therefore, the first issue has to be answered by holding that, a lottery is an 'actionable claim' and goods or moveable property. The first issue is answered accordingly.
The Constitution (One hundred and first Amendment) Act, 2016 introduced the Goods and Services Tax regime in India. It sought to replace all indirect taxes levied on goods and services by the Union as well as the State Governments. It came to be a comprehensive indirect tax levy on manufacture, sale or consumption of goods and services.
The Act of 2016 inserted Article 246A, 269A and 279A to the Constitution of India. It amended the provisions of Article 286 of the Constitution. It deleted Entry 92 and 92C of List I of the Seventh Schedule and inserted Entry 84 of List I and Entry 54 of the List II of the Seventh Sc
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ax on supplies in the course of inter-state trade or commerce. It allows the apportionment of the tax levied and collected between the Union and the States as may be provided by Parliament by law. It recognises the authority of the Parliament by law to formulate the principles for determining the place of supply and when a supply of goods or of services or both takes place in the course of inter-state trade or commerce. Article 279A deals with Goods and Services Tax Council. It envisages the Constitution of a Goods and Services Tax Council. It enumerates the powers and functions of such Council, the decision making process therein and the establishment of a mechanism to adjudicate any disputes.
Part XIII of the Constitution of India deals with Trade, Commerce and Intercourse within the territory of India. Article 301 lays down that, subject to other provisions of Part XIII, Trade, Commerce and Intercourse throughout the territory of India shall be free. Article 302 empowers the Parlia
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erwise requires,
(1) “actionable claim” shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882);
2(52). “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;
2(98). “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;
7. Scope of supply
(1) For the purposes of this Act, the expression “supply” includes
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to
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by notification, the transactions that are to be treated as-
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
9. Levy and collection
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
(2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.
(3
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ommerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
Similar provisions appear in the West Bengal Goods and Services Tax Act, 2017. It regulates the levy and collection of tax on intra-State supply of goods or services or bot
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ot be declared unconstitutional on the ground that, it is arbitrary or unreasonable. In the facts of the present case, it has not been substantiated that, the State Legislature promulgating the West Bengal Goods and Services Tax Act, 2017 did not have the competence to pass the law or that it violates any fundamental rights of the petitioner or any other right of the petitioner or any provision of the Constitution. The definition of 'goods' in Article 366(12) of the Constitution allows the Legislatures to classify lottery as 'goods' and charge tax thereon.
The Integrated Goods and Services Tax Act, 2017 makes provisions for levy and collection of tax on inter-state Supply of Goods or Services or both by the Central Government. It defines Import of Goods in Section 2(10) and Import of Services in Section 2(11) of the Act of 2017. By Import of Goods, it means Import of Goods from a place outside India. By Import of Services, it means the supply of any service where the supplier o
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uthority of law. CGST Act, 2017 and WB GST Act, 2017 cannot be held to be unconstitutional. Lotteries come within the scope and ambit of CGST Act, 2017 and WB GST Act, 2017. Therefore, lottery can be taxed under the CGST Act, 2017 and WB GST Act, 2017. The second issue is answered accordingly.
The second issue is answered by holding that, lottery can be taxed under the Central Goods and Services Tax Act as well as the West Bengal Goods and Services Tax Act, 2017.
The rates imposed by the GST Council are decisions which a Writ Court is slow to examine. The rationale for imposing differential rates appear from the minutes of the 17th meeting of the GST Council. The rationale for the differential rate or the rates by themselves have not been substantiated to be breach of any provision of the Constitution. Keshab Chandra (supra) has held that, the State Government cannot challenge its own notification as unconstitutional as, it has the wherewithal to set the wrong, right. In the present
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