The Hon’ble High Court of Sikkim in case of M/s Future Gaming Solution of India Private Limited v Union of India 2013 TIOL 904 HC SIKKIM ST has held where transaction between assessee-distributor and State Government involved only sale and purchase including 'on sale or return' of lottery tickets, which are actionable claims, in that case assessee was not acting as agent of Government, there was no service involved in transaction and no service tax could therefore be levied.
In the present case the petitioner company is registered under the Companies Act, 1956 and is engaged in the business of sale of lottery tickets organized by the Government of Sikkim. The petitioner company procures the lottery tickets in bulk from the Government of Sikkim and resells those to the public through various agents, stockists, resellers etc.The department has sought levy of service tax thereon arguing that said activity amounted to provision of services by way of promoting, marketing, etc. and was liable to service tax as per rule 6(7C) of Service Tax Rules, 1994.
After detailed discussion on various issues and reference to decided cases, the High Court concluded,
- In the light of Sub-Section (1) to Section 65B read with Sub-Section (44) thereof lottery is excluded from the definition of 'service' being 'actionable claim';
- Even under Sub-Section (34) of Section 65B read with Sections 66B and 66D lottery stands excluded from the purview of service tax under the Finance Act, 2012 as being one in the 'negative list';
- The activity of the Petitioner comprising of promotions, organizing, reselling or any other manner assisting in arranging of lottery tickets of the State Lotteries does not establish the relationship of a principal or an agent but rather that of a buyer and a seller and, on principal to principal basis.
- there is no provision anywhere for imposing of service tax on 'lottery' and the action of the Respondents to impose such tax on the Petitioner on the basis of Notification No.36 /2012-ST dated 20-06-2012 and the Service Tax Rules is ultra vires the very provisions of the Finance Act being in excess of the powers vested therein.
In the light of the aforesaid, the High court was of the view that transactions in lottery tickets are not liable to Service tax under the provisions of Finance Act, 1994 as amended by the Finance Act, 2012
Atul Kumar Gupta
B Com (Hons) FCA, FCMA, MIMA, CIQA, PGDEMM
Central Council Member of ICAI (2013-16)
Former Chairman NIRC of Institute of Chartered Accountants of India
Former Chairman NIRC of Institute of Cost Accountants of India
Author of “An Introduction to Service Tax” & “Comprehensive Guide to Service Tax”
M: 9810103611 E: firstname.lastname@example.org