LexK. ARUMUGAM versus UNION OF INDIA & OTHERS ETC.
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[2024] 8 S.C.R. 830 : 2024 INSC 630 K. Arumugam v. Union of India & Others Etc. (Civil Appeal Nos. 2842-2848 of 2012) 08 August 2024 [B.V. Nagarathna* and Nongmeikapam Kotiswar Singh, JJ.] Issue for Consideration Appellant-assessees purchased Kerala State Lotteries from the District Lottery Offices and other States’ lotteries in bulk from registered promoters at a discounted rate. The appellant subsequently sold them to retailers on an outright sale basis. Whether the activity of the appellants-assessees would attract service tax within the scope and ambit of Section 65(19)(ii) read with Section 65(105)(zzb) of the Finance Act, 1994. Headnotes† Finance Act, 1994 – s.65(19)(ii) r/w. s.65(105)(zzb) – Appellant was directed by the Superintendent of Central Excise, Service Tax Range, to obtain registration and pay service tax under the heading ‘business auxiliary service’ in terms of the provisions of the Finance Act, 1994 – Correctness: Held: It was opined in Sunrise Associates case that lottery tickets can be categorised as actionable claims – On a reading of clause (19) of Section 65 of the Finance Act, 1994 and on analyzing the same, it is evident that tax on a business auxiliary service is relatable to (i) any service concerning promotion or marketing or sale of goods, produced or provided by, or belonging to the client and (ii) promotion or marketing of service provided by the client – The definition of goods has also been noted in clause (50) of Section 65 of the Finance Act, 1994 which refers to clause (7) of Section 2 of the Sale of Goods Act, 1930 – The expression “goods” under the Sale of Goods Act expressly excludes actionable claims as well as money – Therefore, lottery tickets would not come within the meaning of the expression goods under clause (7) of Section 2 of the Sale of Goods Act, 1930, they would also * Author [2024] 8 S.C.R. 831 K. Arumugam v. Union of India & Others Etc. not come within the scope and ambit of clause (50) of Section 65 of the Finance Act, 1994 – If that is so, they would also not come within the scope and ambit of clause (19)(i) of Section 65 of the Finance Act, 1994 – Lottery tickets being actionable claims and not being goods within the meaning of sub-clause (i) of clause (19) of Section 65 of the Finance Act, 1994, would expressly get excluded from the scope of the said provision – As far as Explanation added with effect from 16.05.2008 under clause 19(ii) of section 65 is concerned, when lottery ticket is an actionable claim and not “goods” and is therefore outside the scope of sub-clause (i) of clause 19 of Section 65 of the Finance Act, 1994, it could not have been included as lottery per se in the Explanation to sub-clause (ii) of Clause 19 of Section 65 of the Finance Act, 1994 – On a plain reading of the Explanation in light of the activity actually carried on by the appellant(s)- assessee(s) herein, it becomes clear that the outright purchase of lottery tickets from the promoters of the State or Directorate of Lotteries, as the case may be, is not a service in relation to promotion or marketing of service provided by the client, i.e., the State conducting the lottery – The conduct of lottery is a revenue generating activity by a State or any other entity in the field of actionable claims – The Explanation, cannot over-ride the main text of the provision as the Explanation which was sought to remove doubts is in fact contrary to the main provision which defines business auxiliary service and also contrary to the judgment of this Court in Sunrise Associates case and having regard to clause (50) of Section 65 of the Finance Act, 1994 – The said Explanation was omitted with effect from 01.07.2010 – However, these cases pertain to the period prior to 01.07.2010 – Therefore, either under sub-clause (i) of clause (19) of Section 65 or under the Explanation to sub-clause (ii) of Clause 19 of Section 65 of the Finance Act, 1994, after it was introduced with effect from 16.05.2008 and until it was omitted, service tax could not have been levied on the promotion or marketing of sale of goods or service provided by the client, on the premise that it was a ‘business auxiliary service’. [Paras 6.7, 6.8, 6.9, 6.10] Case Law Cited Sunrise Associates v. Govt. of NCT of Delhi [2006] Supp. 1 SCR 421 : (2006) 5 SCC 603 – followed. 832 [2024] 8 S.C.R. Digital Supreme Court Reports List of Acts Finance Act, 1994; Finance Act,
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