M/S. SUNRISE ASSOCIATES versus GOVT. OF NCT OF DELHI AND ORS.

Citation: [2006] SUPP. 1 S.C.R. 421 · Decided: 28-04-2006 · Supreme Court of India · Bench: RUMA PAL · Disposal: Reference answered

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Judgment (excerpt)

MIS. SUNRISE ASSOCIATES 
A 
v. 
GOVT. OF NCT OF DELHI AND ORS. 
APRIL 28, 2006 
[RUMA PAL, B.N. SRIKRISHNA, S.H. KAPADIA, TRAUN CHATTERJEE 
B 
AND P.P. NAOLEKAR, JJ.] 
Delhi Sales Tax Act, 1975; 
Lottery tickets-Whether goods-Sale of-Liability to sales tax-Held, C 
sale of a lottery ticket amounts to the transfer of an actionable claim and 
as such it is not a sale of goods for the purposes of the sales tax laws-Article 
366(29A)(a), Constitution of India-Sections 3 and 130 of the Transfer of 
Property Act, 1882. 
On the question whether sales tax can be levied by States on the sale of 
lottery tickets, a Bench of two-Judges has held in H. Anraj v. Government of 
Tamil Nadu, [1986] I SCC 414, that a lottery involved (i) the right to 
participate in the lottery draw, and (ii) the right to win the prize, depending 
D 
on chance. The Judges were of the opinion that while the second right was a 
chose in action and therefore not 'goods' for the purpose of the levy of Sales E 
Tax, the first was a transfer of a beneficial interest in moveable goods and 
was a sale within the meaning of Article 366(29-A)(d) of the Constitution and 
consequently subject to sales tax. Against the decision of the High Court of 
Delhi dated 17th July, 1998 in Haryana State Lotteries v. Govt. of NCT, (1998) 
46 DRJ 397 disposing of a series of writ petitions construing H. Anraj and F 
holding that lottery tickets were goods and are liable to sales tax under the 
Delhi Sales Tax Act, 1975, several appeals have been filed before this Court. 
In the appeal preferred by Sunrise Associates, the order of reference was 
made on the prima facie view that there was no good reason to split a lottery 
into two separate rights and, therefore, the judgl!Jent in H. Anraj 
reconsideration. Since in the case of Vikas Sales Corporation v. Commissioner G 
of Commercial Taxes, (supra), a Bench of three-Judges had agreed with the 
decision of H. Anraj, it was necessary that the appeal had to be heard by a 
Constitution Bench. 
The appellants, who are dealers in the sale of lottery tickets, have 
~I 
H 
422 
SUPREME COURT REPORTS [2006] SUPP. I S.C.R. 
A contended that H. Anraj wrongly drew a distinction between the right to 
participate in the draw and chance to win the prize. Such bifurcation was 
artificial as both were part of the same transaction. It was further contended 
that even on the "two rights" theory each of those rights would be chose in 
action. As far as the decision in Vikas Sales is concerned, it was contended 
B that the additional reason given namely, free transferability for holding that 
a particular thing was goods, was erroneous. It was pointed out that even 
actionable claims such as negotiable instruments and debentures may be freely 
transferable. As far as the DEPB is concerned, according to the appellants, it 
was in the nature of a notional credit which an exporter acquires on export by 
way of an entry in a passbook. This credit was utilizable by the importer to be 
C adjusted against the import duty payable on goods imported. The credit was 
freely transferable but it could not be said to be goods only by that reason. At 
best it was an actionable claim. According to some appellants, the right to 
participate in a draw which was held to be a sale of goods by H. Anraj was 
only a right to service rendered by the lottery organizers. There was no 
transfer of any moveable property in the entire transaction. It was also 
D submitted that when there were divisible elements in a contract, the 
predominant element would determine the nature of the right. As far as lottery 
tickets were concerned, the right to participate in the draw was 
overwhelmingly dominated by the element of the right to claim the prize by 
the prize winner. It was contended that value wise the prize money constituted 
E 90% of the total amount collected from the purchasers whereas the value of 
~he right to participate would be limited to the administrative expenses for 
holding the draw which accounted for the balance 10% of the monies 
collected. 
The State Governments have not taken consistent stands. The 
F Government of the National Capital Territory of Delhi advanced the very 
arguments which had been made, considered and rejected in H. Anraj 's case. 
It was submitted that the reasoning in H. Anraj did not require 
reconsideration. It had held the field for several decades and had been followed 
in a number of cases. It was submitted that a lottery ticket repr

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