Parliament has Power to Impose Service Tax on Activities relating to Sale of Lotteries: Sikkim HC [Read Judgment]

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The Sikkim High Court, in M/s Future Gaming & Hotel Services (P) Ltd v. UOI, has upheld the constitutionality of amendments brought through the Finance Act, 2016, which made service tax leviable on a person engaged in promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner.

The petitioners approached the High Court against the levy of Service Tax on buying and selling of lottery tickets brought by the Central Government through an amendment in 2016. The petitioners also challenged Notification No. 18/2016 dt 01.03.2016. According to them, the Parliament lacks jurisdiction to levy tax on the same since the matters is wholly covered under Entry 34 and Entry 62 of List II of the Seventh Schedule of the Constitution of India.

Rejecting the contentions of the petitioners, the division bench comprising Chief Justice Satish K Agnihotri observed that the Union Parliament is conferred with the power and competence under Article 268A read with Entry 97, List I (Union List) to impose and levy service tax on other related activities.

“It is well settled principles as laid down in the cases (supra) that entries in the three lists are fields of legislation. Taxation is a distinct matter for the purpose of legislative competence and it must flow from the specific entry provided for levy and imposition of taxes. The relevant service tax leviable is not on the lottery as also submitted by the respondents, but on promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner.”

However, it was held that court the amendments carried out by the Finance Act, 2016, were not capable to being implemented for imposition and levy of the service tax on the services allegedly provided by the petitioners.

“It is further submitted that there is no payment of any consideration for incidental activities like advertisement etc. and there is no denial of the fact by the respondents that there is any methodology to distinguish the consideration paid for the services for the purposes as aforestated. In such view of the matter, when consideration is unascertainable for the services rendered by a distributor or selling agent, the service tax is not imposable and liable to be set aside.”

Read the full text of the Judgment below.

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