1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION WRIT PETITION (CIVIL) NO.961 OF 2018 SKILL LOTTO SOLUTIONS PVT. LTD. ...PETITIONER VERSUS UNION OF INDIA & ORS. ...RESPONDENTS JUDGMENT ASHOK BHUSHAN, J. petitioner, authorized agent, for sale and distribution of lotteries organized by State of Punjab has filed this writ petition impugning definition of goods under Section 2(52) of Central Goods and Services Tax Act, 2017 and consequential notifications to extent it levies tax on lotteries. petitioner seeks declaration that Signature Not Verified Digitally signed by ARJUN BISHT Date: 2020.12.03 levy of tax on lottery is discriminatory and 17:03:04 IST Reason: 2 violative of Articles 14, 19(1)(g), 301 and 304 of Constitution of India. 2. We need to notice certain background facts which has given rise to this writ petition. 2.1 Parliament enacted Lotteries (Regulation) Act, 1998 to regulate lotteries and to provide for matters connected therewith and incidental thereto. Section 2(b) of Act defines lottery which provides that lottery means scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in chances of prize by purchasing tickets. Section 4 provides that State Government may organise, conduct or promote lottery subject to conditions enumerate therein. Different States have been organizing and conducting lotteries in accordance with aforesaid Act. It is to be noted that prior 3 to parliamentary enactment for regulating lotteries, different States have enacted legislation regulating lotteries which were legislations even prior to enforcement of Constitution, levying tax on sale of lottery tickets. Reference is made to Bengal Finance Sales Tax Act, 1941 and Madras General Sales Tax Act, 1939. Another Statute to be noticed is Bombay Lotteries (Control and Tax) and Prize Competitions (Tax) Act, 1958. 2.2 There has been series of litigation regarding taxability of lottery tickets and this Court had occasion to deliver several judgments on subject which we shall notice hereinafter. Service tax was levied on lottery tickets by Finance Act, 1994. Circular dated 14/21.2.2017 was also issued providing for mode of determination of amount of service tax. Rules were also 4 framed namely Lotteries (Regulation) Rules, 2010 by Central Government containing set of rules for regulation of lotteries organized by States. 2.3 By Constitution (One Hundred and First Amendment) Act, 2016, Article 246A was inserted in Constitution containing special provisions with respect to Goods and Services Tax. Article 269A and Article 279A were also inserted by same constitutional amendment. Article 279A provided for constitution of Goods and Services Tax Council. Parliament enacted Central Goods and Services Tax Act, 2017 (Act No.12 of 2017) to make provisions for levy and collection of tax on intra-State supply of goods or services or both by Central Government and for matters connected therewith or incidental thereto. Act came into force w.e.f. 12.04.2017. 5 Parliament also enacted Integrated Goods and Services Tax Act, 2017 (Act No.13 of 2017), Union Territory Goods and Services Tax Act, 2017 (Act No.14 of 2017) and Goods and Services Tax (compensation to States) Act, 2017 (Act No.15 of 2017). 2.4 Under Section 2(52) of Central Goods and Services Tax Act, 2017, term goods has been defined which provides that goods means every kind of movable property other than money and securities but includes actionable claim . Chapter III of Act provides for levy and collection of tax. Section 15 deals with value of taxable supply. After enactment of Act No.12 of 2017, Notification was issued by Government of India dated 28.06.2017 in exercise of power conferred by sub-section (1) of Section 9 notifying rate of integrated tax. By notification dated 28.06.2017 with 6 regard to lottery run by State Government, value of supply of lottery was deemed to be 100/112 of face value of ticket or prize as notified in official gazette of organising State, whichever is higher. With regard to lotteries authorised by State Government value of supply of lottery was deemed to be 100/128. 2.5 writ petitioner, authorised agent for state of Punjab for sale and distribution of lotteries organised by State of Punjab aggrieved by provisions of Act No.12 of 2017 as well as notifications issued therein filed present writ petition praying for following reliefs:- a) By appropriate writ, order or direction, quash and set aside definition of 'Goods' under Section 2(52) of Central Goods and Services Tax Act, 2017 [Annexure P-18 (Pg.141 to 143)], Impugned Notifications 01/2017 Central Tax (Rate), 01/2017 7 [Annexure P-19 (Pg.144 to 148)], Integrated Tax (Rate), 01/201 [Annexure P-20 (Pg. 149 to 154)], and State rate Notifications of Respondent State of Punjab [Annexure P-21(Pg.155 to 157)] to extent it levies tax on Lottery by declaring same to be discriminatory and violative of Article 49, (19)(1)(g), 301, 304 of Constitution of India and of CGST, SGST and IGST Act. b) In Alternative, by appropriate writ, order or direction quash and set aside impugned Notifications 01/2017 Central Tax (Rate), 01/2017 Integrated Tax (Rate) 01/2017 and State rate Notification of Respondent State of Punjab to extent it levies tax on face value of lottery ticket without abating prize money Component of lottery ticket when said amount never forms part of income of Petitioner or lottery trade. c) In Alternative, by appropriate writ, order or direction quash and set aside Impugned Notifications 01/2017 Central Tax (Rate), 01/2017 Integrated Tax (Rate) 01/2017 and State rate Notification of Respondent State of Punjab to extent it levies two different rates on tax on face value of lottery ticket and declare that Respondents can levy 8 uniform rate of 12% Tax on Lottery irrespective of place where it is being sold, and after adjusting prize money component from face value of lottery tickets. 3. We have heard Shri Ravindra Shrivastava, learned senior counsel for petitioner and Shri Vikramjit Banerjee, learned Additional Solicitor General for Union of India. We have also heard Shri C.A. Sundaram, learned senior counsel for intervenor. 4. Shri Shrivastava submits that lottery is not goods and under Central Goods and Services Tax Act, 2017, GST is levied only on goods, hence levy of GST on lottery is ultra vires to Constitution. It is further submitted that Constitution Article 366 sub-article (12) define goods to include all materials, commodities and articles. definition in Constitution exclude actionable claims since it only refers to materials, commodities and articles. definition of goods given in Section 9 2(52) of Central Goods and Services Tax Act, 2017 (hereinafter referred to as Act, 2017 ) is unconstitutional. It is further submitted that Constitution Bench of this Court in Sunrise Associates Vs. Govt. of NCT of Delhi and Ors., (2006) 5 SCC 603 has categorically held that lottery is not good. When Constitution Bench has held that lottery is not good, provisions of Act, 2017 treating lottery as goods is contrary to judgement of Constitution Bench in Sunrise Associates (supra). lottery is not actionable claim as is now sought to be included in definition of goods given in Section 2(52). provisions of Act, 2017 are self-contradictory in as much as definition of actionable claim is as per definition of Transfer of Property Act, which is only claim and not goods. Further, under definition of goods, actionable claims have been included as goods under Section 2(52). It is further submitted that GST is being levied on face value of lottery tickets which is impermissible since face value of 10 tickets also includes prize money to be reimbursed to winners of lottery tickets. Learned senior Counsel submits that meaning of goods as occurring in Constitution of India has to be taken in its legal sense. definition of goods as occurring in Sale of Goods Act, 1930 clearly excludes actionable claims from definition of goods, which definition has been held to be definition of goods under Constitution by this Court in State of Madras Vs. Gannon Dunkerley & Co., (Madras) Ltd., (1959) SCR 329. attempt of including actionable claim within meaning of goods seems to be deliberate attempt to make lottery fall within scope of GST which would render definition of goods contrary to meaning ascribed to it by Constitution of India as held by Gannon Dunkerley (supra). words defined in Constitution of India will have to be ascribed their legal meaning and not popular meaning. 11 5. Shri Shrivastava further submits that Parliament does not enjoy absolute power to make inclusive definition of something to be taxed which is not taxable otherwise. There is no absolute power with legislature to define something. If such definition has no rationale, such artificial definition cannot be treated only for purpose of assuming taxation power. Shri Shrivastava further submits that taxing actionable claim only is discriminatory since all actionable claims are not being taxed. Shri Shrivastava submits that according to Schedule III to Act, 2017 under Item No.6 actionable claims other than lottery, betting and gambling have been treated neither as supply of goods nor supply of services. There is clear hostile discrimination in taxing only lottery, betting and gambling whereas all other actionable claims have been left out of taxing net. Shri Shrivastava has further submitted that observations made in judgment of Constitution Bench in Sunrise Associates (supra) that lotteries are actionable 12 claims are only obiter dicta and cannot be treated to be ratio of judgment. 6. Shri Vikramjit Banerjee, learned Additional Solicitor General refuting submissions of learned senior counsel for petitioner at very outset submits that writ petition filed by writ petitioner under Article 32 is not maintainable. It is submitted that lottery is res extra commercium and no right under Article 19(1)(g) and Article 301 can be claimed by petitioner with regard to lottery. transaction of lottery tickets cannot be raised to status of trade, commerce or intercourse. There is no right with petitioner which can be enforced by writ petition filed under article 32 of Constitution, hence, writ petition being not maintainable deserves to be dismissed. Mr. Banerjee further submits that laws relating to economic activity need to be viewed with greater latitude than laws touching civil rights. He further submits that 13 courts are loath to interfere with taxing policies of States. fact of not levying tax on other actionable claims apart from lottery, betting and gambling cannot be said to be discriminatory. It is submitted that Constitution Bench of this court in Sunrise Associates (supra) has held that actionable claim is movable property and goods in wider sense. definition of goods given in Section 2(52) of Act 2017 is in accord with Constitution Bench judgment of this court in Sunrise Associates (supra) and argument that definition of goods given in Section 2(52) is contrary to above Constitution Bench judgment in Sunrise Associates (supra) is misplaced. definition of goods given under Article 366(12) of Constitution is inclusive definition. Article 366(12A) defines goods and services tax to mean tax on supply of goods or services or both except taxes on supply of alcoholic liquor for human consumption. Lottery having been judicially held to be actionable claim is covered within meaning of term goods under 14 section 2(52). Union Parliament has competence to levy GST on lotteries under article 246A of Constitution. Under Article 279A GST Council has approved levy of GST on lottery tickets, hence, inclusion of actionable claims in definition of goods under section 2(52) is in keeping with legislative and taxing policy. It is well settled that courts would not review wisdom or advisability or expediency of tax. levy on face value is authorised by section 15(1) read with section 15(5) of Act, 2017 and Rule 31(A) of Central Goods and Services Tax Rules, 2017. levy of 28% tax on face value is neither discriminatory nor beyond taxing policy/powers of State. 7. Shri Banerjee further submits that during pendency of writ petition, Rule 31A has been amended vide notification dated 02.03.2020 merging earlier two separate rates, i.e., regarding value of supply of lottery run by State Government, which was 15 earlier 100/112 and value of supply of lottery authorised by State Government, which was 100/128 has been made uniform and by virtue of Rule 31A sub- rule(2), value of supply of lottery is one and same, i.e., 100/128 of face value of ticket or prize as notified by organising State, whichever is higher. He submits that in view of above amendment dated 02.03.2020, which is not challenged in present writ petition, argument on ground of discrimination in rate of tax is no longer available to petitioner. Shri Banerjee further submits that judgment of this Court in State of Madras Vs. Gannon Dunkerley (supra) relied by learned senior counsel for petitioner is not attracted in facts of present case. It is submitted that above decision dealt with definition of term sale and was not concerned with interpretation of goods . 8. Shri Sundaram appearing for intervenor submits that Constitution permits tax on goods and 16 actionable claims being not taxed under Constitution, Parliament cannot have power of taxing lottery. taxing power of legislature is traceable to Constitution alone. It is not open to legislature to enlarge its taxing power. word goods is not new word and is concept well known in Constitution. Legislature cannot tax something which is constitutionally not goods. Act, 2017 cannot include something that was not part of definition as provided for in Constitution. definition of goods under GST Act would necessarily have to be guided by definition of goods given under Constitution. Shri Sundaram further submits that in any event, prize money in lottery deducted from lottery claim ought not to be taxed at all and tax, if at all ought to be levied only on invoice value, i.e., transaction value of lottery ticket or lottery scheme after deducting prize money. lottery ticket has zero value and is only chance, which cannot be taxed. Shri Sundaram submits 17 that lottery ticket is not even actionable claim but only chance, which is treated as actionable claim by ratio of Constitution Bench judgment in Sunrise Associates (supra), which will not be good within meaning of Article 366(12) of Constitution. He submits that since it is not good under Constitution, Union and States had no right to tax. Statute cannot bring in definition something as good, which Constitution itself excludes. Exclusion of all actionable claims from levy of GST except three, i.e., lottery, betting and gambling is nothing but hostile discrimination. Shri Sundaram submits that when lottery is being permitted by States, it is commercial activity. When State itself organise lottery, it is not pernicious. No reason is forthcoming as to why only three actionable claims are taxed leaving all others out of tax net. 18 9. Shri Ravindra Shrivastava in his rejoinder submits that he is not claiming any violation of right under Article 19(1)(g) or Article 301. He submits that writ petition is fully maintainable under Article 32 of Constitution. Parliamentary enactment on ground of violation of Article 14 is sought to be challenged in writ petition, which writ petition is fully maintainable. Shri Shrivastava questions legislative competence of Parliament to tax lottery as goods. Shri Shrivastava submits that he has placed reliance on principle, which has been laid down by this Court in Gannon Dunkerley (supra). This court in Gannon Dunkerley (supra) laid down that definition of goods has to be taken as it is meant under Sale of Goods Act, 1930, which definition is also to be taken for purposes of Article 366(12) of Constitution. Goods has to be interpreted in its legal sense. Goods cannot be defined in artificial manner as has been done by Parliament in Section 2(52). Shri Shrivastava submits that inclusive definition cannot be expansive 19 and unrealistic. He submits that there is no similarity in goods and actionable claims. There cannot be artificial expansion of definition of goods. He submits that lottery acquires property only when prize is declared. ticket is only chance and GST is levied on every sale of lottery ticket, which is not permissible since it is not actionable claim. 10. He reiterated his challenge on ground of hostile discrimination with regard to only three categories of actionable claims, i.e., lottery, betting and gambling whereas all other actionable claims are not being taxed under Act, 2017. He submits that taxing only three items has no nexus with object sought to be achieved. No rationale has been provided by respondent. If actionable claim is homogeneous clause, why only three have been picked out. Lottery is not something pernicious. Relying on earlier circular dated 14.02.2017, Shri Shrivastava submits that prize money has to be excluded from face value. 20 Shri Shrivastava further submits that lottery is held all across world and in other countries, GST is levied by excluding prize money. Shri Shrivastava has lastly submitted that notification, which has been issued during pendency of writ petition now providing uniform rate of lotteries organised by States or authorised by State having not been challenged in this writ petition, hence, petitioner reserve its right to challenge notification dated 21.02.2020/02.03.2020 separately in appropriate proceedings. 11. We have considered submissions of learned counsel for parties and have perused records. 12. From submissions of learned counsel for parties and materials on record, following are questions which arise for consideration in this writ petition:- 21 (I) Whether writ petition is not maintainable under Article 32 of Constitution of India since writ petition relates to lottery, which is res extra commercium and petitioner cannot claim protection under Article 19(1)(g)? (II) Whether inclusion of actionable claim in definition of goods as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is contrary to legal meaning of goods and unconstitutional? (III) Whether Constitution Bench judgment of this Court in Sunrise Associates (supra) in paragraphs 33, 40, 43 and 48 of judgment has laid down as proposition of law that lottery is actionable claim or observations made in judgment were only obiter dicta and not declaration of law? (IV) Whether exclusion of lottery, betting and gambling from Item No.6 Schedule III of 22 Central Goods and Services Tax Act, 2017 is hostile discrimination and violative of Article 14 of Constitution of India? (V) Whether while determining face value of lottery tickets for levy of GST, prize money is to be excluded for purposes of levy of GST? Question No. I 13. Learned Additional Solicitor General submits that petitioner, who is authorised agent on behalf of State of Punjab for lotteries organised by State of Punjab cannot complain violation of Article 19(1)(g) of Constitution and lottery being res extra commercium, writ petition cannot be entertained. He submits that right to practice any profession or to carry on any occupation, trade or business does not extend to practicing profession or carrying on occupation, trade or business which is inherently vicious and 23 pernicious. Shri Ravindra Shrivastava, learned senior counsel appearing for petitioner submits that he is not claiming any violation of right under Article 19(1)(g) in writ petition. In view of this submission of learned senior counsel for petitioner, we need not consider writ petition with reference to violation of Article 19(1)(g). 14. Article 32 confers right to move to Supreme Court for enforcement of right conferred by Part III, which is guaranteed by sub-article (1) of Article 32 of Constitution. Article 32 is important and integral part of basic structure of Constitution. Article 32 is meant to ensure observance of rule of law. Article 32 provides for enforcement of fundamental rights, which is most potent weapon. In Constituent Assembly Debates, Dr. B.R. Ambedkar speaking about this Article made following statement:- 24 If I was asked to name any particular Article in Constitution as most important Article without which Constitution would be nullity I could not refer, to any other Article except this one. It is very soul of constitution and very heart of it. 15. By this petition, petitioner has challenged provisions of Central Goods and Services Tax Act, 2017 insofar as it imposes tax on lottery. grounds of challenge include violation of Article 14 of Constitution of India. levy of GST has been attacked as discriminatory. It is also submitted that there is hostile discrimination in taxing only lottery, betting and gambling whereas leaving all other actionable claims from taxing net as is evident by entry 6 of Schedule III of Act, 2017. 16. writ petition alleging violation of Article 14 specially with respect to parliamentary Act can very well be entertained under Article 32. We may 25 also notice that with regard to matter of lottery itself, this Court had entertained writ petition earlier under Article 32. Reference is made to judgment of this Court in H. Anraj and Ors. Vs. State of Maharashtra, (1984) 2 SCC 292 where writ petitioner, who were agents for sale of tickets for lottery filed writ petition questioning ban imposed on sale of lottery tickets within State of Maharashtra. Even judgment of this Court in H. Anraj Vs. Government of Tamil Nadu, (1986) 1 SCC 414 was also writ petition, which was heard alongwith civil appeal questioning leviability of sales tax by State Legislature on sale of lottery tickets. 17. We are, thus, of considered opinion that on grounds, which have been raised in writ petition, writ petition cannot be said to be not maintainable under Article 32 and preliminary objection made by learned ASG that writ 26 petition cannot be entertained under Article 32 and is overruled. Question Nos. II and III 18. Both above questions being inter related are taken together. question to be considered is as to what is legal meaning of goods and whether actionable claim can also be part of goods. We need to first notice as to what is concept of goods. 19. Sale of Goods Act, 1930 defines goods in Section 2(7) in following words: Section 2. Definitions. In this Act, unless there is anything repugnant in subject or context, ..... (7)"goods" means every kind of movable property other than actionable claims and money; and includes stock and shares, 27 growing crops, grass, and things attached to or forming part of land which are agreed to be severed before sale or under contract of sale; 20. Section 311(2) of Government of India Act, 1935 which has been referred by this Court as Constitution Act defines goods as including all materials, commodities and articles. Entry 48 in List II of Seventh Schedule of Government of India Act, 1935 was Taxes on Sale of Goods . Prior to enforcement of Constitution of India goods were defined in different provincial legislations. Article 366 of Constitution of India contains heading 'definition'. Article 366 sub clause (12) defines goods. Article 366 sub clause (12) is as follows: "In this Constitution, unless context otherwise requires, following expression has, meaning hereby respectively assigned to them, that is to say (12)goods includes all materials, commodities, and articles; 28 21. Another expression which we may need to notice is actionable claim . Section 3 of Transfer of Property Act, 1882 which is interpretation clause defines actionable claim in following words: actionable claim" means claim to any debt, other than debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in possession, either actual or constructive, of claimant, which Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent; 22. Now, we may notice definition of goods in Central Goods of Services Tax Act, 2017 which definition is under challenge in present writ petition. Section 2 sub section (52) defines goods in following words: Section 2(52)- goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached 29 to or forming part of land which are agreed to be severed before supply or under contract of supply; 23. Section 2(1) defines actionable claim in following words: Section 2(1) actionable claim shall have same meaning as assigned to it in section 3 of Transfer of Property Act, 1882; 24. definition of goods as contained in Sale of Goods Act, 1930 in Section 2(7) : goods means every kind of movable property other than actionable claims and money; whereas definition of goods in Section 2(52) in Act, 2017 while defining goods as every kind of movable property other than money and securities but includes actionable claim . We have noted above various grounds of attack on inclusion of actionable claim in definition of goods under Section 2(52) as raised by learned counsel for petitioner. first ground of 30 attack of learned counsel for petitioner is that expression goods is well known concept and is also defined in Constitution of India. definition of goods as meant and understood in Constitution of India has to be adopted and not departed by Legislature. 25. Shri Srivastava in his usual persuasive style submits that goods as defined in Sale of Goods Act, 1930 is concept which has been held to be applicable with respect to goods as understood in Constitution of India also. Act, 2017 could not have taken any contrary definition and contrary definition taken in Section 2(52) of Act, 2017 is unconstitutional and liable to be struck down. Sheet anchor of arguments of Shri Srivastava is Constitution Bench Judgment in State of Madras vs. Gannon Dunkerley & Co.(Madras) Ltd., 1959 SCR 379. In above case this Court had occasion to consider Entry 48 in List II in Schedule VII of 31 Government of India Act, 1935 that is Taxes on sale of goods . Madras General Sales Tax Act, 1939 was amended by Madras General Sales Tax (Amendment) Act, 1947 introducing several new provisions. Section 2(c) of Act had defined goods as meaning all kinds of movable property other than actionable claims, stocks and shares and securities and as including all materials, commodities and articles . provision was amended and so as to include materials used in construction, fitting out, improvement or repair of immovable property or in fitting out, improvement or repair of movable property . definition of sale in Section 2(h) was also enlarged so as to include transfer of property in goods involved in execution of works contract . assessing authorities included in turnover of respondent value of materials used in construction works which was contested by respondent on ground that power of Madras Legislature to impose tax on sales under Entry 48 in List II in Schedule VII of 32 Government of India Act, does not extend to imposing tax on value of materials used in works, as there is no transaction of sale in respect of those goods, and provisions introduced by Madras General Sales Tax(Amendment) Act, 1947, authorising imposition of such tax are ultra vires. High Court deciding question in favour of respondent held that expression sale of goods had same meaning in Entry 48 which had in Sale of Goods Act, 1930. State of Madras filed appeal in this Court. question which fell for consideration in above case has been noticed in judgment in following words: "The sole question of determination in this appeal is whether provisions of Madras General Sales Tax Act are ultra vires, in so far as they seek to impose tax on supply of materials in execution of works contract treating it as sale of goods by contractor, and answer to it must depend on meaning to be given to words sale of goods in Entry 48 in List II of Schedule VII to Government of India Act, 1935.... 33 26. This Court laid down that expression sale of goods in Entry 48 has to be interpreted in its legal sense. Following observation was made at page 396: "...We must accordingly hold that expression sale of goods in Entry 48 cannot be construed in its popular sense, and that it must be interpreted in its legal sense. What its connotation in that sense is, must now be ascertained.... 27. This Court at page 404 held: ...We think that true legislative intent is that expression sale of goods in Entry 48 should bear precise and definite meaning it has in law, and that that meaning should not be left to fluctuate with definition of sale in laws relating to sale of goods which might be in force for time being. ... 28. Interpreting expression of sale of goods at page 413 this Court held: "...If words sale of goods have to be interpreted in their legal sense, that sense can only be what it has in interpretation that words of legal import occurring in statute should be construed in their legal sense is that those words have, in law, acquired definite and precise sense, and that, accordingly, 34 legislature must be taken to have intended that they should be understood in that sense. In interpreting expression used in legal sense, therefore, we have only to ascertain precise connotation which it possesses in law. ... 29. Summing up its conclusion this Court at page 425 held: "To sum up, expression sale of goods in Entry 48 is nomen juris,its essential ingredients being agreement to sell movables for price and property passing therein pursuant to that agreement. In building contract which is, as in present case, one,entire and indivisible- and that is its norm, there is no sale of goods, and it is not within competence of Provincial Legislature under Entry 48 to impose tax on supply of materials used in such contract treating it as sale. 30. We may also notice following pertinent observation made by this Court in above case at page 426: ....It is also fact that acting on view that Entry 48 authorises it, States have enacted laws imposing tax on supply of materials in works contracts, and have been realising it, and their validity has been affirmed by 35 several High Courts. All these laws were in statute book when Constitution came into force, and it is to be regretted that there is nothing in it which offers solution to present question. We have, no doubt, Art. 248 and Entry 97 in List I conferring residual power of legislation on Parliament, but clearly it could not have been intended that center should have power to tax with respect to works constructed in States. In view of fact that State Legislatures had given to expression "sale of goods" in Entry 48 wider meaning than what it has in Indian Sale of Goods Act, that States with sovereign powers have in recent times been enacting laws imposing tax on use of materials in construction of buildings, and that such power should more properly be lodged with States rather than center, Constitution might have given inclusive definition of "sale" in Entry 54 so as to cover extended sense. But our duty is to interpret law as we find it, and having anxiously considered question, we are of opinion that there is no sale as such of materials used in building contract, and that Provincial Legislatures had no competence to impose tax thereon under Entry 48. 31. ratio of above judgment which is heavily relied by Shri Srivastava is that this Court laid down that legal meaning of expression sale of goods 36 has to be taken. It is further submitted that this Court relied on definition of sale of goods as occurring in Sale of Goods Act, 1930 for interpreting Entry 48 in List II Schedule VII of Government of India Act, 1935. We may notice that in above judgment this Court had occasion to deal with definition of term sale and explaining legal meaning as existed at time of enactment of Government of India Act, 1935, above law was laid down. 32. We may further notice that by Constitution (Forty sixth Amendment) Act, 1982 sub-Article (29A) has been inserted in Article 366 of Constitution. Defining tax on sale or purchase of goods which is inclusive definition. above Constitution Amendment was made with intent to tax on sale or purchase of goods on transfer, otherwise than in pursuance of contract, of property. Definition of sale as interpreted by this 37 Court in Gannon Dunkerley & Co.(Madras) Ltd. case (supra) is no longer applicable any more and work contracts were also taxed. We may also notice subsequent Constitution Bench judgment in case of M/s Gannon Dunkerley and Co. and Others Vs. State of Rajasthan and others, 1993 (1) SCC 364 , where this Court had occasion to examine Article 366(29A) sub- clause (b) of Constitution. This Court referring to its earlier judgment in Builders' Association of India vs. Union of India, (1989) 2 SCC 645, made following observations in paragraphs 25 and 30: 25. We find it difficult to accept this contention. question whether as result of Forty Sixth Amendment independent taxing power has been conferred on States had arisen for consideration before this Court in Builders' Association case (supra) since it was specifically raised in contentions urged on behalf of States. While summarising said contentions this Court has thus mentioned this contention Sub-clause (b) of Clause 29-A of Article 366 of Constitution has conferred on Legislatures of States power to levy tax on works contract which is independent of power conferred on Legislatures of States under Entry 54 of State List, 38 (p.346). said contention was rejected with these observations. object of new definition introduced in Clause (29-A) of Article 366 of Constitution is, therefore, to enlarge scope of tax on sale or purchase of goods wherever it occurs in Constitution so that it may include within its scope transfer, delivery or supply of goods that may take place under any of transactions referred to in Sub-Clauses (a) to (f) thereof wherever such transfer, delivery of supply becomes subject to levy. of sales tax. So construed expression tax on sale or purchase of goods in Entry 54 of State List, therefore, includes tax on transfer of property in goods (whether as goods or in some other form) involved in execution of works contract also. tax leviable by virtue of Sub-clause (b) of Clause (29-A) of Article 366 of Constitution thus becomes subject to same discipline to which any levy under Entry 54 of State List is made subject to under Constitution. 30. Having regard to observations referred to above and stand of parties during course of arguments before us, we do not consider it appropriate to reopen issues which ; are covered by decision in Builders' Association case (supra) and we will, therefore, deal with matter in accordance with law as laid down in that case that expression tax on sale or purchase of goods in Entry 54 of State List includes tax 39 on transfer of property in goods (whether as goods or in some other form) involved in execution of works contract also and tax leviable by virtue of Sub-clause (b) of clause (29-A) of Article . 366 of Constitution is subject to discipline to which any levy under Entry 54 of State List is made subject to under Constitution. 33. Definition of goods as occurring in Section 311(12) of Government of India Act, 1935 although was noticed by this Court in Gannon Dunkerley and Co.(supra) but definition of goods was not further elaborated. Definition of goods as occurring in Article 366(12) is inclusive definition and does not specifically excludes actionable claim from its definition. Whenever inclusive definition is given of expression it always intended to enlarge meaning of words or phrases, used in definition. In this context, it is relevant to refer to judgment of this Court in Reserve Bank of India vs. Peerless General Finance and Investment co.Ltd. And others,1987(1) SCC 424 with regard to inclusive 40 definition. Following was observed in paragraphs 32-33: "32....All that is necessary for us to say is this: Legislatures resort to inclusive definitions (1) to enlarge meaning of words or phrases so as to take in ordinary, popular and natural sense of words and also sense which statute wishes to attribute to it, (2) to include meanings about which there might be some dispute, or, (3) to bring under one nomenclature all transactions possessing certain similar features but going under different names. .... 33. Interpretation must depend on text and context. They are bases of interpretation. One may well say if text is texture, context is what gives colour. Neither can be ignored. Both are important. That interpretation is best which makes textual interpretation match contextual. statute is best interpreted when we know why it was enacted. ... 34. Constitution framers were well aware of definition of goods as occurring in Sale of Goods Act, 1930 when Constitution was enforced. By providing inclusive definition of goods in Article 41 366(12), Constitution framers never intended to give any restrictive meaning of goods. 35. In State of Madras v. Gannon Dunkerley & Co., (supra) this Court was concerned with Provincial Legislatures under Entry 48 in List II in Schedule VII of Government of India Act, 1935. We have extracted observations made by this Court at page 426. This Court at page 426 of judgment held that none of Provincial Legislatures could have exercised power conferred to make law with respect to sale of goods in Lists, to impose tax on construction contracts. This Court further observed that before such law could be enacted it would have been necessary to have had recourse to residual powers of Governor-General under under Section 104 of Act. This Court has further observed that it has no doubt, Article 248 and Entry 97 of List I conferring residual powers of legislation on Parliament, but clearly it could not 42 have been intended that Centre should have power to tax with respect to works constructed in States. 36. Act, 2017 is Act of Parliament in exercise of power of Parliament as conferred under Article 246A of Constitution. Article 246A is extracted for ready reference: Article 246A. Special provision with respect to goods and services tax. (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), Legislature of every State, have power to make laws with respect to goods and services tax imposed by Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where supply of goods, or of services, or both takes place in course of inter State trade or commerce. Explanation. provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from date recommended by Goods and Services Tax Council. 43 37. When Parliament has been conferred power to make law with respect to goods and services, legislative power of Parliament is plenary. observations of this Court in State of Madras v. Gannon Dunkerley & Co.,(supra) at page 426 are clear pointer that although State Legislature had no legislative competence to enact impugned legislation but Parliament on strength of residual power could have legislated. We are view that judgment of this Court in State of Madras v. Gannon Dunkerley & Co.,(supra) does not lend support to submission of learned counsel for petitioner that Parliament could not have defined goods in Act, 2017, expanding definition of goods as existing in Sale of Goods Act, 1930. 38. Now, we come to Constitution Bench judgment of this Court in Sunrise Associates vs. Govt. of NCT of Delhi and others, (2006) 5 SCC 603, on which judgment learned counsel for both parties have placed 44 reliance. above Constitution Bench was constituted to reconsider earlier judgment of this Court in H. Anraj and Ors. Vs. Government of Tamil Nadu and Ors. , (1986) 1 SCC 424. Paragraphs 4 and 5 of referring order (Sunrise Associates vs. Govt. of NCT of Delhi and others, 2010 (10) SCC 420) reads: 4. We are inclined to agree that judgment in H. Anraj requires reconsideration for reason that, prima facie, only right of purchaser of lottery ticket is to take chance of winning prize. There seems to us to be no good reason to split transaction of sale of lottery ticket into acquisition of (I) right to participate in lottery draw, and (ii) right to win prize, dependent on chance. 5. In case of Vikas Sales Corpn. v. Commr. Of Commercial Taxes (1996 (4) SCC 433), Bench of three learned Judges agreed with decision in H. Anraj. It is, therefore, necessary that these appeals should be heard by Constitution Bench. 45 39. Before we further look into judgment of this Court in Sunrise Associates, we need to notice very briefly judgment of this Court in H. Anraj. In above case question arose out of levy of tax on sales of lottery tickets under Tamil Nadu General Sales Act 1959. writ petition was filed questioning levy of tax imposed on sale of lottery tickets before this Court. contention which was urged before this Court for challenging levy has been noticed in paragraph 5 of judgment in following words: 5. ....Counsel pointed out that under charging provision contained in both Acts (s. 3 of Tamil Nadu Act 1959 and Section 4 of Bengal Act 1941) taxable event is sale of goods (here lottery tickets) and levy is imposed upon taxable turnover of every dealer in regard to sales of lottery tickets and therefore, quite clearly, each of State Legislatures has purported to Act in exercise of its own taxing power under Entry 54 of List II. But according to counsel Entry 54 of List II enables legislation imposing tax, inter alia, on "sale of goods" that it is well-settled that expression "sale of goods" has to be construed in sense which it has in Indian Sale of Goods Act, 1930(vide 46 Ganon Dunkerley's case) MANU/SC/0152/1958 : [1959]1SCR379 "goods under Section 2(7) thereof comprises within its scope every kind of movable property but specifically excludes actionable claim, that essence of lottery is chance for prize, that sale of such chance is not sale of goods and therefore levy of sales tax on sale of lottery tickets would be beyond ambit of Entry 54 of List II. Alternatively, counsel contended that lottery ticket is actionable claim as defined in Section 3 of Transfer of Property Act or chose-in-action known to English law, ticket itself being merely slip of paper or memorandum evidencing right of holder thereof to claim or receive prize if successful in draw and therefore impugned levy is outside Entry 54 of List II. 40. This Court in above judgment noted definitions of goods as occurring in Sale of Goods Act, 1930, sale of goods in Tamil Nadu General Sales Act, 1959, and definition of goods in Article 366 (12). After considering, this Court in H Anraj came to conclusion that lottery to extent that they comprise entitlement to participate in draw are goods properly so called, and they are 47 not actionable claims. In paragraph 33 of judgment following was laid down: 33. In light of aforesaid discussion my conclusions are that lottery tickets to extent that they comprise entitlement to participate in draw are "goods" properly so called, squarely falling within definition of that expression as given in Tamil Nadu Act, 1959 and Bengal Act, 1941, that to that extent they are not actionable claims and that in every sale thereof transfer of property in goods is involved. In view of these conclusions impugned Amendments made in two concerned Acts for levying tax on sale of lottery tickets will have to be upheld as falling within legislative competence of concerned State legislature under Entry 54 of List II in Seventh Schedule and therefore, we think it unnecessary to go into validity of alternative submission made by learned Attorney General that legislative competence for enacting impugned Amendments would also be there under Entry 62 of List II in Seventh Schedule of Constitution. 41. As noted above judgment of H Anraj came to be questioned. Bench of three Judges in Vikas Sales Corporation and another vs. Commissioner of Commercial Taxes and another, (1996) 4 SCC 433, 48 agreed with decision of H Anaraj necessitating reference before Constitution Bench in Sunrise Associates, Constitution Bench noticed question which arose before Constitution Bench. In paragraph 29 it noticed that only question we are called upon to answer is whatever decision in H Anaraj that lottery tickets are goods for purposes of Article 366(29A)(a) of Constitution and State sales tax laws, was correct . Constitution Bench in paragraph 33 observed that to extent that lottery ticket evidenced right to claim prize, it was not goods but actionable claim and therefore not goods under sales tax laws. In paragraph 33 following has been observed: "33. In other words, second conclusion which we have indicated against 'B', was ratio. lottery ticket was held to be merely evidence of right to participate in draw and therefore goods transfer of which was sale. To extent that lottery ticket evidenced right to claim prize, it was not goods but actionable claim and therefore not 'goods' under Sales Tax 49 Laws. transfer of it was consequently not sale. lottery ticket per se had no innate value. interpretation by Delhi High Court of ratio in H. Anraj was in our opinion erroneous. 42. pertinent observation has been made by Constitution Bench in paragraph 36 wherein it noticed that in States sales tax laws actionable claims have been uniformly excluded from definition of goods. This Court held were actionable claims, etc. not otherwise includible in definition of goods there was no need for excluding them . Following has been laid down in paragraph 36: 36. We have noted earlier that all statutory definitions of word 'goods' in State Sales Tax Laws have uniformly excluded, inter alia, actionable claims from definition for purposes of Act. Were actionable claims etc., not otherwise includible in definition of 'goods' there was no need for excluding them. In other words, actionable claims are 'goods' but not for purposes of Sales Tax Acts and but for this statutory exclusion, actionable claim would be 'goods' or subject matter of ownership. Consequently actionable claim is movable property 50 and 'goods' in wider sense of term but sale of actionable claim would not be subject to sales tax laws. 43. In paragraph 40 Constitution Bench reiterated that sale of lottery ticket also amounts to transfer of actionable claim. Following was laid down in paragraph 40: 40. actionable claim would include right to recover insurance money or partner's right to sue for account of dissolved partnership or right to claim benefit of contract not coupled with any liability (see Union of India v. Sarada Mills Ltd. SCC at p.880, (1972) 2 SCC 877 ). claim for arrears of rent has also been held to be actionable claim (State of Bihar v. Maharajadhiraja Sir Kameshwar Singh, SCR at p.910 (1952) SCR 889). right to credit in provident fund account has also' been held to actionable claim (Official Trustee, Bengal v. L. Chippendale, AIR 1944 Cal 335; Bhupati Mohan Das v. Phanindra Chandra Chakravarty and Anr., AIR 1935 Cal 756. In our opinion sale of lottery ticket also amounts to transfer of actionable claim. 51 44. Further in paragraphs 46 and 48 this Court held lottery to be actionable claim. Paragraphs 46 and 48 are to following effect: 46. There is no value in mere right to participate in draw and purchaser does not pay for right to participate. consideration is paid for chance to win. There is therefore no distinction between two rights. right to participate being inseparable part of chance to win is therefore part of actionable claim. 48. Even if right to participate is assumed to be separate right, there is no sale of goods within meaning of sales tax statutes when that right is transferred. When H. Anraj said that right to participate was beneficial interest in movable property, it did not define what that movable property was. draw could not and was not suggested to be movable property. only object of right to participate would be to win prize. transfer of right would thus be of beneficial interest in movable property not in possession. By this reasoning also right to participate in lottery is actionable claim. 45. This Court concluded in paragraph 51 that in H Anraj it was incorrectly held that sale of lottery 52 ticket involved sale of goods. Paragraph 51 is as follows: 51 We are therefore of view that decision in H. Anraj incorrectly held that sale of lottery ticket involved sale of goods. There was no sale of goods within meaning of Sales Tax Acts of different States but at highest transfer of actionable claim. decision to extent that it held otherwise is accordingly overruled though prospectively with effect from date of this judgment. 46. One of submissions which has been pressed by Shri Srivastava is that observations made by Constitution Bench in above paragraphs that lottery is actionable claim is based on obiter dicta since question was not up for consideration. He submits that Court was to consider as to whether lottery tickets are goods or not within meaning of Section 2(j) of Tamil Nadu General Sales Act, 1959 as amended. definition of goods in Section 2(j) as noticed by Constitution Bench in paragraph 9 states that 'goods' means all kinds of 53 movable property (other than newspaper, actionable claims, stocks, shares and securities). exclusion of actionable claims from goods as enumerated in definition is also part of definition. If particular item is covered by exclusion it is obvious that it does not fall in definition of goods. When Constitution Bench came to conclusion that lottery is actionable claim it was considering definition of 2(j) itself and what has been held by Constitution Bench cannot be held to be obiter dicta. 47. Explaining obiter dicta this Court in Municipal Corporation of Delhi vs. Gurnam Kau, 1989(1) SCC 101, made following observation in paragraphs 10 and 11: "10....The only thing in judge's decision binding as authority upon subsequent judge is principle upon which case was decided. Statements which are not part of ratio decidendi are distinguished as obiter dicta and and are not authoritative. .... 54 11. Pronouncements of law, which are not part of ratio decidendi are classed as obiter dicta and are not authoritative. .... 48. It cannot be said that question as to whether lottery is goods or actionable claim had not arisen in decision in Sunrise Associates. When item was covered by excluded category, said conclusion could have been arisen only after consideration of definition and exclusionary clause. We, thus, are not in agreement with submission of learned counsel for petitioner that observations of Constitution Bench holding lottery as actionable claim is only obiter dicta and not binding. Constitution Bench in Sunrise Associates has categorically held that lottery is actionable claim after due consideration which is ratio of judgment. When Section 2(52) of Act, 2017 expanded definition of goods by including actionable claim also, said definition in Section 2(52) is in line with Constitution Bench 55 pronouncement in Sunrise Associates and no exception can be taken to definition of goods as occurring in Section 2(52). 49. We are of view that definition of goods under Section 2(52) of Act,2017 does not violate any constitutional provision nor it is in conflict with definition of goods given under Article 366(12). Article 366 clause(12) as observed contains inclusive definition and definition given in Section 2(52) of Act, 2017 is not in conflict with definition given in Article 366(12). As noted above Parliament by Constitution(One Hundred and First Amendment) Act, 2016 inserted Article 246A. special provision with respect to goods and services tax. Parliament was fully empowered to make laws with respect to goods and services tax. Article 246A begins with non obstante clause that is Notwithstanding anything contained in Articles 246 and 254 , Which confers very wide power to make laws. 56 power to make laws as conferred by Article 246A fully empowers Parliament to make laws with respect to goods and services tax and expansive definition of goods given in Section 2(52) cannot be said to be not in accord with constitutional provisions. 50. Shri Shrivastava with his usual ability and skill submits that Parliament does not enjoy absolute power to make inclusive definition of something to be taxed, which is not taxable otherwise. power of legislature to lay definition has limitations and cannot include something which cannot in rational sense be included. While goods and actionable claims are both different concepts, lottery has no resemblance with either. legislature can only provide extended meaning by inclusive definition only for preventing tax evasion. To support his submission, he has relied on judgment of this Court in Bhopal Sugar Industries Ltd., M.P. And Anr. Vs. D.P. Dube, Sales Tax Officer and Anr., (1964) 1 SCR 57 481. facts of case have been noticed by Constitution Bench of this Court in following words: By this petition under Article 32 of Constitution it is claimed that definition of retail sale in Section 2(1) of Act which seeks to render consumption by owner of motor-spirit liable to tax under Act by virtue of Section 3 is beyond competence of State Legislature and hence void and order of first respondent seeking to impose liability upon Company for payment of tax infringes fundamental rights of Company under Article 19(1) (f) and (g) of Constitution. 51. This Court held that consumption by owner of goods in which he deals is not sale within meaning of sale of goods. It was held that extended definition, which includes consumption by retail dealer of motor spirit or lubricants is beyond competence of State legislature. Following was laid down by this Court:- Consumption by owner of goods in which he deals is therefore not sale within meaning of Sale of Goods Act and therefore it is not sale of goods within meaning of Entry 54 List II Schedule VII of Constitution. legislative 58 power for levying tax on sale of goods being restricted to enacting legislation for levying tax on transactions which conform to definition of sale of goods within meaning of Sale of Goods Act, 1930, extended definition which includes consumption by retail dealer himself of motor spirit or lubricants sold to him for retail sale is beyond competence of State legislature. But clause in definition in, Section (1) and includes consumption by retail dealer himself or on his behalf of motor spirit or lubricant to him for retail sale which is ultra vires State Legislature because of lack of competence under Entry 54 in List II Schedule VII of Constitution is saverable, from rest of definition, and that clause alone must be declared invalid. 52. In above case, Constitution Bench was considering concept of sale and extended definition of sale by which consumption by owner himself was treated to be sale was held ultra vires to legislative competence of State. present is case where we are not dealing with concept of sale and further in case before us, it is Parliament, which has enacted Act, 2017 59 which has competence to make law imposing tax on goods and services. 53. We may notice another Constitution Bench Judgment of this Court in Navinchandra Mafatlal Bombay Vs. Commissioner of Income Tax, Bombay City, AIR 1955 SC 58. In above case, challenge was made to Section 12-B of Indian Income Tax Act, 1922. It was contended that Section 12-B, which authorise levy of tax on capital gains was ultra vires to central legislature. Constitution Bench laid down following in paragraph 5:- 5. .If we hold, as we are asked to do, that meaning of word income has become rigidly crystallized by reason of judicial interpretation of that word appearing in Income Tax Act then logically no enlargement of scope of Income Tax Act, by amendment or otherwise, will be permissible in future. conclusion so extravagant and astounding can scarcely be contemplated or countenanced. XXXXXXXXXX 60 54. This Court further laid down that word appearing in Constitution Act, must not be construed in any narrow and pedantic sense. Following was laid down in paragraph 6:- 6. It should be remembered that question before us relates to correct interpretation of word appearing in Constitution Act which, as has been said, must not be construed in any narrow and pedantic sense 55. Another judgment of Constitution Bench of this Court to be noticed is Navnitlal C. Javeri Vs. K.K. Sen, Appellate, Assistant Commissioner of Income Tax, (1965) 1 SCR 909. In above case, question arose regarding constitutionality of Section 12(1B) read with Section 2(6A)(e) of Income Tax Act, 1922. It was contended before this court that loan advanced to shareholder by company cannot, in any legitimate sense, be treated as his income; and so, artificial manner in which such dividend is ordered to be treated as income by impugned provision is not justified. It is true that this 61 Court has laid down that Parliament cannot choose to tax as income item which in no rational sense can be regarded as citizen s income. Following was observed:- This doctrine does not, however, mean that Parliament can choose to tax as income item which in no rational sense can be regarded as citizen's income. item taxed should rationally be capable of being considered as income of citizen. But in considering question as to whether particular item in hands of citizen can be regarded as his income or not, it would be inappropriate to apply tests traditionally prescribed by Income Tax Act as such. 56. This Court held that legislature has not travelled beyond legislative field while enacting impugned provision. Following was observed:- There must no doubt be some rational connection between item taxed and concept of income liberally construed. If legislature realises that private controlled companies generally adopt device of making advances or giving loans to their shareholders with object of evading payment of tax, it can step in to meet 62 this mischief, and in that connection, it has created fiction by which amount ostensibly and nominally advanced to shareholder as loan is treated in reality for tax purposes as payment of dividend to him. We have already explained how small number of shareholders controlling private company adopt this device. Having regard to fact that legislature was aware of such devices, would it not be competent to legislature to devise fiction for treating ostensible loan as receipt of dividend? In our opinion, it would be difficult to hold that in making fiction, legislature has travelled beyond legislative field assigned to it by Entry 82 in List I. 57. In view of what has been laid down by Constitution Bench, as above, there has to be rational connection between item taxed but it is well settled that with regard to taxing policy of legislature, Courts have very limited role to play. It is useful to refer observations of this Court in Sri Krishna Das Vs. Town Area Committee, Chirgaon, (1990) 3 SCC 645 wherein paragraph 31, following was observed:- 63 31. contention that tax is discriminatory in view of exemptions granted to some of products and to those that enter TAC by rail or motor transport is equally untenable. It is for legislature or taxing authority to determine question of need, policy and to select goods or services for taxation. courts cannot review these decisions . 58. We have already noted that under Article 246A notwithstanding anything contained in Articles 246 and 254, Parliament has power to make laws with respect to goods and services tax. Article 246A is special provision with regard to goods and services tax w.e.f. 16.09.2016, which special power has to be liberally construed empowering Parliament to make laws with respect to goods and services tax. submission of learned counsel for petitioner is that actionable claim has been artificially and with view to assume power to tax has been included in Section 2(52). Constitution Bench of this Court in Sunrise Associates (supra) has held that actionable claims are includible in definition of 64 goods and had actionable claims were not includible there was no need for excluding them. Constitution Bench held were actionable claims, etc., not otherwise includible in definition of goods , there was no need for excluding them. In other words, actionable claims are goods but not for purpose of Sales Tax Acts and but for this statutory exclusion, actionable claim would be goods or subject-matter of ownership . 59. Thus, in view of what has been said above by Constitution Bench, submission of petitioner that actionable claims have been artificially included in definition of goods cannot be accepted. Constitution Bench has clearly laid down that actionable claims are goods. We, thus, do not agree with submission of Shri Shrivastava that Parliament has exceeded its jurisdiction in including actionable claims in definition of goods under Section 2(52). 65 60. We, thus, answer Question Nos.II and III in following manner: Answer No.II 61. inclusion of actionable claim in definition goods as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is not contrary to legal meaning of goods and is neither illegal nor unconstitutional. Answer NO.III 62. Constitution Bench judgment of this Court in Sunrise Associates has laid down that lottery is actionable claim as proposition of law. observation cannot be said to be obiter dicta. Question No. IV 63. As noted above, another limb of attack mounted by Shri Shrivastava is on ground of hostile 66 discrimination while taxing lottery, betting and gambling and excluding other actionable claims. Reference is made to Item No.6 of Schedule III of Act, 2017. Schedule III begins with heading activities or transactions which shall be treated neither as supply of goods nor supply of services. Item No.6 of Schedule III is as follows:- Item No.6 Actionable claims other than lottery, betting and gambling. 64. Submission is that assuming lotteries to be actionable claims, Act, 2017 suffers from hostile discrimination in first including actionable claims within category of goods and then excluding all actionable claims from supply of goods and creating further exception of lottery, betting and gambling in Schedule III. Further submission is that there is no intelligible differentia for excluding lotteries, betting and gambling from other actionable claims, nor does such exclusion have any nexus with purpose of Act. In support 67 of above preposition, Shri Shrivastava has relied on judgment of this Court in Ayurveda Pharmacy and Anr. Vs. State of Tamil Nadu, (1989) 2 SCC 285. This Court in above case laid down that when commodities belong to same class or category, there must be rational basis for discrimination between one commodity and other for purpose of imposing tax. In paragraph 6 of judgment, following has been laid down:- 6. It is open to legislature, or State Government if it is authorised in that behalf by legislature, to select different rates of tax for different commodities. But where commodities belong to same class or category, there must be rational basis for discriminating between one commodity and another for purpose of imposing tax. It is commonly known that considerations of economic policy constitute basis for levying different rates of sales tax. For instance, object may be to encourage certain trade or industry in context of State policy for economic growth, and lower rate would be considered justified in case of such commodity. There may be several such considerations bearing directly on choice of rate of sales tax, and so long as there is good 68 reason for making distinction from other commodities no complaint can be made. What actual rate should be is not matter for courts to determine generally, but where distinction is made between commodities falling in same category question arises at once before court whether there is justification for discrimination 65. Another judgment laying down same preposition as relied by learned counsel for petitioner is State of Uttar Pradesh and Ors. Vs. Deepak Fertilizers & Petrochemical Corporation Ltd., (2007) 10 SCC 342. 66. There can be no dispute to above preposition laid down by this Court. question to be answered is as to whether there is any rational reason for taking out only three actionable claims, i.e., lottery, betting and gambling while leaving other actionable claims from tax net. 67. Whether there is any rational basis for taking out only these three actionable claims is question to 69 be answered, whether legislature has created hostile discrimination by taxing only these three whereas leaving other actionable claims out of tax net. 68. Even before enforcement of Constitution of India, there were several legislations by different States regulating lottery, betting and gambling. Before Constitution bench of this court in State of Bombay Vs. R.M.D. Chamarbaugwala and Anr., AIR 1957 SC 699 , this Court had occasion to consider nature of activities akin to lottery, betting and gambling. Bombay Lotteries and prize Competition Control and Tax Act, 1948 was enacted to regulate tax, lotteries and prize competition. petitioner, who was conducting and running prize competition from State of Mysore where entries were received from various parts of India including State of Bombay had challenged Act, 1948 and Rules namely Bombay Lotteries and Prize Competitions Control and 70 Tax Rules, 1952. writ petition was allowed by High Court, against which State of Bombay had filed appeal. Constitution Bench held activity of respondent as activity of gambling nature. This Court laid down following in paragraphs 41 and 46:- 41. It will be abundantly clear from foregoing observations that activities which have been condemned in this country from ancient times appear to have been equally discouraged and looked upon with disfavour in England, Scotland, United States of America and in Australia in cases referred to above. We find it difficult to accept contention that those activities which encourage spirit of reckless propensity for making easy gain by lot or chance, which lead to loss of hard earned money of undiscerning and improvident common man and thereby lower his standard of living and drive him into chronic state of indebtedness and eventually disrupt peace and happiness of his humble home could possibly have been intended by our Constitution makers to be raised to status of trade, commerce or intercourse and to be made subject-matter of fundamental right guaranteed by Article 19(1)(g). We find it difficult to persuade ourselves that gambling was ever intended 71 to form any part of this ancient country's trade, commerce or intercourse to be declared as free under Article 301. It is not our purpose nor is it necessary for us in deciding this case to attempt exhaustive definition of word trade , business , or intercourse . We are, however, clearly of opinion that whatever else may or may not be regarded as falling within meaning of these words, gambling cannot certainly be taken as one of them. We are convinced and satisfied that real purpose of Articles 19(1)(g) and 301 could not possibly have been to guarantee or declare freedom of gambling. Gambling activities from their very nature and in essence are extra- commercium although external forms, formalities and instruments of trade may be employed and they are not protected either by Article 19(1)(g) or Article 301 of our Constitution. 46. For reasons stated above, we have come to conclusion that impugned law is law with respect to betting and gambling under Entry 34 and impugned taxing section is law with respect to tax on betting and gambling under Entry 62 and that it was within legislative competence of State Legislature to have enacted it. There is sufficient territorial nexus to entitle State Legislature to collect tax from petitioners who carry on prize competitions through medium of 72 newspaper printed and published outside State of Bombay. prize competitions being of gambling nature, they cannot be regarded as trade or commerce and as such petitioners cannot claim any fundamental right under Article 19(1)(g) in respect of such competitions, nor are they entitled to protection of Article 301. result, therefore, is that this appeal must be allowed and orders of lower courts set aside and petitions dismissed and we do so with costs throughout. state will get only one set of costs of hearing of this and Appeals Nos. 135, 136, & 187 of 1956 throughout. 69. In later decision, Union of India and Ors. Vs. Martin Lottery Agencies Limited, (2009) 12 SCC 209, this Court had occasion to consider levy of service tax on lottery tickets. This Court had held that law as it stands today recognises lottery to be gambling, which is res extra commercium. In paragraph 17, following has been laid down:- 17. We fail to persuade ourselves to agree with aforementioned submission. law, as it stands today (although it is possible that this Court in future may take different view), recognises lottery 73 to be gambling. Gambling is res extra commercium as has been held by this Court in State of Bombay v. R.M.D. Chamarbaugwala [AIR 1957 SC 699] and B.R. Enterprises v. State of U.P. [(1999) 9 SCC 700] 70. Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations. When Act, 2017 defines goods to include actionable claims and included only three categories of actionable claims, i.e., lottery, betting and gambling for purposes of levy of GST, it cannot be said that there was no rationale for including these three actionable claims for tax purposes. Regulation including taxation in one or other form on activities namely lottery, betting and gambling has been in existence since last several decades. When parliament has included above three for purpose of imposing GST and not taxed other actionable claims, it cannot be said that there is no 74 rationale or reason for taxing above three and leaving others. 71. It is duty of State to strive to promote welfare of people by securing and protecting, as effectively as it may, social order in which justice, social, economic and political, shall inform all institutions of national life. Constitution Bench in State of Bombay Vs. R.M.D. Chamarbaugwala and Anr. (supra) has clearly stated that Constitution makers who set up ideal welfare State have never intended to elevate betting and gambling on level of country's trade or business or commerce. In this country, aforesaid were never accorded recognition of trade, business or commerce and were always regulated and taxing lottery, gambling and betting was with objective as noted by Constitution Bench in case of State of Bombay Vs. R.M.D. Chamarbaugwala and Anr. (supra), we, thus, do not accept submission of 75 petitioner that there is any hostile discrimination in taxing lottery, betting and gambling and not taxing other actionable claims. rationale to tax aforesaid is easily comprehensible as noted above. Hence, we do not find any violation of Article 14 in Item No. 6 of Schedule III of Act, 2017. Question No.5 72. petitioner s contention is that price money should be abated from face value of lottery ticket for levy of GST. prices are paid to winner of lottery ticket by distributer/agent. It has been submitted that in earlier regime of service tax also for purposes of computing service tax value of service tax was taken into account as total face value of ticket sold minus total cost of ticket and prize money paid by distributor. Further, service tax was levied at miniscule rate of 0.82% 76 and 1.2% as compared to exorbitant rate of 28% which is being charged now. question to be answered is that while determining face value of ticket for levy of tax price money of ticket is to be excluded. reliance has also been placed on circular dated 14.02.2007 which provided that value of taxable service shall be taken into account at total face value of ticket sold minus (a) total cost of ticket paid by distributor to State Government and (b) price money paid by distributer. Further, reliance has been placed on Constitution Bench judgment of this Court in M/s. Gannon Dunkerley and co. and others vs. State of Rajasthan and others, 1993(1) SCC 364, where Constitution Bench laid down that value of goods involved in execution of works contract on which tax is leviable must exclude charges which appertain to contract for supply of labour and services. reliance is placed on paragraph 47 of judgment which is to following effect: 77 45. Keeping in view legal fiction introduced by Forty Sixth Amendment whereby works contract which are entire and indivisible into one for sale of goods and other for supply of labour and services, value of goods involved in execution of works contract on which tax is leviable must exclude charges which appertain to contract for supply of labour and services. This would mean that labour charges for execution of works item no (i) amounts paid to sub- contractor for labour and services [item No. (ii), charges for planning, designing and architect's fees [item No. (iii), charges for obtaining on hire or otherwise machinery and tools used in execution of works contact [item No. (iv), and cost of consumables such as water, electricity, fuel etc. which are consumed in process of execution of works contract item No. (v) and other similar expenses for labour and services will have to be excluded as charges for supply of labour and services. ... 73. We may first notice statutory scheme under Act, 2017 and Rules framed thereunder regarding determination of value of supply. Section 15 of Act deals with value of taxable supply. Section 15 (1) to (4) which is relevant for present case is as follows: 78 Section 15. (1) value of supply of goods or services or both shall be transaction value, which is price actually paid or payable for said supply of goods or services or both where supplier and recipient of supply are not related and price is sole consideration for supply. (2) value of supply shall include (a) any taxes, duties, cesses, fees and charges levied under any law for time being in force other than this Act, State Goods and Services Tax Act, Union Territory Goods and Services Tax Act and Goods and Services Tax (Compensation to States) Act, if charged separately by supplier; (b) any amount that supplier is liable to pay in relation to such supply but which has been incurred by recipient of supply and not included in price actually paid or payable for goods or services or both; (c) incidental expenses, including commission and packing, charged by supplier to recipient of supply and any amount charged for anything done by supplier in respect of supply of goods or services or both at time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and 79 (e) subsidies directly linked to price excluding subsidies provided by Central Government and State Governments. Explanation. For purposes of this sub section, amount of subsidy shall be included in value of supply of supplier who receives subsidy. (3) value of supply shall not include any discount which is given (a) before or at time of supply if such discount has been duly recorded in invoice issued in respect of such supply; and (b) after supply has been effected, if (i) such discount is established in terms of agreement entered into at or before time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to discount on basis of document issued by supplier has been reversed by recipient of supply. (4) Where value of supply of goods or services or both cannot be determined under sub section (1), same shall be determined in such manner as may be prescribed. 74. Rules have been framed, namely, Central Goods and Services Tax Rules, 2017 in which Rules by notification dated 23.01.2018 Rule 31A has been 80 inserted dealing with value of supply in case of lottery, betting, gambling and horse racing. Article 31A as was inserted provides as follows: Section 31A. Value of supply in case of lottery, betting, gambling and horse racing. (1) Notwithstanding anything contained in provisions of this Chapter, value in respect of supplies specified below shall be determined in manner provided hereinafter. (2) (a) value of supply of lottery run by State Governments shall be deemed to be 100/112 of face value of ticket or of price as notified in Official Gazette by organising State, whichever is higher. (b) value of supply of lottery authorised by State Governments shall be deemed to be 100/128 of face value of ticket or of price as notified in Official Gazette by organising State, whichever is higher. Explanation: For purposes of this sub rule, expressions (a) lottery run by State Governments means lottery not allowed to be sold in any State other than organizing State; 81 (b) lottery authorised by State Governments means lottery which is authorised to be sold in State(s) other than organising State also; and (c) Organising State has same meaning as assigned to it in clause (f) of sub rule (1) of rule 2 of Lotteries (Regulation) Rules, 2010. (3) value of supply of actionable claim in form of chance to win in betting, gambling or horse racing in race club shall be 100% of face value of bet or amount paid into totalisator. 75. Rule 31A has now been amended vide notification dated 02.03.2020 by which following sub-rule (2) has been substituted: Sub-Rule (2). value of supply of lottery shall be deemed to be 100/128 of face value of ticket or of price as notified in Official Gazette by Organising State, whichever is higher. 76. We may first deal with submission of petitioner based on circular dated 14.02.2007. Circular dated 14.02.2007 was issued when service tax was levied on distributor of paper lottery. circular provided for determination of value of taxable 82 service by deducting total cost of ticket paid by distributor and price money paid by distributor, that was regime when it was treated as business auxilliary service rendered by distributor. said circular has no relevance or application after 2017 enactment. 77. We may also refer to Constitution Bench judgment of Gannon Dankerley and Co.(second) where this Court laid down that value of goods involved in execution of works contract on which tax is leviable must exclude charges which appertain to contract for supply of labour and services. As noted above in paragraph 47 this Court noted items which were to be excluded while determining value of goods involved in works contract. What was held by this Court in above case relates to works contract which judgment has no application on issue which has arisen before us that is abatement of price money while determining value of lottery. 83 78. For determining value of lottery, now, there is statutory provision contained in Section 15 read with Rule 31A as noted above. Section 15 of Act, 2017 by sub-section (2) it is provided what shall be included in value of supply. What can be included in value is enumerated in sub-clause (a) to (e) of sub-section (2) of Section 15. Further, sub- section (3) of Section 15 provides that what shall not be included in value of supply. When there are specific statutory provisions enumerating what should be included in value of supply and what shall not be included in value of supply we cannot accept submission of petitioner that prize money is to be abated for determining value of taxable supply. What is value of taxable supply is subject to statutory provision which clearly regulates, which provision has to be given its full effect and something which is not required to be excluded in value of 84 taxable supply cannot be added by judicial interpretation. 79. Further, Rule 31A as noted above, sub-rule (2) as amended clearly provides that value of supply shall be deemed to be 100/128 of face value of ticket or of prize as notified in Official Gazette by Organising State, whichever is higher. Learned Additional Solicitor General has explained working of Rule 31A of Rules by giving example: For example, if Rs. 100 is face value of lottery ticket, 28% GST is levied only on Rs.78.125[(100*28)/128]. GST amount will be 21.875. Therefore, Rs.100 includes GST of 21.875 on taxable value of Rs.78.125. This is mechanism to split face value of Rs.100 in two parts (A and B). is transaction value. B is GST on A. formula as above is to come to by reverse calculation. 80. value of taxable supply is matter of statutory regulation and when value is to be transaction value which is to be determined as per Section 15 it is not permissible to compute value of taxable supply by excluding prize which has been contemplated 85 in statutory scheme. When prize paid by distributor/agent is not contemplated to be excluded from value of taxable supply, we are not persuaded to accept submission of petitioner that prize money should be excluded for computing taxable value of supply prize money should be excluded. We, thus, conclude that while determining taxable value of supply prize money is not to be excluded for purpose of levy of GST. 81. Learned counsel for petitioner has also relied on various taxing statutes of other countries, wherein petitioner submits that prize money of lottery ticket are not being computing for levy of tax. He has referred to provisions of United Kingdom- Value Added Tax, 1994; Excise Tax Act of Canada; Goods and Services Tax Act of Singapore; Goods and Services Act, 1985 of New Zealand and Sri Lanka-Value Added Tax Act, 2002. When levy of GST, determination of taxable value are governed by Parliamentary Act in this country, we are of view 86 that legislative scheme of other countries may not be relevant for determining issue which has been raised before us. taxing policy and taxing statute of various countries are different which are in accordance with taxing regime suitable and applicable in different countries. issue which has been raised before us has to be answered by looking into statutory provisions of Act, 2017 and Rules framed therein which govern field. 82. In foregoing discussion we are of view that petitioner is not entitled to reliefs as claimed in writ petition. 83. We may, however, notice that petitioner has prayed for grant of liberty of challenging notifications dated 21.02.2020/02.03.2020 by which rate of GST for lottery run by State and lottery organized by State have been made same, which notification has not been challenged in writ petition since 87 notifications were issued during pendency of writ petition. Petitioner has prayed that said issue be left open, notification having not been challenged in writ petition liberty be given to petitioner to challenge same in appropriate proceedings. We accept above prayer of petitioner. petitioner shall be at liberty to challenge notifications dated 21.02.2020/02.03.2020 (challenging rate of levy tax uniformally at 28%) separately in appropriate proceedings. Subject to liberty as above, writ petition is dismissed. ....................J. (Ashok Bhushan) ....................J. (R.Subhash Reddy) ....................J. (M.R. Shah) NEW DELHI, DECEMBER 03, 2020. Skill Lotto Solutions Pvt. Ltd. v. Union of India & Or