K. Arumugam Vs Union of India & Others Etc. (Supreme Court of India)
Supreme Court held that the sale of lottery tickets by the State is a privileged activity by itself and not rendering of a service for which the assessees are rendering promotion or marketing service. Hence, service tax not leviable under ‘Business Auxiliary Services’.
Facts- The appellant is registered with the Directorate of State Lotteries in Thiruvananthapuram and has purchased Kerala State Lotteries from the District Lottery Offices and other States’ lotteries in bulk from registered promoters at a discounted rate. The appellant contends that this purchase was made on an outright sale basis, meaning, they bought all tickets in bulk with no return policy (“all sold basis”) and subsequently sold them to retailers, also on an outright sale basis. A profit was made from the difference between the amount received from retailers and the amount paid to the State Government or registered promoters.
Appellant was directed by the Superintendent of Central Excise, Service Tax Range, Palakkad Division, Mettuppalayam Street, Palakkad-1, Kerala, to obtain registration and pay service tax under the heading ‘business auxiliary service‘ in terms of the provisions of the Finance Act, 1994. Subsequently, the appellants were served notices by the Assistant Commissioner of Central Excise demanding details of their lottery purchase since the year 2003.
