A) ABSTRACT / HEADNOTE

The writ petition questioned the constitutional validity of levying Goods and Services Tax on lottery transactions under the Central Goods and Services Tax Act, 2017, particularly challenging the inclusion of actionable claims within the statutory definition of goods under Section 2(52). The petitioner, an authorised distributor of State-run lotteries, alleged violation of Article 14 on the ground of hostile discrimination, arguing that only lottery, betting, and gambling were taxed while other actionable claims were excluded under Schedule III. The petition further contested the legislative competence of Parliament to expand the constitutional meaning of goods, contending that actionable claims stood excluded under established legal understanding as reflected in the Sale of Goods Act, 1930.

The Court examined the scope of Article 32 maintainability, the nature of inclusive definitions under constitutional interpretation, and the effect of Article 246A inserted by the 101st Constitutional Amendment. Reliance was placed on the Constitution Bench ruling in Sunrise Associates, clarifying that lotteries are actionable claims and that such classification formed the ratio decidendi of that judgment. The Court also analysed the valuation mechanism under Section 15 read with Rule 31A of the CGST Rules, rejecting the plea to exclude prize money from the taxable value.

The judgment upheld the constitutional validity of the impugned provisions, reaffirmed Parliament’s plenary taxing power under the GST regime, and reiterated judicial restraint in fiscal matters. The writ petition was dismissed in entirety.

Keywords: Goods and Services Tax; Actionable Claim; Lottery Taxation; Article 246A; Article 14

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arose in the aftermath of the constitutional restructuring of indirect taxation through the Constitution (One Hundred and First Amendment) Act, 2016, which introduced a unified Goods and Services Tax regime. The petitioner functioned as an authorised agent for distribution of lotteries organised by the State of Punjab under the Lotteries (Regulation) Act, 1998. Historically, lotteries had been subject to varying forms of State taxation, including sales tax and service tax, upheld through a long line of judicial decisions.

With the enactment of the CGST Act, 2017, Parliament defined goods expansively to include actionable claims, a departure from the exclusionary definition under the Sale of Goods Act, 1930. Further, Schedule III carved out actionable claims other than lottery, betting, and gambling from GST, thereby subjecting only these three categories to tax. This selective inclusion formed the core of the constitutional challenge.

The petitioner contended that the statutory redefinition amounted to an artificial enlargement of taxing power, inconsistent with Article 366(12). Heavy reliance was placed on State of Madras v. Gannon Dunkerley & Co. to argue that constitutional expressions must carry their legal meaning. The challenge also targeted valuation rules which taxed the face value of lottery tickets without excluding prize money, allegedly leading to taxation of non-income components.

The background reflects a classic tension between fiscal autonomy of the legislature and constitutional limitations on taxing power, requiring judicial balancing within the GST framework.

D) FACTS OF THE CASE

The petitioner acted as a selling agent for State-organised lotteries under statutory authorisation. Following the introduction of GST, notifications dated 28.06.2017 imposed tax on lotteries based on the face value of tickets, prescribing different valuation formulas depending on whether the lottery was run or merely authorised by the State. Subsequently, Rule 31A was inserted to regulate valuation.

The petitioner challenged Section 2(52) of the CGST Act, asserting that inclusion of actionable claims within goods was unconstitutional. It was argued that lottery tickets represented mere chances and did not constitute movable property. The petitioner further alleged discriminatory treatment under Article 14 since other actionable claims such as debts and insurance claims were excluded from GST.

Alternative reliefs sought included exclusion of prize money from taxable value and uniform tax rates across States. During pendency, amendments were introduced equalising valuation rates, though the petitioner reserved the right to challenge the same separately.

The Union of India defended the levy, asserting parliamentary competence under Article 246A and contending that lotteries have historically been treated as taxable commodities. It was further argued that fiscal classifications enjoy wide latitude and that courts should not interfere absent manifest arbitrariness.

E) LEGAL ISSUES RAISED

i. Whether the writ petition was maintainable under Article 32 of the Constitution?
ii. Whether inclusion of actionable claims in the definition of goods under Section 2(52) is unconstitutional?
iii. Whether Sunrise Associates declared lottery as an actionable claim as ratio or merely obiter dicta?
iv. Whether taxing only lottery, betting, and gambling violates Article 14?
v. Whether prize money must be excluded while determining taxable value of lottery tickets?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the petitioner submitted that goods under the Constitution must carry the legal meaning ascribed in the Sale of Goods Act, 1930, which expressly excludes actionable claims. It was argued that Parliament cannot artificially expand constitutional terms to assume taxing power. Reliance was placed on Gannon Dunkerley to assert that constitutional entries are nomen juris.

It was contended that Sunrise Associates did not conclusively declare lotteries as actionable claims and that such observations were obiter. The selective taxation of only three actionable claims was assailed as hostile discrimination lacking rational nexus. On valuation, it was urged that prize money never accrues to the distributor and taxing the face value amounts to unjust enrichment of the State.

G) RESPONDENT’S ARGUMENTS

The counsels for the respondent submitted that challenges alleging violation of Article 14 against parliamentary statutes are maintainable under Article 32. It was argued that Article 366(12) contains an inclusive definition and does not exclude actionable claims.

Reliance was placed on Sunrise Associates to establish that lotteries are actionable claims and goods in the wider sense. The Union asserted plenary legislative competence under Article 246A, introduced with a non obstante clause. On discrimination, it was argued that lotteries, betting, and gambling form a distinct class historically regulated and taxed. The valuation mechanism under Section 15 and Rule 31A was defended as a matter of legislative policy.

H) JUDGEMENT

The Court first upheld the maintainability of the writ petition, reiterating that Article 32 forms part of the basic structure and can be invoked to challenge parliamentary enactments on Article 14 grounds.

On merits, the Court held that Article 366(12) employs an inclusive definition of goods, intended to enlarge rather than restrict meaning. The Constitution framers were aware of the Sale of Goods Act definition yet deliberately chose inclusive language. The Court clarified that Gannon Dunkerley dealt with the meaning of sale, not goods, and was context-specific.

The Constitution Bench ruling in Sunrise Associates was analysed in detail, and the Court categorically held that the classification of lottery as an actionable claim formed the ratio decidendi. Consequently, Parliament acted within its competence in including actionable claims within goods under GST law.

Regarding Article 14, the Court found a rational basis for taxing lottery, betting, and gambling, given their historical regulation and revenue implications. The exclusion of other actionable claims did not amount to hostile discrimination.

On valuation, the Court held that Section 15 exhaustively governs what may be included or excluded. Prize money exclusion was not contemplated and could not be judicially inserted. The writ petition was dismissed.

a) RATIO DECIDENDI

The inclusive definition of goods under Article 366(12) empowers Parliament to include actionable claims within GST legislation, and such inclusion is constitutionally valid under Article 246A.

b) OBITER DICTA

Judicial restraint in fiscal policy is imperative, and courts should not evaluate economic wisdom or comparative international practices in taxation matters.

c) GUIDELINES

i. Inclusive definitions in fiscal statutes must be interpreted expansively.
ii. Fiscal classifications require only rational nexus, not mathematical precision.
iii. Valuation of taxable supply is governed strictly by statute and rules.

I) CONCLUSION & COMMENTS

The judgment reaffirms Parliament’s expansive taxing competence under the GST framework and clarifies the constitutional status of actionable claims. It harmonises earlier jurisprudence with the post-GST constitutional structure and underscores judicial deference in taxation policy. The ruling provides doctrinal clarity on inclusive definitions and cements Sunrise Associates as binding authority on lotteries.

J) REFERENCES

a) Important Cases Referred

i. Sunrise Associates v. Govt. of NCT of Delhi, [2006] 1 Suppl. SCR 421
ii. State of Madras v. Gannon Dunkerley & Co., [1959] SCR 379
iii. H. Anraj v. Government of Tamil Nadu, [1985] 3 Suppl. SCR 342
iv. Reserve Bank of India v. Peerless General Finance, [1987] 2 SCR 1

b) Important Statutes Referred

i. Constitution of India
ii. Central Goods and Services Tax Act, 2017
iii. Transfer of Property Act, 1882
iv. Sale of Goods Act, 1930