In Brief
The Supreme Court dismissed appeals by the Union of India challenging orders of the Sikkim High Court that struck down service tax levies on lottery distributors. The Court held that lottery distributors operate as independent traders (principal-to-principal relationship) purchasing tickets from the State at wholesale prices for resale at profit—not as agents of the Government. Since lottery is actionable claim and falls within betting and gambling (Entry 62 - State List), Parliament lacks power to levy service tax on this activity. The substantive relationship remained principal-to-principal despite multiple Finance Act amendments attempting to characterize distributor activities as taxable services. Service tax is therefore not leviable.
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