THE STATE OF GOA versus SUMMIT ONLINE TRADE SOLUTIONS (P) LTD & ORS. on 14 March 2023

[2023] 2 S.C.R. 247

THE STATE OF GOA

v.

SUMMIT ONLINE TRADE SOLUTIONS (P) LTD & ORS.

(Civil Appeal No. 1700 of 2023)

MARCH 14, 2023

[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]

Constitution of India: Art. 226 – Writ Jurisdiction of the HighCourt – Cause of Action/Part of cause of action – Concept of,u/Art. 226(2) – Notification issued by the State of Goa levying 14%tax on Lottery authorised by State Government – Challenged to, bythe company selling lottery tickets which is being run by the Stateof Sikkim, in various States including Goa, in a writ petition beforethe High Court of Sikkim – Applications by the State of Goa beforethe High Court for deletion of its name from the array of respondenton the ground that notification under a statute enacted by the Statelegislature cannot be subjected to judicial scrutiny within thejurisdiction of a High Court of a different state, more so, no causeof action has arisen in the jurisdiction of the High Court of Sikkim– High Court dismissed the application holding that at least a partof the cause of action has arisen within the jurisdiction of this Courtas the notification was issued under CGST Act as well IGST Act –On appeal, held: Party invoking the writ jurisdiction has to disclosethat the integral facts pleaded in support of the cause of action doconstitute a cause empowering the High Court to decide the disputeand that, at least, a part of the cause of action to move the HighCourt arose within its jurisdiction – Such pleaded facts must have anexus with the subject matter of challenge based on which the prayercan be granted – Those facts which are not relevant or germane forgrant of the prayer would not give rise to a cause of actionconferring jurisdiction on the court – These are the guiding tests –Assuming that a slender part of the cause of action did arise withinthe State of Sikkim, the concept of forum conveniens ought to havebeen considered by the High Court – Tax is levied by the Governmentof Goa in respect of carrying of any business in the territory ofGoa – Merely having the office in the State of Sikkim does not formthe integral part of the cause of action – No, adverse consequenceof the impugned notification felt within the jurisdiction of the High

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ACourt – High Court erred in dismissing the applications – Orderpassed by the High Court set aside – Cause of action.

National Textile Corporation Ltd. v. Haribox Swalram(2004) 9 SCC 786 : [2004] 3 SCR 738; Kusum Ingotsv. Union of India (2006) 4 SCC 254; Ambica IndustriesBv. CCE (2007) 6 SCC 769 : [2007] 7 SCR 685 –referred to.

Cooke v. Gill (1873) 8 CP 107 – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1700of 2023.D

From the Judgment and Order dated 06.06.2018 of the High Courtof Sikkim in IA Nos. 07, 01 and 05 of 2018.

With

Civil Appeal Nos. 1701 and 1702 of 2023.ERavindra A. Lokhande, Baban Jeet Singh Mew, Sudarsh Menon,Satyam Singh, Samarendra Beura, Rajesh Rathore, Advs. for theAppellant.

N. Venkataraman, ASG, Shiv Mangal Sharma, Ms. Vishakha,FShashank Bajpai, Mahaling Pandarge, Siddhartha Sinha, Raj BahadurYadav, Sameer Abhyankar, Ms. Nishi Sangtani, Ms. Vani Vandana Chhetri,Ms. Rupal Agarwal, Narendra Kumar, Raghvendra Kumar, Anand KumarDubey, Ashish Kumar Sinha, Nishant Verma, Mrs. Anisha Mathur,Siddharth Dharmadhikari, Aaditya Aniruddha Pande, Bharat Bagla, Ms.Kirti Dadheech, Nishant Ramakantrao Katneshwarkar, Ms. AnishaGMathur, Aaditya A. Pandae, Ms. Ranjeeta Rohatgi, Abhimanyu Tewari,Ms. Eliza Bar, Ms. K. Enatoli Sema, Ms. Limayinla Jamir, Amit KumarSingh, Ms. Chubalemla Chang, Prang Newmai, Ajay Pal, MayankDahiya, Ms. Sugandh Rathor, Ms. Priyanka C, Ms. Astha Sharma,Ravinder Singh, Srisatya Mohanty, Ms. Raveesha Gupta, Ms. Mantika H

Haryani, Sanjeev Kaushik, Shreyas Awasthi, Himanshu Chakravarty,Devvrat Singh, Ms. Muskan Surana, Advs. for the Repondents.

The Judgment of the Court was delivered by DIPANKAR DATTA, J.

Leave granted.

2. The appellant is one of multiple respondents in W.P.(C) No. 36of 2017, W.P.(C) No. 38 of 2017 and W.P.(C) No. 59 of 2017, pendingon the file of the High Court of Sikkim (hereafter ‘the High Court’, forshort). Separate applications in the said three writ petitions were filed bythe appellant seeking its deletion from the array of respondents. Theappellant had pleaded in the said applications that, inter alia, a notificationissued by it was under challenge in the writ petitions and that if, at all,such notification could be made a subject matter of challenge, the HighCourt of Bombay at Goa is the appropriate court where remedy ought tobe pursued. According to the appellant, a notification issued under astatute enacted by a State legislature cannot be subjected to judicialscrutiny within the jurisdiction of a high court of a different State, moreso when no cause of action has arisen within the jurisdiction of that highcourt. It was further pleaded that since no part of the cause of action forinvocation of the writ jurisdiction had arisen within the territorial limits ofthe High Court, the writ petitions ought not to proceed against theappellant. One other fact brought to the notice of the High Court by theappellant was that the same notification was under challenge in W.P.(C)No. 759/2017 instituted by Serenity Trades Private Limited before theHigh Court of Bombay at Goa and that such writ petition after admissionwas pending for final hearing. It was urged by the appellant that to avoidconflict of opinions, the writ petitioners could either independentlychallenge the notification before the High Court of Bombay at Goa orapply for intervention in W.P.(C) No. 759/2017.

3. The High Court, by a common judgment and order dated 6[th]June, 2018, has dismissed the three applications. These three appeals,by special leave, are directed against such judgment and order.

4. Since a common judgment and order is under challenge, wepropose to decide these appeals by this common judgment and order.

5. Various notifications issued under the Central Goods andServices Tax Act, 2017 (hereafter ‘CGST Act’, for short) and the ABCD

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AIntegrated Goods and Services Tax Act, 2017 (hereafter ‘IGST Act’,for short) are under challenge in all the three writ petitions together withrate-notifications issued by the States of Goa, Maharashtra, Punjab andSikkim. Inter alia, the challenge is to a notification stated to bear “No.01/2017” dated 30[th] June, 2017 issued by the Government of Goa in exerciseof power conferred by sub-section (1) of section 11 of the Goa GoodsBand Services Tax Act, 2017 (hereafter ‘GGST Act’, for short) levyingtax @ 14% on “(L)ottery authorized by State Governments”. Thewrit petitioners have invoked the high prerogative writ jurisdiction of theHigh Court to seek a declaration that the impugned notification isunconstitutional and illegal.C

6. The short question that arises for a decision on these appealsis, whether the High Court was justified in returning the finding that “atleast a part of the cause of action has arisen within the jurisdictionof this Court” and premised on such a finding, to dismiss the applications.

7. Notice was issued by this Court on 12[th] November, 2018, afterDcondonation of delay in presentation of the petitions for special leave toappeal.

8. None has appeared for the writ petitioners despite service ofnotice. We have heard counsel for the appellant and the AdditionalSolicitor General appearing for the Union of India as well as counsel forEthe other appearing parties.

9. For the purpose of a decision on these appeals, the petitionaverments in W.P.(C) No. 38 of 2017 may be noticed. A private limitedcompany, “engaged in the business of purchase and sale of lotterytickets run, conducted and organized by the Government of SikkimFboth within the State of Sikkim as well as outside the State”, is thewrit petitioner. The petitioning company sells lottery tickets in the Statesof Sikkim, Punjab, Goa and Maharashtra. It is the pleaded case that thelottery tickets, which are supplied by the petitioning company, are“lotteries which is being run by the State Government of Sikkim, itGis not a lottery authorized by the State Government requiring todischarge GST under a higher rate of taxation of 28%”. The casesought to be set up is that if the distinction between “(L)ottery run byState Governments” and “(L)ottery authorized by State Governments”were made, as has been done by the impugned notification, the samewould be ex facie illegal and result in wiping out competition.H

THE STATE OF GOA v. SUMMIT ONLINE TRADE SOLUTIONS(P) LTD & ORS. [DIPANKAR DATTA, J.]

10. The prayers in W.P.(C) No. 38 of 2017 are to the followingeffect:

“(i) Set aside the impugned Notifications 01/2017 CentralTax(Rate), 01/2017 Integrated Tax (Rate), 01/2017, and theState rate Notifications of the States of Sikkim, Goa, Punjaband Maharashtra to the extent it levies differential rates oftax on the supply of Lottery tickets by creating an illusorysub-classification between ‘Lottery run by the StateGovernment’ as discriminatory and violative of Article 14,19(1)(g), 301, 304 of the Constitution of India and of theCGST, SGST and IGST Act, and further hold that only 12%ad valorem tax can be levied uniformly in cases of all Staterun lotteries irrespective of where the tickets are sold.

(ii) Direct refund of differential duty paid at the rate of 28%as against the liability of the Petitioner to pay duty only atthe rate of 12% with interest.

(iii) Set aside the impugned Notifications 01/2017 CentralTax (Rate), 01/2017 Integrated Tax (Rate) 01/2017 and theState rate Notifications of the States of Sikkim, Goa, Punjaband Maharashtra to the extent it levies tax on the face valueof the lottery ticket without abating the prize money,component of the lottery ticket when the said amount neverforms part of the income of the Petitioner the lottery trade.”

11. The High Court, while delivering the impugned judgment andorder, proceeded to hold that the writ petitioners were aggrieved notonly by the impugned notification issued by the appellant under the GGSTAct but also by the act of the Central Government in issuing the impugnednotifications under the CGST Act as well as the IGST Act seeking tolevy tax (GST) on lotteries organized, promoted and conducted by theState of Sikkim. The High Court further noted that it was not the actualincidence of GST under the GGST Act which is impugned in the writpetitions but the provisions of law made by the Parliament as well as therespective State Governments including the State of Goa by which theysought to levy GST on lotteries. Considering the prayers made in thewrit petition, the High Court was further of the view that, at least, a partof the cause of action had arisen with its jurisdiction. The High Courtwas also of the view that since notice had been issued on W.P.(C) Nos.

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A36 and 38 of 2017 on 17[th] July, 2017, much before Rule was issued bythe High Court of Bombay at Goa on 28[th] September, 2017 in W.P.(C)No. 759/2017, no ground had been set up by the appellant for deletion;hence, the interim applications seeking deletion stood dismissed.

12. In support of territorial jurisdiction of the High Court to entertainBand try the writ petition, this is what the petitioning company has stated:

“29. That his Hon’ble Court has jurisdiction to entertain thesaid writ petition as the cause of action arises in Sikkim only.

Both the Petitioner and the Respondents are located withinthe territorial jurisdiction of this Hon’ble High Court.”CApart from these two sentences, nothing more has been averredin support of territorial jurisdiction of the High Court.

13. From the above, it is clear that according to the petitioningcompany the cause of action has arisen in Sikkim only, meaning therebyDthe whole of the cause of action and not part of it; additionally, it isstated that allthe respondents are locatedwithin the territorial jurisdictionof the High Court which is factually incorrect.

14. While dealing with an objection as to lack of territorialjurisdiction to entertain a writ petition on the ground that the cause ofaction has not arisen within its jurisdiction, a high court essentially has toEarrive at a conclusion on the basis of the averments made in the petitionmemo treating the contents as true and correct. That is the fundamentalprinciple. Bearing this in mind, we have looked into the petition memo ofW.P.(C) No. 38 of 2017 and searched in vain to trace how at least partof the cause of action has been pleaded by the petitioning company toFhave arisen within the territorial jurisdiction of the High Court.

15. This is a case where clause (2) of Article 226 has been invokedby the High Court to clothe it with the jurisdiction to entertain and try thewrit petitions. The Constitutional mandate of clause (2) is that the ‘causeof action’, referred to therein, must at least arise in part within theGterritories in relation to which the high court exercises jurisdiction when writ powers conferred by clause (1) are proposed to be exercised,notwithstanding that the seat of the Government or authority or theresidence of the person is not within those territories. The expression‘cause of action’ has not been defined in the Constitution. However, theclassic definition of ‘cause of action’ given by Lord Brett in Cooke vs.H

Gill[1]that “cause of action means every fact which it would benecessary for the plaintiff to prove, if traversed, in order to supporthis right to the judgment of the court”, has been accepted by thisCourt in a couple of decisions. It is axiomatic that without a cause, therecannot be any action. However, in the context of a writ petition, whatwould constitute such ‘cause of action’ is the material facts which areimperative for the writ petitioner to plead and prove to obtain relief asclaimed. Determination of the question as to whether the facts pleadedconstitute a part of the cause of action, sufficient to attract clause (2) ofArticle 226 of the Constitution, would necessarily involve an exercise bythe high court to ascertain that the facts, as pleaded, constitute a material,essential or integral part of the cause of action. In so determining, it isthe substance of the matter that is relevant. It, therefore, follows thatthe party invoking the writ jurisdiction has to disclose that the integralfacts pleaded in support of the cause of action do constitute a causeempowering the high court to decide the dispute and that, at least, a partof the cause of action to move the high court arose within its jurisdiction.Such pleaded facts must have a nexus with the subject matter of challengebased on which the prayer can be granted. Those facts which are notrelevant or germane for grant of the prayer would not give rise to acause of action conferring jurisdiction on the court. These are the guidingtests.

16. Here, tax has been levied by the Government of Goa in respectof a business that the petitioning company is carrying on within the territoryof Goa. Such tax is payable by the petitioning company not in respect ofcarrying on of any business in the territory of Sikkim. Hence, merelybecause the petitioning company has its office in Gangtok, Sikkim, thesame by itself does not form an integral part of the cause of actionauthorizing the petitioning company to move the High Court. We hold soin view of the decision of this Court in National Textile CorporationLtd. vs. Haribox Swalram[2]. The immediate civil or evil consequence,if at all, arising from the impugned notification is that the petitioningcompany has to pay tax @ 14% to the Government of Goa. The liabilityarises for the specific nature of business carried on by the petitioningcompany within the territory of Goa. The pleadings do not reflect thatany adverse consequence of the impugned notification has been feltwithin the jurisdiction of the High Court. At this stage, we are not 1(1873) 8 CP 107

2 (2004) 9 SCC 786

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Aconcerned with the differential duty as envisaged in Schedule II [@6%] vis-à-vis Schedule IV [@ 14%] of the impugned notification. Thatis a matter having a bearing on the merits of the litigation. The long andshort of the matter is that the petitioning company has to bear the liabilityof paying tax @ 14% levied by the Government of Goa for selling lotterytickets in the State of Goa under Schedule IV of the impugned notification.BIt does not bear out from the petition memo how the impugned notificationlevying tax for carrying on business in the State of Goa subjects thepetitioning company to a legal wrong within the territory of Sikkim forthe writ petition to be entertained by the High Court.

17. In our opinion, the High Court ought not to have dismissed theCapplications of the appellant without considering the petition memo whichhas no semblance of a case having been made out as to how part ofcause of action arose within the territorial limits of the High Court orwithout any pleading as to how any right has been affected within theterritory of Sikkim.D

18. Even otherwise, the High Court was not justified in dismissingthe interim applications. Assuming that a slender part of the cause ofaction did arise within the State of Sikkim, the concept of forumconveniens ought to have been considered by the High Court. As heldby this Court in Kusum Ingots Vs. Union of India[3]and AmbicaEIndustries Vs. CCE[4], even if a small part of the cause of action ariseswithin the territorial jurisdiction of a high court, the same by itself couldnot have been a determinative factor compelling the High Court to keepthe writ petitions alive against the appellant to decide the matter qua theimpugned notification, on merit.

F19. For the reasons aforesaid, we have no hesitation to hold thatthe High Court erred in dismissing the applications filed by the appellant.Consequently, the impugned judgment and order dated 6[th] June, 2018 isset aside. The civil appeals are allowed, without costs.

20. The appellant shall stand deleted from the array of respondentsGin W.P.(C) Nos. 36, 38 and 59 of 2017.

21. Interim order staying the proceedings before the High Courtstands vacated with the result that the High Court may proceed to decidethe writ petitions against the other respondents according to law.

3 (2006) 4 SCC 254H4 (2007) 6 SCC 769

THE STATE OF GOA v. SUMMIT ONLINE TRADE SOLUTIONS(P) LTD & ORS. [DIPANKAR DATTA, J.]

22. This order shall, however, not preclude the respective writpetitioners from approaching the appropriate court to assail the notificationdated 30[th] June, 2017 in accordance with law, if so advised.

Nidhi Jain(Assisted by : Shashwat Jain, LCRA)

Appeals allowed.

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