In Civil Appeal No. 1700/2023 - SC –Supreme Court rules Notification levying Tax for conducting business in Goa, did not give rise to a legal wrong that affected the petitioning company within the territory of Sikkim; removes State of Goa from list of respondents in writ petition pending before Sikkim High Court
Justice S. Ravindra Bhat & Justice Dipankar Datta [14-03-2023]

Read Order: The State of Goa V. Summit Online Trade Solutions (P) Ltd & Ors

Chahat Varma

New Delhi, June 5, 2023:  The Supreme Court has set aside the order of the Sikkim High Court, stating that the High Court of Sikkim had erred in dismissing the applications filed by the State of Goa (appellant) without considering the contents of the petition memo. The court observed that the petition memo did not provide any evidence or pleading to establish that any part of the cause of action arose within the jurisdiction of the Sikkim High Court or that any rights were affected within the territory of Sikkim.

Briefly stated issue involved the present case was that a private limited company, engaged in the business of purchase and sale of lottery tickets run, conducted and organized by the Government of Sikkim both within the State of Sikkim as well as outside the State, challenged various notifications issued under the Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act). Specifically, the challenge was directed towards a notification dated June 30, 2017, bearing No. 01/2017, issued by the Government of Goa under the Goa Goods and Services Tax Act, 2017 (GGST Act). This notification imposed a 14% tax on lotteries authorized by State Governments. The writ petitioners had approached the High Court of Sikkim, invoking its prerogative writ jurisdiction, seeking a declaration that the impugned notification was unconstitutional and illegal.

The appellant was one of the multiple respondents in the Writ petitions, pending before the High Court of Sikkim. Separate applications in the said writ petitions were filed by the appellant seeking its deletion from the array of respondents. The appellant had argued that a notification issued by them was being challenged in the writ petitions, and if there were grounds for challenging the notification, the appropriate court for seeking remedy would be the High Court of Bombay at Goa.

However, the High Court of Sikkim, in a common judgment and order dismissed the appellant's applications.

The division bench of Justice S. Ravindra Bhat and Justice Dipankar Datta observed that when addressing an objection regarding lack of territorial jurisdiction to entertain a writ petition, the high court must assess the contents of the petition memo and treat the averments made in it as true and correct. It is a fundamental principle to determine whether at least part of the cause of action had been claimed to arise within the jurisdiction of the High Court. After examining the petition memo of W.P.(C) No. 38 of 2017, the bench found no indication of how any part of the cause of action pleaded by the petitioning company had arisen within the territorial jurisdiction of the High Court of Sikkim.

The bench remarked, “Here, tax has been levied by the Government of Goa in respect of a business that the petitioning company is carrying on within the territory of Goa. Such tax is payable by the petitioning company not in respect of carrying on of any business in the territory of Sikkim. Hence, merely because the petitioning company has its office in Gangtok, Sikkim, the same by itself does not form an integral part of the cause of action authorizing the petitioning company to move the High Court of Sikkim. “

The bench noted that the petitioning company had to bear the liability of paying tax @14% imposed by the Government of Goa for the sale of lottery tickets in the State of Goa, as per Schedule IV of the disputed notification. However, upon examining the petition memo, the bench found no indication of how the impugned notification, which levied tax for conducting business in Goa, gave rise to a legal wrong that affected the petitioning company within the territory of Sikkim.

The bench concluded that the appellant shall be removed from the list of respondents in W.P.(C) Nos. 36, 38, and 59 of 2017. Furthermore, the interim order staying the proceedings before the High Court stood vacated. As a result, the court directed that the Sikkim High Court may proceed to decide the writ petitions against the other respondents according to law.