Office in Sikkim, tax in Goa. The Supreme Court says that's not enough.

Goa’s lottery tax fight: The Supreme Court tells Sikkim High Court to stay out

Three companies selling lottery tickets across India, including in Goa, walked into the High Court of Sikkim. They wanted to strike down a Goa state tax notification. The State of Goa objected: why should a court in Gangtok decide a tax levied for business done in Panaji? The Sikkim High Court refused to let Goa off the hook. The Supreme Court just reversed that. The stakes were simple: a state’s tax policy being challenged in a forum 2,000 kilometres away, and the constitutional limits on a High Court’s territorial reach.

The notification that started it all

On 30 June 2017, the Government of Goa issued Notification No. 01/2017 under Section 11(1) of the Goa Goods and Services Tax Act, 2017. It levied a 14% tax on lotteries “authorized by State Governments.” Three companies — Summit Online Trade Solutions (P) Ltd and two others — were in the business of selling lottery tickets in multiple states, including Goa. They saw the notification as discriminatory. Lotteries “run by State Governments” were taxed at 6% under Schedule II; those merely “authorized by State Governments” were hit with 14% under Schedule IV. The companies moved the High Court of Sikkim in July 2017, filing W.P.(C) Nos. 36, 38 and 59 of 2017. They argued the differential rate violated Articles 14, 19(1)(g), 301 and 304 of the Constitution.

Why Sikkim? The companies’ answer

The companies had their registered offices in Sikkim. They claimed that part of their business operations — including the sale of lottery tickets — occurred within the state. They argued that the Goa notification, by taxing their business, caused them injury in Sikkim. The State of Goa saw this as forum shopping. It filed applications before the Sikkim High Court seeking deletion from the array of respondents. Goa’s argument was simple: the notification was issued in Goa, the tax was levied on business carried on in Goa, and no part of the cause of action arose in Sikkim.

The Sikkim High Court’s stand

On 6 June 2018, the Sikkim High Court dismissed Goa’s applications. It held that at least a part of the cause of action had arisen within its territorial jurisdiction. The High Court invoked Article 226(2) of the Constitution, which allows a High Court to issue writs even if the seat of the government or authority is outside its territory, provided the cause of action arises wholly or in part within its jurisdiction. The High Court did not elaborate on which specific facts constituted that part of the cause of action. It simply concluded that the companies’ pleadings disclosed enough to retain jurisdiction. Goa was not convinced. It moved the Supreme Court.

The Supreme Court’s question: What is cause of action?

Justice Dipankar Datta, writing for the Bench that also included Justice S. Ravindra Bhat, began with a foundational question. What exactly is “cause of action”? The Court reached back to an 1873 English decision, Cooke v. Gill, (1873) 8 CP 107, which defined it as “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court.” That definition, the Court said, remains the guiding light for Article 226(2) analysis.

The Court then laid down the test: the party invoking writ jurisdiction must disclose that the integral facts pleaded in support of the cause of action constitute a material, essential or integral part of the cause of action within the High Court’s jurisdiction. Pleaded facts must have a nexus with the subject matter of challenge based on which the prayer can be granted. Facts not relevant or germane for grant of the prayer do not give rise to a cause of action conferring jurisdiction.

What the companies actually pleaded

The Supreme Court examined the writ petitions filed before the Sikkim High Court. The companies had pleaded that they were registered under the Sikkim Goods and Services Tax Act, that they had their principal place of business in Sikkim, and that they were selling lottery tickets in various states including Goa. But the Court found a critical gap: the pleadings disclosed no material facts constituting even a part of the cause of action within Sikkim. The notification was issued in Goa. The tax was levied on business carried on in Goa. The companies’ prayer was to strike down a Goa notification — not a Sikkim notification. The mere fact that the companies had an office in Sikkim did not, by itself, form an integral part of the cause of action.

The Court cited National Textile Corporation Ltd. v. Haribox Swalram, (2004) 9 SCC 786, which held that the mere location of an office does not by itself form an integral part of the cause of action when the impugned action relates to business in another territory. That precedent fit the facts perfectly.

The forum conveniens argument

Even if a small part of the cause of action had arisen in Sikkim, the Supreme Court said, the High Court should have considered the concept of forum conveniens. The Court relied on Kusum Ingots v. Union of India, (2006) 4 SCC 254, and Ambica Industries v. CCE, (2007) 6 SCC 769. Both cases held that a small part of the cause of action arising within a High Court’s jurisdiction is not by itself a determinative factor compelling that court to decide the matter on merits. The High Court must consider whether it is the most convenient forum. Here, the State of Goa, the notification, and the tax collection were all in Goa. The Sikkim High Court was manifestly inconvenient. The Supreme Court did not mince words: the High Court’s order was unsustainable.

THE TEST: When challenging a state tax notification, the party must plead material facts showing that an integral part of the cause of action arose within the High Court’s territory. An office address alone is not enough. The court must also apply the forum conveniens test before retaining jurisdiction.

What the Supreme Court ordered

On 14 March 2023, the Supreme Court allowed the civil appeals — Civil Appeal No. 1700/2023 arising out of SLP(C) No. 29890/2018 and connected matters. It set aside the Sikkim High Court’s judgment and order dated 6 June 2018. The State of Goa was deleted from the array of respondents in all three writ petitions. The interim order staying proceedings before the High Court was vacated. The writ petitioners were given liberty to approach the appropriate court to challenge the Goa notification. The Supreme Court made it clear: the merits of the constitutional challenge — including the differential duty between 6% and 14% — were left entirely open.

Why this matters for practitioners

This judgment is a sharp reminder of the limits of territorial jurisdiction under Article 226. For advocates advising clients on forum selection, the rule is now clearer than ever. You cannot pick a High Court simply because your client has an office there. You must plead — and prove — that the facts integral to your challenge occurred within that court’s territory. A tax notification issued by State A, taxing business in State A, cannot be challenged in State B merely because the petitioner is based there. The Supreme Court has also revived the forum conveniens doctrine as a mandatory filter. Even if a sliver of cause of action arises in a particular High Court, that court must still ask whether it is the most convenient forum. If the answer is no, it must decline jurisdiction.

For the three companies, the fight is not over. They can still challenge the Goa notification — but they must do so in the right court. The Supreme Court has given them that liberty. The substantive question of whether the classification between “lottery run by State Governments” and “lottery authorized by State Governments” is constitutionally valid remains unanswered. That battle will be fought another day, in another forum.

The bottom line: If you are challenging a state tax notification, file where the tax is levied — not where your office is. The High Court must apply the forum conveniens test before retaining jurisdiction. An office address alone is not cause of action.