East
India Hotels Ltd. Vs. State of J & K [1994] INSC 359 (12 July 1994)
Kuldip
Singh (J) Kuldip Singh (J) Ramaswamy, K.
CITATION:
1994 SCC Supl. (2) 580 JT 1994 (5) 449 1994 SCALE (3)181
ACT:
HEAD NOTE:
The
Judgment of the Court was delivered by KULDIP SINGH, J.- The question for
consideration is whether the Jammu & Kashmir State Legislature has the
legislative competence to enact the Jammu & Kashmir Hotel (Amenities and
Services) Tariff Taxation Act, 1980 (the Act). A Division Bench of the Jammu
& Kashmir High Court answered the question in the affirmative. These
appeals are against the judgment of the High Court. In the writ petitions under
Article 32 of the Constitution of India the validity of the Act has been
challenged on the same grounds as was done by the appellants before the High
Court.
2.The
preamble to the Act seeks to provide for the levy of tax on the amenities and
services in a hotel in the State. Section 2 is the definition clause and
defines, inter alia, the expressions "amenities and services" and
"hotel" occurring in clauses (c) and (j) respectively which are as
follows:
"(c)
'Amenity and Service' includes lodging, boarding, massaging, bathing, hair
dressing, and beauty parlor facilities and providing entertainment and other
facilities, whether charged/chargeable jointly or separately;
(j)'Hotel'
means any premises or part of premises including a hut, houseboat, tent, guest
house, rest house or a club occupied by resident or 582 casual visitors with or
without board, service and amenities in consideration of a tariff and includes
a restaurant excluding the portion used as a bar for service or supply of
liquor as defined in Jammu and Kashmir Excise Act, Svt. 1958, attached or
annexed thereto." Section 3 read with Schedule annexed to the Act are the
charging provisions which provide:
"SCHEDULE
Rate of Tariff Rate of Tax A. Resident Visitors
1. Up
to Rs 100 a day5%
2. Rs
101 to Rs 200 a day8%
3. Rs
201 to Rs 300 a day12%
4. Rs
301 and above a day15% B. Casual (Non-resident) Visitors Full amount of tariff
8%" Section 13 of the Act which provides for collection of taxes by the assessee
is as under:
"
13. Collection of tax by the assessee.- (1) A registered hotel-keeper is authorised
to charge the tax due on tariff under the provisions of this Act.
(2)
Notwithstanding anything contained in sub-section (1)- (a) if any person other
than a registered hotel-keeper collects any amount by way of tax leviable under
this Act, or (b) if any registered hotel-keeper collects tax in excess of the amount
chargeable under this Act, such person or such registered hotel-keeper, as the
case may be, shall pay such sum to the Government within the period of thirty
days from the expiry of each quarter and the provisions of sub-section (1) of
Section 12 and the provisions of this Act relating to recovery shall apply to
the recovery of such sum." The remaining sections of the Act refer to the
returns to be filed by every "hotel-keeper" and "person"
liable to pay tax under the Act, the assessment and collection of tax, the
imposition of penalty, the payment of tax and penalty, appeals, revisions etc.
etc.
3. The
main contention raised by the appellants before the High Court was that the
levy of tax is on the gross receipts of the 'hotel-keeper' and as such it is a
tax on 'income' which could only be imposed by Parliament under Entry 82, List
1, Schedule VII, Constitution of India. The High Court referred to Section 13
of the Act which authorised the 'hotel-keeper' to charge the tax due from the
customers. It further noticed that the taxing event under the Act is not the
receipt of gross income by a 'hotel-keeper' but is in fact the provision of
amenities and services by him to his customers. The gross income of a
'hotelkeeper' has been merely used as a measure to quantify the tax payable
under the Act. Interpreting the relevant provisions of the Act the High Court
found that the tax is leviable irrespective of the consideration whether the
'hotel-keeper' earns any income in the sense of the Income Tax Act. All that is
necessary is the occupancy of the hotel by the customers and their availing the
amenities and services envisaged under the Act. On appreciation of all these
factors the High Court came to the conclusion that the levy, being on amenities
and services 583 provided by the 'hotel-keeper' to his customers, it was not a
tax on income and as such was within the legislative competence of the State
Legislature.
4. It
is not necessary for us to go into the merits of the controversy raised before
the High Court because the matter is no longer res integra. The constitutional
validity of the Gujarat Tax on Luxuries (Hotels and Lodging Houses) Act, 1977,
Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981, the
Karnataka Tax on Luxuries (Hotels and Lodging Houses) Act, 1979 and the West
Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 which
are legislations similar to the Act, was challenged before this Court in
Express Hotels Pvt. Ltd. v. State of Gujarat' on the ground that the imposition
of tax on 'luxury' was beyond the legislative competence of the State
Legislatures under Entry 62 List II of Seventh Schedule to the Constitution of
India. This Court dismissed the writ petitions of the hotel owners and upheld
the validity of the State legislations. All the four taxing statutes before
this Court in Express Hotels case1 were analogous to the Act and the scheme of
the legislations was substantially similar. The following contentions, inter alia,
were raised before this Court in Express Hotels case1: (SCC pp. 686-87, para
II) "(a) The taxation entry in 62 of List II providing for taxes on
'luxuries' contemplates, and takes within its sweep, a tax on goods and
articles in their aspect and character as luxuries and does not include 'services'
or ,activities'. The levy on the services for lodging provided at the hotels,
is, therefore, beyond the scope of Entry 62 List II.
(c)
The real criterion distinguishing 'luxury' is the special attribute or quality
of the commodity or the services, as the case may be, and not the price factor simpliciter.
The
essential distinguishing attribute is a qualitative one. Distinction based
purely on the quantitative difference in the price is not a rational criterion
to identify 'luxuries'. The impost based on the mere criterion of price which
has no relation to the concept of luxuries, is ultra vires the State power
under Entry 62 List II.
(d)
The scheme of the Act insofar as it makes the price and not quality, the sole
basis for identification of the subject of the tax, makes no distinction
between the components of the services which include both necessities and
comforts, as distinguishable, from 'luxuries'. Levy on such composite
subject-matter is bad." M.N. Venkatachaliah, J. (as the learned C.J.
then
was) speaking for the Constitution Bench rejected the contentions on the
following reasoning: (SCC pp. 690, 693-94, paras 21, 32) "The concept of a
tax on 'luxuries' in Entry 62, List II cannot be limited merely to tax things
tangible and corporeal in their aspect as 'luxuries'. It is true that while
frugal or simple food and medicine may be classified as necessities; articles
such as jewellery, perfume, intoxicating liquor, tobacco, etc.
could
be called articles of luxury. But the legislative entry cannot be exhausted by
these cases, illustrative of the concept. The entry encompasses all the
manifestations or emanations, the notion of 'luxuries' can fairly and
reasonably (sic) can be said to comprehend the element of extravagance or
indulgence that differentiates 'luxury' from 1 (1989) 3 SCC 677 : (1989) 2 SCR
893 584 ,necessity' cannot be confined to goods and articles. There can be
elements of extravagance or indulgence in the quality of services and
activities.
We are
presently concerned with the question whether the quality or standards of
lodging accommodation in hotels can be called luxurious by contemporary
standards by reason of the higher standards of charges payable for the
accommodation. Legislature has chosen to identify the luxury by the statutory
standards prescribed by it. According to the legislative assumption, price does
become evidence of the special quality on the basis of which 'luxuries' could
be distinguished and that some special quality is attributable to goods and
services through the means of the price. Quality and price, in the legislative
assessment, can be assumed to have a logical interrelationship. This cannot be
held to suffer from the vice of irrationality." The provisions of the Act
are similar to the legislations of the four States mentioned above and the
scheme of the Act is also substantially the same. Therefore, for the reasons
and the conclusions reached by the Constitution Bench of this Court in Express
Hotels case1 the challenge to the validity of the Act on the ground of
legislative competence has to be rejected.
5. We
may briefly notice the constitutional provisions under which the Legislature of
the State of Jammu & Kashmir has the competence to legislate the Act.
Article 370 of the Constitution of India, to the extent relevant, is as under:
"Temporary
provisions with respect to the State of Jammu and Kashmir.- (1) Notwithstanding
anything in this Constitution- (b) the power of Parliament to make laws for the
said State shall be limited to- (i) those matters in the Union List and the
Concurrent List which, in consultation with the Government of the State, are
declared by the President to correspond to matters specified in the Instrument
of Accession governing the accession of the State to the Dominion of India as the
matters with respect to which the Dominion Legislature may make laws for that
State; and (ii) such other matters in the said Lists as, with the concurrence
of the Government of the State, the President may by order specify.
(d) such
of the other provisions of this Constitution shall apply in relation to that
State subject to such exceptions and modifications as the President may by
order specify."
6. By
the Presidential Order, made under Article 370(1) called the Constitution
(Application to Jammu & Kashmir) Order, 1954, the provisions of the
Constitution of India were extended and made applicable to the State of Jammu
& Kashmir with several exceptions and modifications. The words "
notwithstanding anything in clauses (2) and (3)" occurring in clause (1),
and clauses (2), (3) and (4) of Article 246 were omitted. Article 248 and Entry
97 of List 1, List II and List III (Concurrent List) of the Seventh Schedule
were also omitted. Thus Parliament was vested with the power to make laws in
respect of Jammu & Kashmir with respect to the matters enumerated in
Entries 1 to 96 of 585 List I Schedule VII. The residuary power was retained by
the State of Jammu & Kashmir. It is thus obvious that except the
legislation relating to Entries 1 to 96 of List I the Legislature of Jammu
& Kashmir can legislate on every other matter. Section 5 of the Jammu &
Kashmir Constitution reads as under:
"Extent
of executive at and legislative power of the State.- The executive and
legislative power of the State extends to all matters except those with respect
to which Parliament has power to make laws for the State under the provisions
of the Constitution of India." The Jammu & Kashmir Legislature has,
therefore, the legislative competence to enact laws on any subject which comes
within List II Schedule VII by virtue of the residuary power it has been given
by the Presidential Order mentioned above. The Constitution Bench in Express
Hotels case1 has held that the four legislations dealt with therein were under
Entry 62, List II, Schedule VII, Constitution of India. On similar reasoning
the Act would also be a legislation under the same entry, and as such within
the competence of the Jammu & Kashmir Legislature. We also agree with the
reasoning and the conclusions reached by the High Court. There is no force in
the contention that the Act is a legislation under Entry 82, List 1, Schedule
VII, Constitution of India. We, therefore, see no ground to interfere with the
Division Bench judgment of the High Court. The appeals/writ petitions are
dismissed. No costs.
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