1981 (9) TMI 267 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980.
2. Competence of the State Legislature to impose the tax.
3. Nature of the tax-whether it is a tax on income or amenities and services.
4. Alleged double taxation under the Act and the Jammu and Kashmir General Sales Tax Act, 1962.
5. Alleged violation of Article 19(1)(g) of the Constitution.
6. Alleged violation of Article 14 of the Constitution.

Issue-wise Detailed Analysis:

1. Constitutional Validity of the Act:
The primary question was whether the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980, is intra vires the powers of the State Legislature. The court held that the Act is valid and within the legislative competence of the State Legislature. The Act seeks to impose a tax on amenities and services provided by hotel-keepers, which is distinct from a tax on income.

2. Competence of the State Legislature:
The petitioners argued that the tax imposed by the Act is essentially a tax on income, which only Parliament can levy under Entry 82 of List I of the Seventh Schedule to the Constitution of India. The court rejected this argument, stating that the tax is on amenities and services and not on income. It was held that the State Legislature has the power to impose such a tax under Section 5 of the Constitution of Jammu and Kashmir, which extends the State's legislative power to all matters except those with respect to which Parliament has the power to make laws for the State under the Constitution of India.

3. Nature of the Tax:
The court clarified that the tax is not on the gross income of the hotel-keeper but on the amenities and services provided to customers. The tax is calculated based on the tariff, which is a measure to quantify the tax payable. The court cited previous judgments to support the view that a tax's measure does not determine its nature. The tax is on the provision of amenities and services, not on the income derived from them.

4. Alleged Double Taxation:
The petitioners contended that the Act resulted in double taxation, as the same subject matter was taxed under both the Jammu and Kashmir General Sales Tax Act, 1962, and the impugned Act. The court dismissed this argument, noting that the Government had issued a notification (SRO No. 490 dated 17th September 1980) exempting amenities and services from sales tax under the 1962 Act if they were already taxed under the impugned Act. This exemption eliminated the possibility of double taxation.

5. Alleged Violation of Article 19(1)(g):
The petitioners argued that the tax imposed unreasonable restrictions on their right to carry on trade and business. The court rejected this contention, stating that the tax is not confiscatory and does not impose unreasonable restrictions. The court emphasized that the tax's incidence falls on the customer, and the hotel-keeper is merely a conduit for its collection. Provisions aimed at preventing tax evasion do not constitute unreasonable restrictions.

6. Alleged Violation of Article 14:
The petitioners claimed that the Act discriminated against them by exempting certain classes of hotels, such as those run by educational, charitable, and religious institutions, as well as guest houses maintained by the Government and nationalized banks. The court held that this classification is reasonable and based on a rational differentia related to the Act's objective. The exempted entities operate on a no-profit basis and serve different purposes compared to commercial hotels. The classification was deemed valid and not violative of Article 14.

Conclusion:
The court upheld the constitutional validity of the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980, dismissing the writ petitions with costs. The Act was found to be within the legislative competence of the State Legislature, not violative of Articles 14 and 19(1)(g) of the Constitution, and not resulting in double taxation due to the exemption provided by the Government notification.

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