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1991 (2) TMI 403 - SC - VAT and Sales TaxWhether Section 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 can be held to be ultra vires the Article 14 of the Constitution of India for failure to make required classification and for imposition of luxury tax on flat or fixed rate only on the basis of air-conditioned floor space? Held that - The Act requires the luxury tax to be in proportion of or proportional the air-conditioned space and it requires the tax to be uniform upon the same class of owners of airconditioned hotels and restaurants which means that all similarly situated owners shall be treated alike. It does not suffer from lack of classificaion but instead impliedly authorises it by leaving out non-air-conditioned hotels and restaurants. Equality and uniform policy means uniform and equal rates of assessment and taxation which has been followed in this tax. The concept of equality and uniformity has to adjust from time to time to new and advancing social and economic conditions and needs of public finance and fiscal policy, of course within constitutional limitations. Thus the measure or unit and the rate of taxation are uniform for all within the group subjected to tax. Further classification within the group was not considered necessary by the legislature which had wide latitude in the matter of classification keeping in view the nature of the taxable event. We accordingly hold that the luxury tax charged under s. 4 of the Act could not be said to be discriminatory, and consequently, the impugned notices also could not be said to be illegal or void. Appeal dismissed.
Issues Involved:
1. Constitutionality of the luxury tax under the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972. 2. Alleged discrimination under Article 14 of the Constitution of India due to the imposition of a flat rate of luxury tax. Issue-wise Detailed Analysis: 1. Constitutionality of the Luxury Tax: The appellants contended that the provisions of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972, and the rules framed thereunder were unconstitutional and void. They argued that the tax imposed under the Act was a property tax based on floor space rather than a tax on luxury items, thus exceeding the legislative powers of the state legislature under Entry 62 of List II of the Seventh Schedule of the Constitution of India. The Court referred to the Constitution Bench decision in Express Hotels Private Ltd. v. State of Gujarat and Anr., which concluded that the tax on air-conditioned floor space was within the legislative competence of the state. The Court held that the taxable event under Section 4 of the Act was the provision for air-conditioning in hotels and restaurants, irrespective of its utilization or the income derived therefrom. Therefore, the Act was not ultra vires the Constitution. 2. Alleged Discrimination under Article 14: The appellants argued that Section 4 of the Act imposed a flat rate of Rs. 100 per annum for every 10 square meters of air-conditioned floor space, irrespective of the locality, quality, standard, or size of the hotels and restaurants. They claimed that this uniform rate failed to recognize the inherent differences between various hotels and restaurants, resulting in discrimination under Article 14 of the Constitution. The Court examined the arguments and precedents cited by both parties. It was noted that the legislature has wide discretion in matters of classification for taxation purposes, and a tax need not be absolutely perfect in its classification. The Court held that the luxury tax was uniform for all within the group subjected to tax, and further classification within the group was not necessary. The measure of taxation based on air-conditioned floor space was deemed appropriate and not discriminatory. The Court also referred to several cases, including Kunnathat Thathunni Moopil Nair v. The State of Kerala, State of Kerala v. Haji K. Haji K. Kutty Naha & Ors., and Twyford Tea Co. Ltd. & Anr. v. The State of Kerala & Anr., to emphasize that a taxation law will be struck down as violative of Article 14 if there is no reasonable basis behind the classification made by it. However, in this case, the classification based on air-conditioned floor space was found to be reasonable and within the legislative competence. Conclusion: The Court concluded that the luxury tax under Section 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972, was not discriminatory and did not violate Article 14 of the Constitution. The appeal was dismissed with costs quantified at Rs. 5,000. Judgment: Appeal dismissed.
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