2012 (7) TMI 1086 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Deletion of "Three Star" hotels from eligibility for bar licenses.
2. Introduction of distance restrictions for new bar licenses to four-star and above hotels.
3. Allegations of arbitrariness, discrimination, and violation of Article 14 of the Constitution.
4. Impact on tourism promotion and the State's liquor policy.

Summary:

Issue 1: Deletion of "Three Star" Hotels from Eligibility for Bar Licenses

The appellants/petitioners, who are star hotels with categorization above "Three Star," challenged the amendment introduced by SRO No. 779/2011 dated 09/12/2011, which deleted "Three Star" from the category of hotels entitled to bar licenses under Rule 13(3) of the Foreign Liquor Rules. They argued that this amendment was arbitrary, discriminatory, and violative of Article 14 of the Constitution, and against the objective of tourism promotion.

The court found that the primary objective of Rule 13(3) is to promote tourism by granting bar licenses to star hotels, which are major players in the tourism industry. The deletion of "Three Star" hotels from eligibility for bar licenses does not achieve the objective of reducing alcohol consumption and undermines the promotion of tourism. The court held that the amendment was discriminatory and violative of Article 14, and declared it unconstitutional.

Issue 2: Introduction of Distance Restrictions for New Bar Licenses to Four-Star and Above Hotels

The appellants/petitioners also challenged the introduction of sub-rule (3E) to Rule 13 by SRO No. 202/2012 dated 27-03-2012, which prohibited the grant of new FL-3 licenses to hotels within a radius of 3 Kms in Grama Panchayats and 1 Km in Municipal/Corporation limits from another hotel/restaurant with an FL-3 license. They argued that this amendment was arbitrary, discriminatory, and violative of Article 14.

The court found that the distance rule introduced by sub-rule (3E) was arbitrary and created a monopoly for existing hotels, preventing the construction of new hotels in major tourism centers. The court held that this amendment was discriminatory and violative of Article 14, and declared it unconstitutional.

Issue 3: Allegations of Arbitrariness, Discrimination, and Violation of Article 14 of the Constitution

The court considered the appellants/petitioners' allegations of arbitrariness, discrimination, and violation of Article 14. It noted that the amendments discriminated between existing hotels with bar licenses and new hotels seeking licenses, without any rational basis. The court held that the amendments were arbitrary, discriminatory, and violative of Article 14 of the Constitution.

Issue 4: Impact on Tourism Promotion and the State's Liquor Policy

The court examined the impact of the amendments on tourism promotion and the State's liquor policy. It found that the amendments undermined the objective of promoting tourism by denying bar licenses to new three-star hotels and imposing distance restrictions on new four-star and above hotels. The court held that the amendments were inconsistent with the State's tourism policy and the objective of Rule 13(3).

Conclusion:

The court declared the deletion of "Three Star" hotels from Rule 13(3) by SRO No. 779/2011 and the introduction of sub-rule (3E) to Rule 13 by SRO No. 202/2012 as arbitrary, discriminatory, and violative of Article 14 of the Constitution. The court vacated the impugned orders and directed the respondents to consider and grant FL-3 licenses to all eligible hotels with three-star and above and heritage classification based on the unamended rules.