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TMI Blog1993 (7) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also in the State of Maharashtra. The concept of levy of sales tax on food served and supplied in hotel/restaurant existed even under the old Bombay Sales Tax Act, 1946. So far as, the levy of sales tax on the aforesaid basis under the said Act was as per entry 70 of Schedule "C" up to June 30, 1981. By an amendment to the said Act, Schedule "C" was amended on and from July 1, 1981 and the tax on food served in hotels and restaurants was levied under entry 22, which reads as follows: "22. Food and non-alcoholic drinks not being food or drinks to which entry 99 in this Schedule applies served at one time for consumption inside any eating house, restaurant, hotel, refreshment room or boarding establishment- (a) at a price of more than 5 rupees but not 8 paise in 8 paise in more than 30 rupees per person. the rupee. the rupee. (b) at a price of more than 30 rupees per 15 paise in 15 paise in person. the rupee. the rupee." We may mention that entry 99 in Part II of Schedule "C" covers food or drinks served or consumed in a hotel or restaurant or part thereof in any other place, where a cabaret floor or similar entertainment is provided. 4. By the Maharashtra Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." By section 6 of the Constitution (Forth-sixth Amendment) Act, 1982, which is a provision relating to validation and exemption, retrospective effect is given to the above constitutional amendment. The plain object of the above constitutional amendment was to remove retrospectively the existing defect of want of legislative competence on the part of the State Legislature to levy sales tax on supply of food-stuff, etc., in the hotel, restaurant, etc., and to validate such taxes and so also the recoveries of tax made thereunder. 6.. As a consequence of the above constitutional amendment, the Act was amended by the Maharashtra Act No. 24 of 1985 which received assent of the Governor on August 16, 1985. The term "sale" is redefined by adding an explanation which reads thus: "Explanation.-For the purposes of this clause, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax is without any rational basis and, therefore, the same is unconstitutional. According to Mr. Cooper, basing the tax rate on the total price of food and drinks served at a time would amount to taxing the amount of food and drinks consumed at a time and not taxing the sale of goods supposed to have been involved in the transaction. Mr. Cooper submits that fixing different rates of tax on the sale of goods, basing the rates upon the total sale price results in lesser the total price, lesser the rate, more the total price, higher the rate, which means that the tax rate is not on the sale of goods but on the total quantum of price, and as such there is no nexus with the sale of goods. Mr. Saraf, learned counsel for respondents Nos. 2 to 5, submits that the rate fixed under the said entry 22 is a graded rate depending upon the "sale price" of the food and other articles supplied and consumed by the patrons. Mr. Saraf further submits that the rate of tax prescribed under the aforesaid entries has a nexus with the "sale price" of food and drinks consumed and not with consumption. 9.. We are unable to accept the submissions advanced by Mr. Cooper. On reading old entry 22, it is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e city of Bombay. Mr. Cooper submits that the classification under the gradation of "three star" and above has no nexus to the object of the Act and, therefore, the same is liable to be declared as unconstitutional. In support of his submission, Mr. Cooper relied upon pricelists of three or four restaurants in the city of Bombay produced by the petitioner along with the affidavit-in-rejoinder. Mr. Cooper heavily relied upon the judgment of the Supreme Court in Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 73 STC 346. 11.. In our opinion, there is no arbitrariness or unreasonableness in the classification of hotels/restaurants having status of "three star" or above. These hotels are given "star" status by the Tourism and Civil Aviation Department having regard to the facilities available in such establishments. Such recognition entails several benefits. It is well-known that the tariff in hotels depends on its star status, it being higher for the higher star hotels. The object being to tax food sold at a higher tariff, the status of the hotel where it is sold is certainly relevant. The classification is made in the present case to bring within the tax net, hotels or eating ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or without any nexus with the object sought to be achieved by the enactment. In Federation of Hotel Restaurant Association of India v. Union of India [1989] 74 STC 102 the Supreme Court, while dealing with the similar objection to classification in a taxing statute, held as under: "............The State, in the exercise of its Governmental power, has, of necessity, to make laws operating differently in relation to different groups or class of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things. It is also recognised that no precise or set formulae or doctrinaire tests or precise scientific principles of exclusion or inclusion are to be applied. The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience." The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. So long as those within the tax net can be legitimately classified together enacting an intelligible differentia vis-a-vis those left out and the classification so made bears a rational nexus with the object sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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