# • EXPRESS HOTELS PRIVATE LIMITED v. STATE OF GUJARAT & ANR

- **Citation:** [1989] 2 S.C.R. 893
- **Court:** Supreme Court of India
- **Decided:** 1989-05-02
- **Case number:** Civil Appeal Nos. 338 E F G H and 339 of 1981
- **Bench:** R.S. Pathak, Sabyasachi Mukharji, S. Natarajan, M.N. Venkatachaliah, S. Ranganathan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/express-hotels-private-limited-v-state-of-gujarat-anr-10494
- **Pages:** 25

## Headnote

Gujarat Tax on Luxuries (Hotels & Lodging Houses) Act, 1977/
Tamil Nadu Tax on Luxuries in Hotels & Lodging Hn11ses Acr. /C/81/
J:arnataka Tax on Luxuries (Hotels & Lodging Houses) Act, 1979/
West Bengal Entertainments and Luxuries (Hotels & Restaurants) Tax
Act, 1972: Tax on luxury provided in hotels, lodging houses and
restaurants-State Legislations-Competency of-Tax on means of
providing luxury-Permissibility of.
Constitution of India, 1950: Articles 246, 301 and Schedule V ll.
List II Entry 62: Tax on luxuries enjoyed in hotels, lodging houses and
restaurants-Validity of-Whether impedes freedom of trade.
Statutory Interpretation: Legislative entry-To be construed
widely and liberally to include ancillary and subsidiary matters.
Words and Phrases: 'Luxury'-Meaning and scope of.
Clause (a) of s. 2 of the Gujarat Tax on Luxuries (Hotels and
Lodging Houses) Act, 1977, defines "charges for lodging" .to include
charges for airconditioning, telephone, television, radio, music and
extra beds, and the like. The Explanation appended thereto makes the
decision of the State Government on any dispute in that behalf final.
Clause (e) defines 'luxury provided in a hotel' to mean accommodation
the charges for which, including charges for airconditioning etc. but
excluding charges for food and other amenities, .is not less than thirty
five rupees per person per day. Section 3 prescribes the rates of tax at
certain percentage of the lodging charges per person per day recovered
by proprietors of hotels and lodging houses from persons lodging
therein. Sub-section (3) of s. 4 provides that where luxury provided in a
hotel to any person, not being an employee of the hotel, is not charged
at all, or is charged at concessional rate, then also there shall be levied
and collected the tax on such luxury, as if full charges for such luxury
were paid to the proprietor of the hotel.
893
A
B
c
D
E
F
G
H
894
SUPREME COURT REPORTS
[1989] 2 S.C.R.
A
It was contended for the appellants that Entry 62 of List JI of ~
Schedule VII to the Constitution providing for taxes on luxuries contemplates and takes within its sweep a tax on.goods and articles in their
aspect and character as 'luxuries', which does not include services and
activities, the levy on the services for lodging provided at the hotels was,
B therefore, ultra vires the State power under the said entry; that the real
criterion distinguishing luxury being a special attribute or quality of the
commodity llr the services, as the case may be, and not the quantitative
difference in the price, the impost has no relation to the concept oi.
luxuries in the legislative entry; that the scheme of the Act in so far as it
makes no distinction between the components of the services, which
include both necessities and comforts, as distinguishable from luxuries,
C the levy on such composite subject matter was bad; that the expression
D
"and the like" in the definition of "charges for lodging" ins. 2(a) was
vague and irrational and read with the explanation thereto, which
renders the decision of the State Government on what constitutes
"lodging charges" final, was an unreasonable restriction, violative of
Article 19(l)(g), that s. 4(3), which provides that the luxury provided
free or at concessional rates be taxed as if the full charges were deemed
'f,'
to have been received was unreasonable and offends Article 19(I)(g),
and that the luxury tax imposed on the charges for lodging has the
direct and immediate effect of restricting the freedom under Article
30 I of the Constitution as it directly impedes the right of intercourse
•
E throughout the territories of India.
Similar contentions were raised in the writ petitions'challenging
the analogous provisions of the Tamil Nadu Tax on Luxuries in Hotels
and Lodging Houses Act, 1981 and the Karnataka Tax on Luxuries
(Hotels and Lodging Houses) Act, 1979.
F
In the writ petition challenging s. 4 of the West Bengal Entertain-
~
ments and Luxuries (Hotels and Restaurants) T

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•
EXPRESS HOTELS PRIVATE LIMITED
v.
STATE OF GUJARAT & ANR.
MAY 2, 1989
[R.S. PATHAK, CJ, SABYASACHI MUKHARJI,
S. NATARAJAN, M.N. VENKATACHALIAH AND
S. RANGANATHAN, JJ.)
Gujarat Tax on Luxuries (Hotels & Lodging Houses) Act, 1977/
Tamil Nadu Tax on Luxuries in Hotels & Lodging Hn11ses Acr. /C/81/
J:arnataka Tax on Luxuries (Hotels & Lodging Houses) Act, 1979/
West Bengal Entertainments and Luxuries (Hotels & Restaurants) Tax
Act, 1972: Tax on luxury provided in hotels, lodging houses and
restaurants-State Legislations-Competency of-Tax on means of
providing luxury-Permissibility of.
Constitution of India, 1950: Articles 246, 301 and Schedule V ll.
List II Entry 62: Tax on luxuries enjoyed in hotels, lodging houses and
restaurants-Validity of-Whether impedes freedom of trade.
Statutory Interpretation: Legislative entry-To be construed
widely and liberally to include ancillary and subsidiary matters.
Words and Phrases: 'Luxury'-Meaning and scope of.
Clause (a) of s. 2 of the Gujarat Tax on Luxuries (Hotels and
Lodging Houses) Act, 1977, defines "charges for lodging" .to include
charges for airconditioning, telephone, television, radio, music and
extra beds, and the like. The Explanation appended thereto makes the
decision of the State Government on any dispute in that behalf final.
Clause (e) defines 'luxury provided in a hotel' to mean accommodation
the charges for which, including charges for airconditioning etc. but
excluding charges for food and other amenities, .is not less than thirty
five rupees per person per day. Section 3 prescribes the rates of tax at
certain percentage of the lodging charges per person per day recovered
by proprietors of hotels and lodging houses from persons lodging
therein. Sub-section (3) of s. 4 provides that where luxury provided in a
hotel to any person, not being an employee of the hotel, is not charged
at all, or is charged at concessional rate, then also there shall be levied
and collected the tax on such luxury, as if full charges for such luxury
were paid to the proprietor of the hotel.
893
A
B
c
D
E
F
G
H
894
SUPREME COURT REPORTS
[1989] 2 S.C.R.
A
It was contended for the appellants that Entry 62 of List JI of ~
Schedule VII to the Constitution providing for taxes on luxuries contemplates and takes within its sweep a tax on.goods and articles in their
aspect and character as 'luxuries', which does not include services and
activities, the levy on the services for lodging provided at the hotels was,
B therefore, ultra vires the State power under the said entry; that the real
criterion distinguishing luxury being a special attribute or quality of the
commodity llr the services, as the case may be, and not the quantitative
difference in the price, the impost has no relation to the concept oi.
luxuries in the legislative entry; that the scheme of the Act in so far as it
makes no distinction between the components of the services, which
include both necessities and comforts, as distinguishable from luxuries,
C the levy on such composite subject matter was bad; that the expression
D
"and the like" in the definition of "charges for lodging" ins. 2(a) was
vague and irrational and read with the explanation thereto, which
renders the decision of the State Government on what constitutes
"lodging charges" final, was an unreasonable restriction, violative of
Article 19(l)(g), that s. 4(3), which provides that the luxury provided
free or at concessional rates be taxed as if the full charges were deemed
'f,'
to have been received was unreasonable and offends Article 19(I)(g),
and that the luxury tax imposed on the charges for lodging has the
direct and immediate effect of restricting the freedom under Article
30 I of the Constitution as it directly impedes the right of intercourse
•
E throughout the territories of India.
Similar contentions were raised in the writ petitions'challenging
the analogous provisions of the Tamil Nadu Tax on Luxuries in Hotels
and Lodging Houses Act, 1981 and the Karnataka Tax on Luxuries
(Hotels and Lodging Houses) Act, 1979.
F
In the writ petition challenging s. 4 of the West Bengal Entertain-
~
ments and Luxuries (Hotels and Restaurants) Tax Act, 1972 which fixes ..
the liability to pay tax on the proprietor of the hotel and restaurant on
the basis of the floor area as well, it was contended that the means of
providing luxury by itself does not provide the nexus between the taxing
power and the subject of tax, and that the power to levy a tax on the
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mere existence of the provision for luxury without its actual and not
•
merely a notional or potential consumption or utilisation was beyond
the scope of the legislative entry and also violative of the fundamental
right under Article 19(l)(g).
H
Dismissing the appeals and writ petitions,
EXPRESS HOTELS v. STATE OF GUJARAT
89)
.....
j
HELD: I.I The entries in the Legislative List should not be read
A
in a narrow or pedantic sense but must be given their fullest meaning
and the widest amplitude and be held to extend to all ancillary and
subsidiary matters which can fairly and reasonably be said to be comprehended in them. [906F]
•
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1.2 So read, the concept of a tax on 'luxuries' in Enlry 62, List II
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~annot be limited merely to tax things tangible and corporeal in their
aspect as 'luxuries'. The entry encompasses all the manifestations or
emanations, the notion of 'luxuries' can fairly and reasonably be said to
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comprehend. The element of extravagance or indulgence that differenl
tiates 'luxury' from 'necessity' cannot be confined to goods and articles.
'
It can also be found in the quality of services and activities. An c
"" )"
airconditioned space, whether in a hotel or in a restaurant, is a luxury
by itself. People enter into these spaces with a view to enjoy, amuse or
entertain themselves. [908CE, 906C]
A.B. Abdul Kadir & Ors. v. State of Kera/a, [1976] 2 SCR 690;
(
Western India Theatres Ltd. v. The Cantonment Board. Poona CantonD
ment, [19591 2 Supp. SCR 63 and State of Bomhay v. R.M.D.
Chamarbaugwalia, [1957] SCR 874, referred to.
. ! .
Spences Hotel Private Ltd. & Anr. v. State of West Bengai, [1975]
TLR 1890, approved.
A.S. Bava v. State of Kera/a, [1971] T.L.R. 512, overruled.
2.1 The ideas of luxury or necessity are necessarily relative ideas
and require to be understood in the context of contemporary standards
of living. What might have been a luxury some decades ago might cease
to partake of that character now. What is luxury today might be considered a necessity a decade or so later. A number of factors have to be
taken into account in adjudging a luxury.: [91 IH, 912C]
A:B. Abdul Kadir & Ors. v. State of Kera/a, [1976] 2 SCR 690,
referred to.
2.2 In the instant case, 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
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of the price. Quality and price, in the legislative assessment can thus be
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896
SUPREME COURT REPORTS
[1989] 2 S.C.R.
assumed to have a logical interrelationship. This cannot be held to
suffer from the vice of irrationality. [912DE]
2.3 In the context of lodging accommodation and the services
that go with it, the concept of luxury would necessarily be a comprehensive idea taking into account the various components of the services.
Differences of degree can at particular stage become differences of
kind. The composite elements of lodging accommodation and services~
associated with it cannot be broken i.1to components so as to distinguish '
some components as necessities, some others as comforts and yet others
as luxuries. Even necessities and comforts which have to them the
additional element of undue elegance to a point of extravagance and
indulgence might become luxuries. [912G-913A]
It cannot, therefore, be said that there is nothing in the law which
identifies or distinguishes luxury on the basis of any special attribute
apart from the price factor. [913B]
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3. I The mere absence of a corrective machinery by way of appeal
E
or revision, to rectify an adverse order made by an authority on whom
power is conferred or the existence of a provision imparting finality in a
statute by themselves would not be conclusive so as to render the con1
ferment of power per-se unreasonable and arbitrary rendering the
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provision unconstitutional. [913F]
Babu Bhai v. State of Gujarat, [1985] 2 SCC 732, referred to.
Corporation of Calcutta v. Calcutta Tramways Co., [1964] 5 SCR
25, cjistinguished.
>
F
3.2 In the instant case, there are in-built checks on the power
under Explanation to s. 2(a). The expression "and the like" occurring
,,...
in the section when construed ejusdem generis indicates that the class of f- \...
items envisaged by the precedicg words was not exhaustive of the
genus. The Legislature, therefore, has supplied these words so as to
bring in any other item of the same class of genus. This, by itself, is
G a clear guide for the exercise of the power. [914B]
·+.-
3.3 Another relevant consideration is the identity and status of
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the repository of the power. The power in the instant case is given to a
high authority like the State Government. It cannot, therefore, be said
that the power is an uncanalised power and is an arbitrary or unreasonH able one so as to fall under Article 19(1)(g). There are statutory guides.
EXPRESS HOTELS "· STATE OF GUJARAT
897
).governing its exercise and the guidelines are covered by well-settled
principles of interpretation. [914C]
4. The deeming provision in s. 4(3) of the Act does not apply to
cases where accommodation is provided free or at concessional rates to
the employees of the hotel. This provision, which merely states that
,>{. where the usual lodging charges are not collected for providing the
.1"1ging accommodation, tax shall he payable as if the usual charges had
been collected is a provision against evasion. It cannot, therefore, be
s;iid to he unreasonable. [914EF]
5.1 Freedom under Article 301 is a great freedom, one of the
utmost significance to economic unity of the nation. However, taxes can
)' and do sometimes constitute restrictions on the said freedom. But such
restrictions must stem from the provisions of the law imposing the tax
which could he said to have a direct and immediate effect of restricting
the free flow of trade, commerce and intercourse. [916F, E]
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5.2 In the instant case, it has not been shown how a tax on
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luxuries enjoyed by a person in a hotel was either discriminatory or has
the direct and immediate effect of impeding the freedom of intercourse.
J. It cannot thus he said to offend Article 301 of the Constitution. [916G]
Atiabari Tea Co. v. State of Assam, [1961] I SCR 809; Firm
A. T.B. Mehtab Majid & Co. v. State of Madras, [1963] Supp. 2 SC~ E
435; Gratwick v. Johnson, [1945] 70 CLR I; Baldwin v. GAF Inc.,
[1934] US 511 and Grannallv. Marrickville Margarine Pty. Ltd., [1955]
93 CLR 55, referred to .
.J.
6.1 Section 4 of the West Bengal Act cannot he said to be beyond
~
the legislative entry. The taxable event need not necessarily be the
p
~actual utilisation or the actual consumption, as the case may be, of the
·luxury. So long as the legislation has reasonable nexus with the concept
of ''luxuries" in the broad and general sense in which the expressions in
legislative tests are comprehended, the legislative competence extends
to all matters with respect to that field of topic of legislation. In the
~ instant case, provision for 'luxury' in a hotel or restaurant amenable to
G
a potential consumption does provide the nexus. [909C, 910F, E, HJ
Bhagwan Dass Jain v. Union of India, AIR 1981 SC 907, referred
to.
Ramesh Waman Toke & Ors. v. The State of Maharashtra, AIR
H
1984 Bombay 345, overruled.
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SUPREME COURT REPORTS
[1989] 2 S.C.R.
6.2 If the provider of the luxury is also independently amenable ~
to the tax, the further restriction on the power would tend to cut into
the plenitude of the field of legislation. If the idea of 'luxuries' is
required to be .so wide as to comprehend in it every aspect which can
fairly and reasonably be said to be embraced by it, then the said taxing
power under the Entry cannot be limited or conditioned in any manner
whatsoever. [911A)
>'--•
6.3 Once the legislative competence and the nexus between the
taxing power and the subject of taxation is established the other incidents are matters of fiscal policy behind the taxing law. The actual
measure of the tax, which is a matter of legislative policy and convenience, is not the same thing as, and must be kept distinguished from, the
subject of the tax. [9118)
-('
6.4 The mere excessiveness of a tax or the fact that it affects the
earnings cannot pre-se be held to violate Article 19(l)(g). [911C]
D
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 338
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and 339 of 1981.
From the Judgment and Order dated 23.7.1980 of the Gujarat A
High Court in S.C.A. Nos. 405 of 1979 and 1263 of 1978.
Soli J. Sorabjee, N .A. Palkhiwala, Lalit Bhasin, Bina Gupta,
S.S. Shroff, Mrs. P .S. Shroff, Ms. Malvika Rajkatia, R.F. Nariman,
P.H. Parekh, San jay Bhartari, M.K.S. Menon, R.K. Dhillon, Ms.
Rohini Chhabra, Ms. Sunita Sharma, Ms. Ayesha Misra, Harish N.
Salve and Mukul Mudgal for the Appellants.
K. Parasaran, Attorney General B. Datta, Additional Solicitor ._,,.
General P.S. Poti, G.A. Shah, Dr. V. Gauri Shankar, S.K. Dholakia, ,-
V. Jagannatha Rao, K. Sudhakaran, Ms. A. Subhashini, B.B. Ahuja,
H.K. Puri, A. Subba Rao, A.S. Bhasme, K.R. Nambiar, M.N. Shroff,
M. Veerappa, R. Mohan, R. Ayyamperumal and J.P. Misra for the
Respondents.
The Judgment of the court was delivered by
VENKATACHALIAH, J. In these civil appeals and writ petitions the constitutional validity of legislations of different States viz.,
State of Gujarat, State of Tamil Nadu, State of Karnataka and State of
West Bengal, imposing a tax on '.luxuries' under Entry 62 of List II of
VII Schedule to the Constitution of India is challenged.
EXPRESS HOTELS 1·. STATE OF GUJARAT [VENKATACHAL!AH. J.]
899
;J
Civil Appeal Nos. 338 and 339 of 1981, writ-petition NC!s. 7990,
A
9119, 8338, 8339 of 1981 relate to the challenge to the legislation
of the State of Gujarat viz., the Gujarat Tax on Luxuries (Hotels &
Lodging Houses) Act, 1977. Writ Petition No. 162 of 1982 pertains to
the corresponding legislation cf the State of Tamil Nadu viz., Tamil
Nadu Tax on Luxuries in Hotels & Lodging Houses Act, 1981. Writ
petition Nos. 1271 and 1272 of 1982 pertain to the challenge to
B
~ corresponding Karnataka Legislation viz., the Karnataka Tax on
I~xuries (Hotels and Lodging Houses) Act, 1979. W.P. No. 5321 of
1985 pertains to the challenge to West Bengal Entertainments and
Luxuries (Hotels and Restaurants) Tax Act, 1972. All these taxing-
-
statutes, except for certain aspects individual to them, are analogous
and the scheme of the legislation is substantially similar. The variations are in the differences in the criteria of classification of the hotels C
•
i
)- to which the Act is applied and the rates of taxes. The grounds of
challenge are substantially the same. An examination of the contentions urged in support of the challenge to one statute would cover the
cases of the other statutes as well.
2. We might take up for consideration, the provision; of the
Gujarat Act which may be considered as representative of the legislations on the topic. The constitutional validity of the Gujarat Act had
been assailed before the High Court of Gujarat, which by its judgment
dated 23.7.1980 upheld its constitutional validity. The judgment of the
High Court is under appeal in C.A. Nos. 338 and 339 of 1981.
3. The statement of objects and reasons in the Gujarat Legislative Bill states:
"With a view to augmenting the financial resources of
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the State it is proposed to levy a tax on luxury provided in F
hotels and lodging houses at the rate of certain percentages
of lodging charges recovered by the proprietors of such
hotels and lodging houses from persons lodging therein.
Every accommodation provided in a hotel or .lodging house
the charges for which are not less than rupees thirty-five
per day per person is, for the purposes of the tax, to be G
treated as a luxury. This bill seeks to achieve that object."
Section 2 is the interpretation clause and defines, inter a/ia, the
expressions Bcharges for lodging", "hotel", "luxury provided in
hotel", "proprietor" occurring in clauses (a) (d) (e) and (g) respectively.
The definitions are as follows:
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SUPREME COURT REPORTS
[1989] 2 S.C.R.
"(a) "charges for lodging" include charges for aircondi- ~
tioning, telephone, television, radio, music and extra"
beds and the like but do not include any charges for
food, drink or other amenities.
(d) "hotel" means a building or part of a building where
lodging accommodation, with or without board is, by
way of business provided for a monetary considera- )•<
tion, and includes a lodging house;
...
( e) " luxury provided in a hotel " means accommodation
for lodging provided in a hotel, the rate of charges for
-
which (including charges for airconditioning, telephone, television, radio, music, or extra beds and the
like but excluding charges for food, drink and other '{
amenities) is not less than thirty five rupees per person
per day."
D
Section 3 is the charging section which provides:
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"3. (1) Subject to the provisions of this Act, with effect on
and from the date on which this Act comes into force, there
shall be levied and collected from every person a tax (to be
known as "luxury tax") in respect of any luxury provided to
him in a hotel, at the following rates, namely:
(a) Where the charges for
lodging are thirty five
rupees or more but not
more than fifty rupees per
day per person.
10 per cent "of such charges.
r
(b) Where the charges for
lodging are more than
fifty rupees but not more
than one hundred rupees
per day per person.
Rs.5 plus 20 per cent of
such charges in excess of ...
Rs.SO per person per day.
( c) Where the charges for
lodging are more than one
hundred rupees per day
per person.
Rs.15 plus 30 per cent of
such charges in excess of
Rs.100 per person per day:
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J.I
901
-i
Provided that where charges for lodging are levied .A
otherwise than on daily basis or person, then, for the
purpose of determining the tax liability of any person under
this section, the charges shall be computed as for a day and
per person, based on the period of lodging for which
charges are payable and the number of persons actually
lodging or permitted to lodge according to the rule or
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custo.m of the hotel:
•
Provided further that where any charges for lodging
are.paid by any person other than a citizen of India in any
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foreign exchange, then such person or where such charges
are paid by any person or class of persons as the State c
Government may, by order, direct such as foreigners staying as guests in India of any Government or of any Corporation or Company owned or controlled by Government,
or such other person as in the opinion of the State Government it is expedient in the public interest to exempt, then
such person or persons shall be exempt from the payment
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of the tax.
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(2) Where luxury is provided in a hotel to representatives
or employees of any company and charges for such luxury
are to be borne by the company, there shall be levied and
collected the tax from such company.
E
Explanation: In this sub-section "Company" means any
body corporate and includes a firm or other association of
persons.
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(3) The tax payable under this section shall be collected by
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the proprietor and be paid into a Government treasury
••
within the time and in the manner provided in the Act .
( 4) In computing the amount of tax payable under this
section, the amount shall, if it is not a multiple of five paise,
be increased to the next higher multiple of five paise."
G
Section 4 provides for the mode of collecting of tax. It provides:
"4. (1) Where the rate of charges for luxury provided in a
hotel is inclusive of the charges for food or drink or other
amenities, if any (being amenities referred to in clause (e)
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902
SUPREME COURT REPORTS
[ 1989] 2 S.C.R.
of section (2)), then the Collector may, from time to time, ~
after giving the proprietor an opportunity of being heard,
fix separate rates of charges for such luxury and for food or
drink or other amenities, if any, being amenities referred to
in clause ( e) of section 2 for the purpose of calculating the
tax under this Act.
(2) Where, in addition to the charges for luxury provided
K
in a hotel, service charges are levied and appropriated t°'.
the proprietor and not paid to the staff, then, such charges
shall be deemed to be part of the charges for luxury provided in the hotel.
:...
(3) Where luxury provided in a hotel to any person (not
being an employee of the hotel) is not charged at all, or is
-{
charged at a concessional rate, then also there shall be
levied and collected the tax on such luxury, as if full
charges for such luxury were paid to the proprietor of the
hotel.
( 4) Where luxury provided in a hotel for a specified
number of persons is shared by more than the number
specified, then, in addition to the tax paid for luxury pro-
~
vided to the specified number of persons, there shall be
levied and collected separately, the tax in respect of the
charge made for the extra persons accommodated.
(5) Where any proprietor fails or neglects to collect the tax
payable under this Act, the tax shall be paid by the
proprietor as if the tax was recovered by the proprietor
from the person to whom the luxury was provided and who
-k
was accordingly liable to pay the same."
Section 5, 6, 7, 8, 9, and 10, respectively refer to the returns to be filed •
by every proprietor liable to pay tax under the Act; the assessment and
collection of tax; the imposition of penalty; the payment of tax and
penalty; appeals and revision.
Sections 13 and 14 speak of offences and offences by companies.
Sec. 15 pertains to the compounding of offences. Sec. 17 confers power
of inspection of accounts and documents and of search and seizure.
Sec. 21 confers the power to make Rules.
...
EXPRESS HOTELS v. STATE "OF GUJARAT I VEN KA TACHALIAH, J. I
903
4. The Gujarat Act seeks to levy a tax at certain percentages of
the lodging charges recovered by the proprietors of the hotels and
lodging houses from persons lodging therein treating the lodgingaccommodation for which charges of Rs.35 or more per day per person
as a taxable luxury. The scheme of the West Bengal Act is slightly
different in regard to the scope of the charge to be given effect to
under that 'Act'. The levy there is not confined to the lodging charges
'recovered from persons lodging in the hotels, but on the basis of the
·provision for luxury and not, as in the case of the other legislation, as
the lodging-charges actually paid by the lodgers. Section 4 of the West
Bengal Act provides:
"4. Liability for luxury tax. There shall be charged, levied
and paid to the State Government a luxury tax by the
proprietor of every hotel and restaurant in which there is
provision for luxury and such tax shall be calculatedA
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c
(a) in the case of a restaurant at the rate of an annual
sum of rupees three hundred for every ten square
D
metres or part thereof in respect of so much of
the floor area of restaurant which is provided
with luxury, and
(b) in the case of a hotel at such rate not exceeding
fifteen per centum on the daily charges of a room
E
provided with luxury as may be notified by the
State Government in the Official Gazette."
One of the contentions, which is peculiar to the West Bengal Act is
that the impost on the mere possibility of enjoyment of a 'luxury'
cannot be taxed.
F
5. We have heard Shri Soli J. Sorabjee, Senior Advocate, Shri
R.F. Nariman, Shri Harish Salve, Advocates for petitioners and Shri
P .S. Poli, and Shri Shah, learned Senior Advocates, for the respondents.
On the contentions urged at the hearing in support of the
challenge, the following points arise for consideration:
.(a) The Taxation-Entry 62 of List II providing for taxes
G
on "luxuries" contemplates., -and takes within its sweep, a tax on
goods and articles in their aspect and character as luxuries and
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SUPREME COURT REPORTS
[1989] 2 S.C.R.
dose 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.
(b) Section 4 of the West Bengal Act which envisages a tax
on the mere existence of the means of providing the luxuryindependently of its utilisation-is outside 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 in so far 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.
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(e) The expression 'and the like' in the definition of
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"charges for lodging" in sec. 2(a) is vague and irrational and read
with the explanation, which renders the decision of the State
Government on what constitutes "lodging-charges" final, is an
unreasonable restriction, violative of Article 19(1)(g).
(f) Sec. 4(3) which provides that tax in respect of accomtnodation provided free or at concessional rates be taxed as if the
full charges were deemed to have been received, is unreasonable
and offends Article 19( l)(g).
(g) The "luxury" tax imposed on the charges for lodgings
has the direct and immediate effect of restricting the freedom
under Article 301 of the Constitution as it directly impedes the
right of "intercourse" through out the territories of India.
5. Re: Contention (a)
H
The arguments of learned counsel on the first three contentions
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J.]
905
f require to be considered together as these contentions themselves
have certain over-lapping areas amongst them, Basically, the question
A
is as to what constitutes 'luxuries' as the subject of a tax under Entry
62, List II, and secondly, whether providing of accommodation for
lodging in hotels or lodging-houses, even if the accommodation
could be said to be 'luxuries' in a colloquial sense, could be the subject
,>,
of a tax under Entry 62 of List II. Shri Sorabjee contended that the
B
-~concept of a tax on 'luxuries' contemplates a tax on articles and goods,
like jewellery, perfumes, liquors, tobacco etc., in their character and
attribute as articles of luxury. The idea, it is urged, does not include
services or activities as falling within the concept of luxuries as a subject of taxation. The Gujarat High Court dealing with this cont,ention
held that the contention, if accepted, would diminish the content of c
the Entry and reduce its scope from "taxes on luxuries" to "taxes on
)'
articles of luxuries". Shri Sorabjee, however, submitted that the High
Court was in error in its understanding of the import of the concept of
'luxuries' in Entry 62 as a subject of tax. The learned counsel also
referred to the following observations of the High Court of Bombay in
State of Bombay v. R.M.D. Chamarbaugwalia & Ors., AIR 1956Bom.
D
1 at page 11:
I
"With regard to luxuries it is significant to note that the
~
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plural and not the singu_lar is used, and the luxuries in
respect of which a tax can be imposed under entry 62 is a tax
~m goods or articles which constitute luxuries, and it is again
E
significant to note that the topic of luxuries, only is to be
found in entry 62 in the taxation power and not in either
entry 33 or 34. That clearly shows that, what was contemplated was a tax on certain articles or goods constituting
),_
luxuries and not legislation controlling an activity which
may not be a necessary activity but may be necessary and in F
~
that sense a luxury."
(Emphasis supplied)
It is to be noticed that the decision of the Bombay High Court in
which the above observation occurs was over-ruled by this Court in
--'
State of Bombay v. R.M.D. Chamarbaugwalia, [1957] SCR 874. The G
impugned State Legislation which the High Court had struck down was
held to be a valid piece of legislation under Entry 62, List II. In the
light of the decision of \his Court in the case, the observations of the
learned Chief Justice of the Bombay High Court excerpted are rendered inapposite. Indeed, a view similar to the one taken by the
Bombay High Court as to the concept of 'luxuries' in Entry 62 of List
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SUPREME COURT REPORTS
[1989] 2 S.C.R.
II was taken by the Kerala High Court in A.S. Bava v. State of Kera/a, *
[1971] Tax L.R. 512. However, the views of the Bombay and Kerala
High Courts were referred to and dissented from by the Calcutta High
Court.
In Spences Hotel Private Ltd. and another v. State of West
Bengal, [1975] TLR 1890 at 1892 it is held:
)<._
"In these premises, we are of opinion that 'luxuries' 1
in Entry 62 of List II should not be confined to articles or
objects of luxury alone. In view of the social and economic
structure of our country there can be no doubt that an
air-conditioned space whether in a hotel or in a restaurant
is a luxury by itself. People enter into these spaces for
enjoyment of a luxury. In fact, the ambit of Entry 62 which
i
includes taxes on entertainments_, amusements, betting and
gambling, shows that a tax levied under Entry 62 cannot be
restricted to certain articles only but may also be extended
to things incorporeal. The comfort that a person derives in
a hot summer day in an airconditioned space is a luxury
particularly in the context of the conditions in which the
masses live in India today. In our opinion, the State legisla_,l
ture is competent to impose a tax on this luxury."
For reasons we shall state presently, we approve the view taken by the
Calcutta High Court.
6. We are dealing with an Entry in a Legislative List. The entries
should not be read in a narrow or pedantic sense but must be given
their fullest meaning and the widest amplitude and be held to extend to
-"'-
all ancillary and subsidiary matters which can fairly and reasonably be
said to be comprehended in them.
~
In the Western India Theatres Ltd. v. The Cantonment Board,
Poona Cantonment, [1959] 2 Supp. SCR 63, this court was dealing with
the scope of the power of the Provincial Legi~lature under Sec. 100 of
the Govt. of India Act, 1935, with respect to Entry 50 in Schedule VII
~
of the said Act, to make laws with respect to "taxes on luxuries including taxes on entertainments, amusements, betting and gambling". The
contention of the appellant in that case was that the entry authorised a
law imposing taxes on persons who received or enjoyed the luxuries
etc. and that no law made with respect to that Entry could impose a tax
on persons who provide the luxuries, entertainment or amusements. It
-
!
..
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH,J.J
907
.Jwas contended that those who provide the luxury·etc., did not themselves receive or enjoy the luxury or entertainment or amusement, but
were simply carrying on their profession or trade and were not amenable to be taxed under that Entry. Rejecting the argument it was said:
" ..... In view of this well established rule of interpretation, there can be no reason to construe the words 'taxes on
luxuries or entertainments or amusements' in entry 50 as
having a restricted meaning so as to confine the operation of
the law to be made thereunder only to taxes. on persons
receiving the luxuries, entertainments, or amusements. The
entry contemplates luxuries, entertainments, and amuse-
·ments as objects on which the tax is to be imposed. If the
words are to be so regarded, as we think they must, there
can be no reason to differentiate between the giver and the
receiver of the luxuries, entertainments, or amusements
and both may, with equal propriety, be made amenable to
the tax ..... "
A
B
c
(Emphasis supplied)
D
The concept of ;luxuries' as a subject of tax was not confined to those
who received or enjoyed the luxury. It could be on.those who provided
it.
. In Encyclopaedia Britannica the meaning of' the word 'luxuryE
tax' is set-out thus:
"Luxury tax: A tax on commodities or services that are
considered to be luxuries rather than necessities. Modern .
· examples are taxes levied on the purchase of jewelry,
perfume and tobacco."
F
•
In Webster's Comprehensive Dictionary, International Edition,
the word 'luxury' is defined:
"Luxury : 1. A free iQdulgence in the pleasures that gratify
the senses. 2. Anything that ministers to comfort or pleaG
sure that is expensive or rare, but is not necessary to life,
health subsistence, etc; a delicacy."
Luxury connotes extravagance or indulgence, as distinguished
from the needs and necessities of life.
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'The New Dictionary of Thoughts' has these thoughtful things to
say of "luxury":
"On the soft bed of luxury most kingdoms have
expired.-Young.
Unless we are accustomed to them from early youth,
splendid chambers and elegant furniture had best be left to
"'-
people who neither have nor can have any· thoughts.~
Goethe."
"War destroys men, but luxury destroys mankind at
once, corrupts the body and the mind."-Crown.
The concept of a tax on 'luxuries' in Entry 62, List II cannot be •f
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,
D
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 be
said to comprehend. The element of extravagance or indulgence that ,..l
differentiates 'luxury' from 'necessity' can not be confined to goods
E
and articles. There can be elements of extravagance or indulgence in
the quality of services and activities.
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G
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In A.B. Abdul Kadir & Ors. v. State of Kera/a, [1976] 2 SCR 690
at 699-700 Khanna J. said:
" .... The word "luxury" in the above context has not been
used in the sense of something pertaining to the exclusive
preserve of the rich. The fact that the use of an article is '
popular among the poor sections of the population would
not detract from its description or nature of being an article
of luxury. The connotation of the word "luxury" is something which conduces enjoyment over and above the necessaries of life. It denotes something which is superfluous and
not indispensable and to which we take with a view to
enjoy, amuse ·or entertain ourselves. An expenditure on
something which is in excess of what is required for
economic and personal well-being would be expenditure on
luxury although the expenditure may be of a nature which
)
EXPRES~HOTELS" STATEOFGUJARAJ[VENKATACHALIAH,JJ
909
is incurred by a large nurn~er of people, including those not
economically well-off .. i . "
A
)
The submission of Shri Sorabjee, '_if accepted, will unduly restrict the
scope of the legislative-Entry whic. should otherwise have the widest
l.
and the most-liberal meaning and c nnotation given to it. Contention
~
(a), in our opinion, is unacceptable.
)8. Re: Contention (b):
B
This contention pertains to a p ovisiori particular to the West
Bengal legislation. It is urged that in s far as Section 4 of the West
Bengal Act envisages a tax on the mere existence of the provision for
the luxury and is levied even if the luxur is not utilised by any person, C
•·
it was beyond the scope of the legislative entry. It was submitted that
there must be both a giving and receiving of the luxury and that a tax
on the mere existence of the means of pro :vi ding the luxury would be
insufficient to support a law imposing a tax thereon. It would, in any
event,·it is urged, constitute an unreasonable restriction on the freedom
D
under Article 19(1)(g).
Reliance was also placed on certain
bservations in Western
'-.
India Theatres Ltd. 's case (supra). The passage1 in the judgment relied
upon by Shri Sorabjee merely says that both th~iver and the receiver
of the luxuries are amenable to be taxed. THe decision cannot be
E
understood as laying down the proposition tha if there is no actual
utilisation of the luxury, no tax can be levied on the mere existence of
the provisions made for the prospective or poten~ial utilisation of the
luxury.
\
i
In support of the proposition that a tax on luxluries must relate to
F
and be based on an actual utilization of the luxury ,jnd not on the mere
•
existence of the means of providing 'luxury' Sri So1·abjee placed strong
reliance on the observations of the High Court of Bombay in Ramesh
Waman Toke and others v. The State of Maharashtra, AIR 1984
Bombay 345, which while dealing with the legislation under Entry 62
l
List II imposing a tax on entertainment held:
G
" ..... In our opinion, this is not a tax on entertainmen.t at
all which the State Legislature is entitled to .levy undOir item
62 of the State List. In order that the entertainment'i:!uty
should amount to a tax on entertainment it should be levied
on entertainment which is actually held and not on enterH
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SUPREM~ COURT REPORTS
[1989] 2 S.C.R.
tainment which is \heoretically capable of being held. +
Looking to the prO\ 'isions which have been examined in
detail it is clear to u;1 that. the said provisions do not take
into account entertai. nment that is actually held by the
owner of the touringr cinema or the owner of the video
~
exhibition. The batis n which tax can be validly levied is
,
the fact of entertai
ent. The taxing event is the entertainment. If there is n entertainment at all, the question of
levying entertain ent tax in exercise of the legislativef.
powers conferred pon the State Legislature does not arise
at all. If the Act p rports to levy tax on notional entertainment then the ex ;rcise of that taxing power must be held
to be ultra vires
e Constitution. This is exactly what has
happened in the· nstant case."
There might possibly be s
e distinction between the ideas of 'entertainment' and 'luxuries'. With due respect to the High Court, the
interpretation that com
nded itself to the High Court would unduly
D restrict the scope of the 1 gislative Entry. On such an interpretation, it
might be possible for a erson to go further and also contend that no
'entertainment' was ac aliy derived. The concept of 'luxuries' in the
legislative Entry takes
ithin it everything that can fairly and reasonably be said to be co prehended in it. The actual measure of the levy
is a matter of legislati•~e policy .and convenience. So long as the legislaE tion has reasonable r/iexus with the concept of 'luxuries' in the broad
and general sense in/i:vhich the expressions in legislative tests are comprehended, the le!j!!slative competence extends to all matters 'with
respect to' that fielcll of topic of legislation.
The taxable /event need not necessarily be the actual utilisation
F
or the actual con~umption, as the case may be, of the luxury.