LexKERALA HOTEL & RESTAURANT ASSOCIATION AND ORS. ETC. ETC. versus STATE OF KERALA AND ORS.
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A KERALA HOTEL & RESTAURANT ASSOCIATION AND ORS. ETC. ETC. v. STATE OF KERALA AND ORS. FEBRUARY 21, 1990 [S. RANGANATHAN, N.D. OJHA AND J.S. VERMA, JJ.] Kera/a General Sales Tax Act, 1963: Sections 5, 9-FirstSchedu/e Item 57-Constitutional validity-Imposition of Sales Tax-Cooked food sold to affluent in luxury hotels-Exemption with regard to modest C eating houses-Whether discriminatory and violates Article 14. - Tamil Nadu General Sales Tax Act, 1959: Section 3(2) Schedule I Item 150-lmposition of Sales Tax-Cooked food sold to affluent in luxury hotels-Exemption with regard to modest eating houses-Whe- the'r discriminatory and violates Article 14. The Constitutional validity of similar provisions in the States of Kerala and Tamil Nadu which result in imposition of Sales Tax on ).._ cooked food sold only in luxury hotels while «xempting the same from sales tax in modest eating houses was challenged by some hoteliers in both States on the ground that this amounted to hostile discrimination E and therefore violative of Article 14 of the Constitution. While the Kerala High Court rejected the challenge, the High Court of Madras upheld it. Consequently one set of appeals and a Writ Petition under It-- Article 32 of the Constitution have been preferred by the unsuccessful hoteliers of Kerala and the other set of appeals by the State of Tamil '..- Nadu against the decision of the Madras High Court allowing the Writ llllP"'.: F Petitions filed before it by the hoteliers. G Upholding the constitutional validity of the impugned provisions in both States, while dismissing the appeals and Writ Petition filed by the hoteliers and allowing the appeals by the State of Tamil Nadu. this Court, HELD: It is the substance and not form alone which must be seen. The difference in the cooked food classified differently, taxed and tax- free, is as intelligible and real as the two types of customers to whom they are served at these different eating houses. This difference must also be available to support the difference in the incidence of the H impugned sales tax. This classification does bear rational nexus with the 516 ·• KERALA HOTEL ASSCN. v. STATE OF KERALA 517 ODject sought to be achieved. The object clearly is to raise the needed revenue from this source, determined by the fiscal policy, which can be achieved by taxing sale of costly food on the affluent alone in the society. The classification is made by grouping together only those places where costly food is sold leaving out the comparatively modest ones. The clas- sification is, therefore, founded on intelligible differentia and has a rational nexus with the object sought to be achieved. In other words, those grouped together possess a common characteristic justifying their inclusion in the group, but distinguishing them from those excluded; and performance of this exercise bears a rational nexus with the reason for the exercise. [5268-D] ·· The scope for classification permitted in taxation is greater and unless the classification made can be termed to be palpably arbitrary, it must be left to the legislative wisdom to choose the yardstick for classifi- cation, in the background of the fiscal policy of the State to promote economic equality as well. It cannot be doubted that if the classification is made with the object of taxing only the economically stronger while leaving out the economically weaker sections of society,· that would he a good reason to uphold the classification if it does not otherwise offend any of the accepted norms of valid classification under the equality clause. ISZ6F-G] The predominant object is to tax sale of cooked food to the minimum extent possible, since it is a vital need for sustenance. Those who can afford the costlier cooked food, being more affluent, would find the burden lighter. This object cannot be faulted on principle and is, indeed, laudable. In addition, the course adopted has the result of taxing fewer people who are more affluent in the society for raising the needed revenue with the added advantage of greater administrative convenience since it involves dealing with fewer eating houses which are easier to locate. T_his accords with the principle of promoting economic equality in the society which must, undoubtedly, govern formulation of the fiscal policy of the State. [S32G-H] The classification is made in the present case to bring within the tax next hotels or
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