Case: Spences Hotel Private Limited and Another Vs. State of West Bengal and Others

2. Appellant 2 is a shareholder and Director of appellant 1 Company M/s. Spences Hotel Pvt. Ltd. (hereinafter referred to as the Company), having its registered office, and carrying on the business of running a hotel, bar and restaurant, at No. 4 Wellesley Place Calcutta. The said hotel, bar and restaurant have been provided by the Company with air-conditioning through a central air-conditioning plant which, according to appellants, would normally run between months of March and October each year remaining unused for the rest of the year3. Respondent 2, Collector of Calcutta by his Memo No. 4600 (86) A.T. dated November 9, 1972 directed the Company to make ad hoc payment of tax under the provisions of the West Bengal Entertainments and Luxuries (Hotel and Restaurants) Tax Act, 1972 (W.B. Act 21 of 1972) hereinafter referred to as the Act, calculated at the flat or fixed rate of an annual sum of Rs. 100 for every 10 sq. metres or part thereof in respect of so much of the floor area of the hotel which was provided with luxury i.e. air-conditioning. Again by Memo No. 1161/A.T. dated March 13, 1973 respondent 2 called upon the Company to expedite the submission of the blue print of the space provided with means for air-conditioning, failing which appropriate legal action would be taken. Appellate 2 submitted a representation showing that the tax was discriminatory and, therefore, illegal and void, but respondent 2 by his Memo No. 5166/A.T. dated December 22, 1972 replied that there was nothing discriminatory in it4. The appellants in their writ petition under Article 226 of the Constitution of India in the High Court of Calcutta contended that the provisions of the Act and the Rules framed thereunder, enabling the respondents to levy luxury tax, were unconstitutional and void, and consequently the notices and memos issued to the appellants were without jurisdiction and amounted to colourable exercise of power practising fraud on legislative powers; and it was prayed inter alia that the Act and the Rules framed thereunder be declared illegal and void being ultra vires the Constitution of India; that a writ of a mandamus or any other appropriate writ be issued commanding the respondents and each of them not to give any or any further effect to the Act, Rules, and the notices5. A learned Single Judge dismissed the writ application by order dated March 6, 1974 but granted stay of operation of his order till April 30, 1974 on which date the appellants preferred therefrom the Appeal No. 137 of 1974 and the Division Bench also granted stay pending the appeal but directed the appellants to deposit a sum of Rs. 6000 towards luxury tax with the Registrar of the High Court, which the appellants did; and after hearing by the impugned judgment and order dated January 2, 1975 dismissed the appeal, but granted certificate of fitness to appeal therefrom to this Court6. In the High Court it was first contended by the appellants that under Entry 62 of List II of the Seventh Schedule taxes could be imposed only on luxuries i.e. objects or articles of luxury, but the impugned Act instead of imposing tax on air-conditioners as articles of luxury has imposed tax on air-conditioned floor space and as such it was a property tax on the basis of floor space and not a tax on any apparatus, instrument or articles of luxury and as such ultra vires the powers of the State legislature. The second contention was that Section 4 of the Act imposes a flat rate of Rs. 100 per annum on a specified air-conditioned floor space in hotels and restaurant which may be differently situated with reference to their localities, clientele, services and amenities rendered and the Act makes no distinction on any of these bases and as such it did not even attempt a reasonable classification of these different types or categories of hotels and restaurants, and, therefore, it suffered from the vice of discrimination under Article 14 of the Constitution

Reasoning: 29. The submission that the incidents falls differently on different classes of hotel owners is not tenable inasmuch as the impact is the result of having different measures of air-conditioned space by different owners. This luxury tax having not been based on income earned therefrom the classification of the owners on basis of income or stars is irrelevant. The question that different proportions of air-conditioned spaces are used in different hotels and restaurants earning different proportions of income is also not relevant as the tax is not based on use of the space. The kinds of air-conditioning or the implements used are also not relevant. It is a tax on the mere provision for luxury and not on the hotel property or equipment, as we have already said. 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 Section 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