Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989 Equivalent citations: 1989 AIR 1949, 1989 SCR (2) 893, AIR 1989 SUPREME COURT 1949, 1989 (3) SCC 677, 1989 TAX. L. R. 944, (1989) 3 JT 72 (SC), 1989 29 STL 204, (1990) 3 COMLJ 275, (1990) 1 GUJ LR 309, (1989) 74 STC 157, (1989) 178 ITR 151 Bench: R.S. Pathak, Sabyasachi Mukharji PETITIONER: EXPRESS HOTELS PRIVATE LIMITED Vs. RESPONDENT: STATE OF GUJARAT & ANR. DATE OF JUDGMENT02/05/1989 BENCH: VENKATACHALLIAH, M.N. (J) BENCH: VENKATACHALLIAH, M.N. (J) RANGNATHAN, S. PATHAK, R.S. (CJ) MUKHARJI, SABYASACHI (J) NATRAJAN, S. (J) CITATION: 1989 AIR 1949 1989 SCR (2) 893 1989 SCC (3) 677 JT 1989 (3) 72 1989 SCALE (1)1200 ACT: Gujarat Tax on Luxuries (Hotels & Lodging Houses) Act, 1977/ Tamil Nadu Tax on Luxuries in Hotels & Lodging Houses Act. 1981/ Karnataka 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 Legisla- tions--Competency of--Tax on means of providing luxury--Permissibility of. Constitution of India, 1950: Articles 246, 301 and Schedule VII. List 11 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 Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  1 construed widely and liberally to include ancillary and subsidiary matters. Words and Phrases. 'Luxury'--Meaning and scope of. HEADNOTE: 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. 894 It was contended for the appellants that Entry 62 of List II 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, therefore, ultra vires the State power under the said entry; that the 'leaf criterion distinguishing luxury being a special attribute or quality of the commodity Or the services, as the case may be, and not the quantitative difference in the price, the impost has no relation to the concept of 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, the levy on such composite subject matter was bad; that the expression "and the like" in the definition of "charges for lodging" in s. 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(1)(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 to have been received was unreason- able and offends Article 19(1)(g), and that the luxury tax imposed on the charges for lodging has the direct and imme- Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  2 diate effect of restricting the freedom under Article 301 of the Constitution as it directly impedes the right of inter- course throughout the territories of India. Similar contentions were raised in the writ peti- tions'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. In the writ petition challenging s. 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 which fixes the liability to pay tax on the pro- prietor of the hotel anti 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 be- tween the taxing power and the subject of tax, and that the power to levy a tax on the 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(1)(g). Dismissing the appeals and writ petitions, 895 HELD: 1.1 The entries in the Legislative List 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. [906F] 1.2 So read, the concept of a tax on 'luxuries' in Entry 62, List II cannot 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 compre- hend. The element of extravagance or indulgence that differ- entiates 'luxury' from 'necessity' cannot be confined to goods and articles. It can also be found in the quality of services and activities. An 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 Kerala, [1976] 2 SCR 690; Western India Theatres Ltd. v. The Cantonment Board, Poona Cantonment, [1959] 2 Supp. SCR 63 and State of Bombay v. R.M.D. Chamarbaugwalia [1957] SCR 874, referred to. Spences Hotel Private Ltd. & Anr. v. State of West Bengal, [1975] TLR 1890, approved. A.S. Bava v. State of Kerala, [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 Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  3 be taken into account in adjudging a luxury. [911H, 912C] A.B. Abdul Kadir & Ors. v. State of Kerala, [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 quali- ty is attributable to goods and services through the means of the price. Quality and price, in the legislative assess- ment can thus be 896 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 neces- sarily 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 into 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] 3.1 The mere absence of a corrective machinery by way of appeal 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 conferment of power per-se unreasonable and arbitrary rendering the provi- sion 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, distinguished. 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 items envisaged by the preceding words was not exhaustive of the genus. The Legis- lature, therefore, has supplied these words so as to bring in any other item of the same class of genus. This, by itself, is a clear guide for the exercise of the power. [914B] 3.3 Another relevant consideration is the identity and status of the repository of the power. The power in the instant case is given to a high authority like the State Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  4 Government. It cannot, therefore, be said that the power is an uncanalised power and is an arbitrary or unreasonable one so as to fall under Article 19(1)(g). There are statutory guides 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 lodging accommo- dation, tax shah be payable as if the usual charges had been collected is a provision against evasion. It cannot, there- fore, be said 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 be said to have a direct and immediate effect of restricting the free flow of trade, commerce and intercourse. [916F, E] 5.2 In the instant case, it has not been shown how a tax on luxuries enjoyed by a person in a hotel was either dis- criminatory or has the direct and immediate effect of imped- ing the freedom of intercourse. It cannot thus be said to offend Article 301 of the Constitution. [916G] Atiabari Tea Co. v. State of Assam, [1961] 1 SCR 809; Firm A.T.B. Mehtab Majid & Co. v. State of Madras, [1963] Supp. 2 SCR 435; Gratwick v. Johnson, [1945] 70 CLR 1; Baldwin v. GAF Inc., [1934] US 511 and Grannall v. Marrick- ville Margarine Pty. Ltd., [1955] 93 CLR 55, referred to. 6.1 Section 4 of the West Bengal Act cannot be said to be beyond the legislative entry. The taxable event need not necessarily be the actual utilisation or the actual consump- tion, as the case may be, of the luxury. So long as the legislation has reasonable nexus with the concept of "lux- uries" in the broad and general sense in which the expres- sions 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 a potential consumption does provide the nexus. [909C, 910F, E, H] Bhagwan Dass Jain v. Union of India, AIR 1981 SC 907, re- ferred to. Ramesh Waman Toke & Ors. v. The State of Maharashtra, AIR 1984 Bombay 345, overruled. 898 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 legis- lation. If the idea of 'luxuries' is required to be .so wide as to comprehend in it every aspect which can fairly and Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  5 reasonably be said to be embraced by it, then the said taxing power under the Entry cannot be limited or condi- tioned in any manner whatsoever. [911A] 6.3 Once the legislative competence and the nexus be- tween the taxing power and the subject of taxation is estab- lished 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. [911B] 6.4 The mere excessiveness of a tax or the fact that it affects the earnings cannot pre-se be held to violate Arti- cle 19(1)(g). [911 C] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 338 and 339 of 1981. From the Judgment and Order dated 23.7.1980 of the Gujarat 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, Sanjay 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 Shan- kar, 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 Sched- ule to the Constitution of India is challenged. Civil Appeal Nos. 338 and 339 of 1981, writ-petition Nos. 7990, 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 of 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 corresponding Karnataka Legislation viz., the Karnataka Tax on Luxuries (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 taxingstatutes, 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 to which the Act is applied and the rates of Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  6 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 provisions 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 the State it is pro- posed to levy a tax on luxury provided in hotels and lodging houses at the rate of certain percentages of lodging charges recov- ered 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 treated as a luxury. This bill seeks to achieve that object." Section 2 is the interpretation clause and defines, inter alia, the expressions "charges for lodging", "hotel", "luxury provided in hotel", "proprietor" occurring in clauses (a) (d) (e) and (g) respectively. The definitions are as follows: "(a) "charges for lodging" include charges for airconditioning, telephone, tele- vision, 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 pro- vided for a monetary consideration, and in- cludes 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, tele- vision, 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." Section 3 is the charging section which pro- vides: "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 10 per cent of such charges. Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  7 lodging are thirty five rupees or more but not more than fifty rupees per day per person. (b) Where the charges for Rs.5 plus 20 per cent of lodging are more than such charges in excess of fifty rupees but not more Rs.50 per person per day. than one hundred rupees per day per person. (c) Where the charges for Rs. 15 plus 30 per cent lodging are more than one of such charges in excess of hundred rupees per day Rs. 100 per person per day per person. Provided that where charges for lodging are levied 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 custom of the hotel: Provided further that where any charges for lodging are paid by any person other than a citizen of India in any foreign exchange, then such person or where such charges are paid by any person or class of persons as the State 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 per- sons shall be exempt from the payment of the tax. (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 col- lected the tax from such company. Explanation: In this sub-section "Company" means any body corporate and includes a firm or other association of persons. (3) The tax payable under this section shall be collected by 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." 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) 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 Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  8 other amenities, if any, being ameni- ties 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 in a hotel, service charges are levied and appropriated to 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 conces- sional 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 provided 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 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 docu- ments and of search and seizure. Sec. 21 confers the power to make Rules. 4. The Gujarat Act seeks to levy a tax at certain per- centages of the lodging charges recovered by the proprietors of the hotels and lodging houses from persons lodging there- in 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 ho- tels, 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 Govern- ment a luxury tax by the proprietor of every hotel and restaurant in which there is provi- sion for luxury and such tax shall be calcu- lated- (a) in the case of a restaurant at the rate of an annual sum of rupees three hundred for every ten square metres or part thereof in respect of so much of the floor area of restaurant which is provided with X X luxury, and Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  9 (b) in the case of a hotel at such rate not exceeding fifteen per centum on the daily charges of a room 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. 5. We have heard Shri Soli J. Sorabjee, Senior Advocate, Shri F. Nariman, Shri Harish Salve, Advocates for petition- ers and Shri P.S. Poti, and Shri Shah, learned Senior Advo- cates, 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 1I providing for taxes on "luxuries" contemplates, and takes within its sweep, a tax on goods and articles in their aspect and character as luxuries and 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 luxury-independently 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 serv- ices, as the case may be, and not the price-factor simplic- iter. The essential distinguishing attribute is a qualita- tive 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. (e) The expression 'and the like' in the definition of "charges for lodging" in sec. 2(a) is vague and irration- al 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 accommodation provided free or at concessional rates be taxed as if the full charges were deemed to have been re- ceived, is unreasonable and offends Article 19(1)(g). Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  10 (g) The "luxury" tax imposed on the charges for lodg- ings 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 territo- ries of India. 5. Re: Contention (a) The arguments of learned counsel on the first three conten- tions require to be considered together as these contentions themselves have certain over-lapping areas amongst them. Basically, the question is as to what constitutes 'luxuries' as the subject of a tax under Entry 62, List II, and second- ly, 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 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 contention held that the contention, if accepted, would diminish the content of 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. Chamar- baugwalia & Ors., AIR 1956 Bom. 1 at page 11: "With regard to luxuries it is significant to note that the plural and not the singular is used, and the luxuries in respect of which a tax can be imposed under entry 62 is a tax on goods or articles which constitute luxuries, and it is again 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 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 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 this 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 II was taken by the Kerala High Court in A.S. Bava v. State of Kerala, [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 'lux- uries' in Entry 62 of List II should not be confined to articles or objects of luxury alone. In view of the social and economic Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  11 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 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 legislature 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 subsid- iary 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 Legislature 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 was 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 interpre- tation, 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 amusements 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 receiv- er of the luxuries, entertainments, or amusements and both may, with equal propriety, be made amenable to the tax ..... " (Emphasis supplied) The concept of 'luxuries' as a subject of tax was not con- fined to those who received or enjoyed the luxury. It could be on those who provided it. In Encyclopaedia Britannica the meaning of the word 'luxurytax' is set-out thus: Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  12 "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, per- fume and tobacco." In Webster's Comprehensive Dictionary, International Edition, the word 'luxury' is defined: "Luxury: 1. A free indulgence in the pleasures that gratify the senses. 2. Anything that ministers to comfort or pleas- ure that is expensive or rare, but is not necessary to life, health subsistence, etc; a delicacy." Luxury connotes extravagance or indulgence, as distin- guished from the needs and necessities of life. '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 limited merely to tax things tangible and corpo- real 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, intoxicat- ing-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 encom- passes all the manifestations or emanations, the notion of 'luxuries' can fairly and reasonably be said to comprehend. The element of extravagance or indulgence that differenti- ates 'luxury' from 'necessity' can not be confined to goods and articles. There can be elements of extravagance or indulgence in the quality of services and activities. In A.B. Abdul Kadir & Ors. v. State of Kerala, [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 is incurred by a large number of people, including those not Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  13 economically well-off .... " The submission of Shri Sorabjee, if accepted, will unduly restrict the scope of the legislative-Entry which should otherwise have the widest and the most-liberal meaning and connotation given to it. Contention (a), in our opinion, is unacceptable. 8. Re: Contention (b): This contention pertains to a provision particular to the West Bengal legislation. It is urged that in so 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 luxury is not utilised by any person, 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 providing 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 under Article 19(1)(g). Reliance was also placed on certain observations in Western India Theatres Ltd.'s case (supra). The passage in the judgment relied upon by Shri Sorabjee merely says that both the giver and the receiver of the luxuries are amenable to be taxed. The decision cannot be understood as laying down the proposition that 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 potential utili- sation of the luxury. In support of the proposition that a tax on luxuries must relate to and be based on an actual utilization of the luxury and not on the mere existence of the means of provid- ing 'luxury' Sri Sorabjee 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 List II imposing a tax on entertainment held: " ..... In our opinion, this is not a tax on entertainment at all which the State Legislature is entitled to .levy under item 62 of the State List. In order that the enter- tainment duty should amount to a tax on entertainment it should be levied on entertainment which is actually held and not on enter- tainment which is theoretically capable of being held. Looking to the provisions which have been examined in detail it is clear to us that the said provisions do not take into account entertainment that is actually held by the owner of the touring cinema or the owner of the video exhibition. The basis on which tax can be validly levied is the fact of entertainment. The taxing event is the entertainment. If there is no entertainment at all, the question of levying entertainment tax in exercise of the legislative powers conferred upon the State Legislature does not arise at all. If the Act purports to levy tax on notional entertainment then the exercise of that taxing power Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  14 must be held to be ultra vires the Constitution. This is exactly what has happened in the instant case." There might possibly be some distinction between the ideas of 'entertainment' and 'luxuries'. With due respect to the High Court, the interpretation that commended itself to the High Court would unduly restrict the scope of the legisla- tive Entry. On such an interpretation, it might be possible for a person to go further and also contend that no 'enter- tainment' was actually derived. The concept of 'luxuries' in the legislative Entry takes within it everything that can fairly and reasonably be said to be comprehended in it. The actual measure of the levy is a matter of legislative policy and convenience. So long as the legislation has reasonable nexus with the concept of 'luxuries' in the broad and gener- al 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 legisla- tion. The taxable event need not necessarily be the actual utilisation or the actual consumption, as the case may be, of the luxury. The contention, in substance, is that the means of providing luxury, by itself, does not provide the nexus between the taxing power and the subject of tax and there must be an actual and not merely a notional or poten- tial, consumption or utilisation of the luxury. As an in- stance of what can be said to be fairly and reasonably comprehended in a legislative Entry, reference may be made to the "notional" income, for purposes of a tax on income, of a person, from a house-property in his own personal occupation or a property not actually let. In that context this COurt said "that which can be converted into an income can be reasonably regarded as giving rise to income" (See: Bhagwan Dass Jain v. Union of India, AIR 1981 SC 907). A luxury which can reasonably be said to be amenable to a potential conception does provide the nexus. If the provider of the luxury is also independently amenable to the tax, the further restriction on the power suggested by the argument tends 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 taxing power cannot be limited to or condi- tioned in the manner suggested. Once the legislative compe- tence 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 measure of the tax is not the' same thing as, and must be kept distin- guished from, the subject of the tax. . So far as the argument that fundamental rights under Article 19(1)(g) are violated by a levy on a mere provision for luxury, without its actual utilisation, is concerned it is settled law that the mere excessiveness of a tax or the fact that it affects the earnings cannot, per-se, be held to violate Article 19(1)(g). Contention (b) is not substantial either. 8. Re: Contentions (c) and (d): These contentions were somewhat attractively presented and bear close scrutiny. Shri Sorabjee urged that the con- cept of "luxuries" is a relative or comparative idea, dis- tinguishable from "necessities" by the special attribute or quality of distinction inherent in them. The articles or activities of luxury could be identified as such only Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  15 by reason of that inherent distinguishing special-quality or attribute. The price factor, says learned counsel, might be, prima facie, an index of that special quality or attribute; but the price is not itself a substitute for the special quality or attribute. Therefore, if what is legislatively classed as luxury is on the sole basis of the price alone, then the legislative definition or the means of identifica- tion of the luxury becomes irrational as it has the effect of substituting price in place of the special quality. The two are not the something. There is nothing in the law, it is urged, which identifies or distinguishes 'luxury' on the basis of any special attribute apart from the price-factor. This argument itself recognises that price might be, and very often is, evidence of quality. The statute proceeds on the premise that any accommodation in a hotel which is priced above a certain level could reasonably be held to be of a particular quality distinguishing it from others. These ideas of luxury or necessity are necessarily relative ideas and require to be understood in the context of the contempo- rary standards of living. What might have been a 'luxury' some decades ago might cease to partake of the character now. What is luxury today might be considered a necessity a decade or so later. In Abdul Kadir's case (supra) it was observed: "It may be added that there is nothing static about what constitutes an article of luxury. The luxuries of yesterday can well become the necessities of today. Like- wise, what constitutes necessity for citizens of one country or for those living in a particular climate may well be looked upon as an item of luxury for the nationals of anoth- er country or for those living in a different climate. A number of factors may 'have to be taken into account in adjudging a commodity as an article to luxury ...... " We are presently concerned with the question whether the quality or standards of lodging accommodation in hotels can be called luxurious by contemporary standards by reason of the higher standards of charges payable for the accommoda- tion. 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 of the price. Quali- ty and price, in the legislative assessment, can be assumed to have a logical inter-relationship. This cannot be held to suffer from the vice of irrationality. 9. The further contention is that when the price factor is made the sole criterion for imparting the quality of luxury to the lodging accommodation, the means of identification so adopted cease to distinguish areas in the services which are not luxuries but are really necessities and comforts and the subject of the tax would come to include, not merely lux- uries but necessities and comforts also. The answer is that 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 compo- nents of the services. Differences of degree can at particu- lar stage become differences of kind. The composite elements of lodging accommodation and services associated with it cannot be broken into components so as to distinguish some components as necessities, some others as comforts and yet Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  16 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. Though the arguments on these contentions were not without their interesting facets, we must, however, express our inability to accept them as valid arguments against the constitutionality of the provisions. Contentions (c) and (d) are accordingly held and an- swered against the petitioners and the appellants. 10. Re: Contention (e): The point sought to be put across arises out of the definition of the expression 'charges for lodging' in sec. 2(a) read with the Explanation to the provision. Sec. 2(a) defines "charges for lodging" to include 'charges for air- conditioning, telephone, television, radio, music, extra beds" and the like". It is contended that the expression 'and the like' is vague and confers an arbitrary power to bring to tax an undefined entity. It is further contended that the Explanation appended to Section 2(a) to the effect that the decision of the State Government on any dispute in that behalf is final and shall not be called in question in any court aggravates the arbitrariness and constitutes an unreasonable restriction and is violative of Article 19(1)(g). Reliance was placed on the decision of this Court in Corporation of Calcutta v. Calcutta Tramways Co., [1964] 5 SCR 25. We are afraid, the argument overlooks certain relevant factors bearing on the point. It is, no doubt, true that it has been held in several cases that the absence of a provi- sion for a correctivemachinery, by way of appeal or revi- sion, to rectify an adverse order made by an authority on whom power is conferred, might indicate that the power so conferred is unreasonable or arbitrary. But the corrective- machinery may itself take several forms and be inherent or found in the provisions for conferment of the power them- selves. The mere absence of a corrective machinery or the existence of a provision imparting finality, by themselves, would not be conclusive so as to render the conferment of power per-se unreasonable and arbitrary rendering the provi- sion unconstitutional. In Babu Bhai v. State of Gujarat, [1985] 2 SCC 732 at 736 this Court said: " ..... in other words mere absence of a corrective ma- chinery by way of appeal or revision by itself would not .make the power unreasonable or arbitrary, much less would render the provision invalid. Regard will have to be had to several factors, such as, on whom the power is conferred--whether on a high official or a petty officer, what is the nature of the power--whether the exercise there- of depends upon the subjective satisfaction of the authority or body on whom it is conferred or is it to be exercised objectively by reference to some existing facts or tests ...... " There are in-built checks on the power under Explanation to sec. 2(a). The expression 'and the like' would require to be construed ejusdem-generis. The genus or the class of items envisaged by the preceding words not having been exhaustive of the genus or the class, the legislature, therefore, has supplied the words 'and the like' so as to bring in any other item of the same class or genus. This, by Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  17 itself, is a clear guide for the exercise of the power. Another relevant consideration is the identity and status of the repository of the power. The power is given to a high authority like the State Government. In these circumstances, it cannot be said that the power is an uncanalised power and is an arbitrary or unreasonable one. There are statutory guides governing its exercise and the guide-lines are gov- erned by well settled principles of interpretation. There is no substance in contention (e). 11. Re: Contention (f): What is assailed here is the deeming provision in sec. 4(3) which brings to charge at the normal rates cases where no charge is collected at all for lodging or where conces- sional rates are charged. The deeming provision does not apply to cases where accommodation is provided free or at commercial rates to the employees of the hotel. No fault can be found with this provision which merely states that where the usual lodging charges are not collected for providing the lodging accommodation, tax shall be payable as if the usual charges had been collected. This is a provision against evasion. There is no merit in the challenge to the validity of this provision. Contention (f) requires to be rejected. 12 Re.' Contention (g): Shri R.F. Nariman, learned counsel, who addressed argu- ments with particular emphasis on this contention submitted that tax laws are not outside the purview of Part XIII of the Constitution and that the present tax on lodgings and accommodations in hotels is violative of the freedom of "trade, commerce and inter-course" and offends Art. 301. Learned counsel submitted "that business undoubtedly is commerce but is something more, it is intercourse". The word "intercourse" specifically occurs in Art. 301 intending to give the largest connotation to the concept of commerce. The question is whether the impugned tax imposes a restriction on the freedom under Article 301. If it does, the further questions whether the restriction is reasonable and is required in public interest and whether Presidential sanc- tion had been obtained for the introduction of the legisla- tive measure arose for consideration. It has been held that only such taxes as are directly and immediately restrictive of trade, commerce and intercourse that fall within the purview of Art. 301. On the several facets of the similar--some say deceptively similar--provisions of sec. 92 of the Commonwealth of Australia Constitution Act 1901 comments of a learned author may be recalled: "The lengthy series of judicial decisions on the meaning and scope of the immunity afforded by s. 92 is ample testimony to the difficulty involved in giving some precise meaning to a provision which in reality expresses a politi- cal slogan rather than a legal precept. Rich J once pithily described the lot of the High Court in relation to s. Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  18 92 as being "to explain the elliptical and expound the unex- pressed", and he emphasized that the practical necessity of determining precisely what impediments were no longer to obstruct inter-State trade "obliged the court to attempt the impossible task of supplying an exclusive and inclusive definition of a conception to be discovered only in the silences of the Constitution." On the significance of the word 'intercourse' in sec. 92 of the Australian Constitution, it was held by the Australi- an High Court in Gratwick v. Johnson, [1945] 70 CLR 1 that an order which provided that no person should travel by rail or commercial passenger vehicle from any State in the com- monwealth to any other State without a permit from a common- wealth official would violate the freedom of 'intercourse' under sec. 92. It was held that the prohibition showed "an indifference to, if not a disdain of, the terms of sec. 92". In Atiabari Tea Co. v. State of Assam, [1961] 1 SCR 809 at 860-61 this Court said: " ..... in determining the limits of the width and ampli- tude of the freedom guaranteed by Art. 301 a rational and work- able test to apply would be: Does the impugned restriction operate directly or immediately on trade or its movement? ... It is the free movement of the transport of goods from one part of the country to the other that is intended to be saved, and if any Act imposes any direct restrictions on the very movement of such goods it attracts the provisions of Art. 301 ...... " In Mehtab Majid & Co. v. State of Madras, [1963] Supp. 2 SCR 435 this Court said: "It is now well settled that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulating measures. Sales tax, of the kind under consideration, cannot be said to be a measure regulating any trade or a compensatory tax levied for the use of trading facilities, sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free flow of trade and it will then offend against Art. 301 ...... " Taxes can and do sometimes, having regard to their effect and impact on the free flow of trade, constitute restrictions on the freedom under Art. 301. But the restric- tion must stem from the provisions of the law imposing the tax which could be said to have a direct and immediate effect of restricting the free flow of "trade, commerce and intercourse". It is not all taxes that have this effect. Freedom under Article 301 is, by all reckoning, a great freedom, one of the utmost significance to economic unity of the nation. Underlying the need for and the recognition of the freedom of inter-State trade, commerce and intercourse, one is tempted to refer to the lofty sentiments of Justice Cardozo in Baldwin v. GAF Inc., [1934] US 511 that "it was flamed upon the theory that peoples of several States must sink or swim together and that in the long run the prosperi- ty and salvation are in union and not in division" and that "the ultimate principle is that one State in dealing with another may not place itself in position of economic isola- tion". Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  19 But in the present case it has not been pointed out how a tax on "luxuries" enjoyed by a person in a hotel is either discriminatory or has the direct and immediate effect of impeding the freedom of inter- course. In Grannall v. Marrickville Margarine Pty. Ltd., [1955] 93 CLR 55 a New South Wales statute which prohibited the manufacture of margarine without a licence which, if granted, would contain a condition limiting the quantity to be manufactured was assailed on the ground of its violation of sec. 92 of the Australian Constitution. Repelling the challenge, it was held: "It is of course obvious that without goods there can be no inter-State or any other trade in goods. In that sense manufacture or production within, or importation into, the Commonwealth is an essential preliminary condition to trade and commerce between the States in merchandise. But that does not make manufacture production or importation trade and commerce among the States. It is no reason for extending the freedom which s. 92 confers upon trade and commerce among the State, to something which precedes it and is outside the freedom conferred." We find no substance in contention (g). 13. In the result, for the foregoing reasons, the writ petitions and the appeals are dismissed. But, in the circum- stances, there will be no order as to costs. P.S.S. Appeals dismissed. Express Hotels Private Limited vs State Of Gujarat & Anr on 2 May, 1989  20