(1.)THESE civil appeals and the connected writ petition involve decision of the substantially common question arising out of the conflicting decisions of the High Courts of Kerala and Madras regarding constitutional validity of similar provisions in the States of Kerala and Tamil Nadu which result in imposition of sales tax in the two States on cooked food sold to the affluent in the luxury hotels while exempting the same from sales tax in the modest eating houses patronised by the lesser mortals. In both these States the exigibility to sales tax of cooked food sold only in luxury hotels was challenged on the ground that it amounted to hostile discrimination. The Kerala High Court rejected the challenge while the Madras High Court has upheld it. This has led to filing of Civil Appeals Nos. 912-20 of 1988 against the Kerala High Court's decision and Writ Petition (Civil) No. 281 of 1988 under Art. 32 of the Constitution by the unsuccessful hoteliers of Kerala while Civil Appeals Nos. 4460-80 of 1985 are by the State of Tamil Nadu against the Madras High Court's decision. THESE conflicting decisions of the two High Courts giving rise to these matters are: Sangu Chakra Hotels Pvt. Ltd. v. State of Tamil Nadu, (1985) 60 STC 125: (1986 Tax LR 2335) (Mad) and Hotel Elite v. State of Kerala, (1988) 69 STC 119 (Ker).
(2.)SHORN of rhetoric and bereft of the legal embroidery which invariably constitute bulk of the armoury of constitutional attack on such a statutory provision and removing the gloss of hypertechnicality from the arguments, the real question is: Whether imposition of sales tax on the sale of cooked food in the more costly eating places alone violates the guarantee of equality enshrined in the Constitution of our 'Socialist' Republic in view of the fact that cooked food sold in the modest eating places catering to the needs of the common man is not similarly taxed ? The challenge is that this can be done only by taxing them equally but not otherwise. In other words, the contention is that this tax burden which is ultimately borne by the consumers of cooked food must be shared equally by all consumers and it cannot be placed only on the more affluent in the society who obviously are the ones frequenting the costlier eating houses, sale of cooked food wherein is taxed, the tax not being on the income or status of the consumer but on the sale of food for consumption. In substance the question is: Is this the kind of equality envisaged and guaranteed in our Constitution ?
It is well settled that in order to tax some thing it is not necessary to tax everything. So long as those within tax net can be legitimately classified together indicating an intelligible differentia vis-a-vis those left out and the classification so made bears a rational nexus with the object sought to be achieved, the classification is clearly permissible and it does not violate Art. 14 of the Constitution. There being obviously no controversy with this settled principle, the contention of Shri T. S. Krishnamurthy Iyer who led the attack to this imposition supported by other learned counsel appearing in these matters is, that the cooked food sold in all eating houses, be it the luxury hotels catering to the affluent or the wayside dhabas frequented by the commoner, has the common characteristic of appeasing the hunger of the consumer, the requirement of the affluent as well as the commoner to appease the hunger being common. On this basis, the main theme of the argument was that the common purpose of sale of cooked food in all eating houses being to appease the hunger of the consumer, there can be no reasonable basis for its classification with reference to the eating house in which it was sold to the customers and, therefore, for exigibility to sales tax the cooked food could not be classified with reference to the place of its sale. Is this the correct approach to examine the reasonableness and validity of the classification made in the present case ?
In case such an argument is valid, it logically follows that in order to tax sale of cooked food the States must levy the sales tax on cooked food sold in all eating places whether it be a luxury hotel or a roadside dhaba; or not tax it at all, if it wishes to relieve the common man who is in eternal pursuit of adequate means of sustenance, of this additional burden. We must frankly admit that unless it be the clear mandate of the Constitution we would not hesitate to reject this argument which, if accepted, may lead to the disastrous consequence of equating for taxation the haves with the have-nots even in the matter of sustenance of the latter. Moreover, such a view may even tempt the legislature to tax all cooked food sold anywhere and we certainly do not wish to make any contribution to a move in that direction. Fortunately, as we read the constitutional provisions and the mandate of equality. enshrined therein, such a view is not envisaged and the indication indeed is to the contrary.
(3.)THE preamble to the Constitution contains the solemn resolve to secure to all its citizens, inter alia, economic and social justice along with equality of status and opportunity. THE expression 'socialist' was intentionally introduced in the preamble by the Constitution (Forty-Second Amendment) Act, 1976 with the principal aim of eliminating inequality in income and status and standards of life. THE emphasis on economic equality in our socialist welfare society has to pervade all interpretations made in the context of any challenge based on hostile discrimination. It is on the altar of this vibrant concept in our dynamic constitution that the attack based on hostile discrimination in the present case must be tested when the legislature intended to rest content with placing the tax burden only on the haves excluding the have-nots from the tax net for satisfying the tax need from this source. THE reasonableness of classification must be examined on this basis when the object of the taxing provision is not to tax sale of all cooked food and thereby tax everyone but to be satisfied with the revenue raised by taxing only the sale of costlier food consumed by those who can bear the tax burden.
The extent to which the revenue is required from a particular source is a matter of fiscal policy and if the legislature chooses to be satisfied with the raising of that amount alone which can be recovered from the affluent, it cannot be faulted for not dragging the impecunious also in the tax net. Even otherwise the play at the joints permitted to the legislature for making classification in a taxing provision is greater and unless the classification made cannot satisfy the test of reasonableness in the context of economic equality envisaged in our society, a legislative enactment which undoubtedly benefits the common man cannot be held discriminatory or arbitrary. The directive principles of State policy also enjoin the State to temper the legislation towards securing a social order conducive to the promotion of social and economic equality, eliminating as far as may be the existing inequalities between different strata in the society. This too is a pointer in the same direction.