Holding

The luxury tax imposed under Sections 3 and 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 is not discriminatory and is constitutionally valid.

Summary

Om Prakash Puri and partners, who operated the Trinca's restaurant in Calcutta, were assessed an ad‑hoc luxury tax of Rs.2,40,000 under Sections 3 and 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 (as amended 1974). They challenged the tax on the grounds that it was discriminatory, violative of Article 14 of the Constitution, and beyond the State's legislative competence. The Calcutta High Court and its Division Bench dismissed the writ petition, holding that the tax was within the State’s power and not discriminatory. On appeal, the Supreme Court affirmed that the tax levied under Section 4 (and by extension Section 3) is constitutionally valid and does not violate Article 14, relying on its earlier decision in Spences Hotel Pvt. Ltd. & Anr. v. State of West Bengal and the East India Hotels Ltd. case. Consequently, the appeal was dismissed with costs.

Issues considered

Whether Sections 3 and 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 violate Article 14 of the Constitution by being discriminatory.
Whether the State legislature has the competence to impose a luxury tax on hotel and restaurant services under Entry 62 of the State List.
Whether the method of calculation and the quantum of the tax are unreasonable or confiscatory.

Legislation cited

Constitution of Indias. Article 14
West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972s. 3, s. 4

Subjects

Article 14DiscriminationLuxury taxState taxationEntertainment taxConstitutional validityState ListWest Bengal

Judgment

- OM PRAKASH PURI AND ANR.
v. A
~
STATE OF WEST BENGAL AND ORS.

FEBRUARY 16, 1991

[K.N. SAIKIA AND MADAN MOHAN PUNCHHI, JJ .] B

Constitution of India, 1950: Article 14--Sections 3 and 4 of the •
_.(_
West Bengal Entertainments and Luxuries (Hotels and Restaurants)
Tax Act, 1972-Whether discriminatory and violative of
,__.
--
West Bengal Entertainments and Luxuries (Hotels and Restau-
ants) Tax Act, 1972: Sections 3 and 4-Constitutional validity of. c
Under the West Bengal Entertainments and Luxuries (Hotels and
'"V Restaurants) Tax Act, 1972 as amended in 1974, the appellants were
called upon to make ad-hoc payment of luxury tax calculated at
Rs.2,40,000. A representation from the Hotel Association to the D
Respondents having been turned down, the appellants filed Writ Peti-
tion before the High Court, challenging the constitutional validity of the
Act.

The Writ Petition was dismissed by a Single Judge. On appeal,
---': the Division Bench declined to interfere holding that there was no dis- E
crimination, and thus there was no violation of Article 14 of the Con-

- stitution. Aggrieved, the appellants preferred the present appeal.

Dismissing the appeal, this Court,

HELD: 1. The Luxury Tax charged under Section 4 of the West F
--:-'y Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act,
1972, is not discriminatory and is constitutionally valid for the reasons
stated in the judgment of this Court in a similar matter wherein the
same contentions were urged. [467E-F]

M/s. Spences Hotel Pvt. Ltd. & Anr. v. State of West Bengal and G
Ors., [1991] 1 SCR applied.
_...( 2. Whatever has been stated by this Court in relation to Section 4
of the Act would be equally applicable to Section 3 of the Act. [467F]

East India Hotels Ltd. v. State of West Bengal, AIR 1990 SC 2029, H
relied on.
465
466 SUPREME COURT REPORTS [1991] 1 S.C.R. -
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4 of
A
1977.

From the Judgment and Order dated 3/4.3.1975 of the Calcutta
High Court in Appeal No. 156 of 1974.

B • G.L. Sanghi, Dhruv Mehta, Aman Vachhar and S.K. Mehta for
the Appellants. .)....

Tapas Ray and G.S. Chatterjee for the Respondents.

Harish N. Salve, Lalit Bhasin, Ms. Nina Gupta, Vibhu Bhakru,
Pranab Mullick and Vineet Kumar for the intervener.
c
The Judgment of the Court was delivered by

K.N. SAIKIA, J. This appeal by certificate is from the Judg-
ment of the Calcutta High Court dated 4.3.1975 passed in appeal No.
D 156 of 1974.

The appellants in partnership have been carrying on business of
restaurants under the name and style of Trinca's at No. 17B, Park
Street Calcutta, providing food and drinks (alcohol and non-alcohol) .._
to the customers under valid licences. Sometimes musical perfor-
E mances are also arranged. The restaurants are provided with air condi-
tioning plant.
.....
Under t'he West Bengal Entertainments and Luxuries. (Hotels
and Restaurants) Tax Act, 1972 as amended by the Act of 1974,
hereinafter referred to as 'tli.e Act', the respondents by their Memo
F No. 4942/A.T. dated 9.12.1972 called upon the appellants to make ad
hoc payment of luxury tax calculated at Rs.2,40,000.00. The President
of the Hotelers' Association made a representation against this illegal
tax which was turned down by the respondents, and thereafter the
appellants challenged the validity of this action in the Calcutta High
Court by filing Writ Petition No. 358 of 1973 on 16.5.1973. The appel-
G lants contended, inter alia before the High Court that the levy was
unreasonable restriction on carrying the business; the Act was not
meaningful and purposeful; the rules were confiscatory in nature; and
the mode of calculation was not in conformity with the mainrobject and
purpose of the Act. The learned Single Judge of the High' Court dis-
missed the writ petition relying on the Judgment passed on 6.3.1974 in
H Writ Petition No. 338 of 1973 wherefrom Civil Appeal No. 406 of 1976
was filed in this Court.
OM PRAKASH v. STATE OF WEST BENGAL [SAIKIA, J.] 467
,,._ From the above order of the learned Single Judge, the appellants A
filed Appeal No. 1'56 of 1974 on 26.6.1974 before the Division Bench
of the Calcutta High Court contending that the legislature cannot
enlarge the scope of Entry 62 and seek to impose a tax on expenditure
incurred by a customer on services rendered to him including food and
drinks. The High Court held thats. 2(b) defined entertainment tax but
B
s. 2(c) defined entertainment tax and under the Act entertainment tax
meant tax payable und_er s. 3 of the Act. A clear distinction had been
made between entertainment and entertainment tax and in this case
the High Court was concerned only with entertainment tax as defined
ins. 2(c). The second submission before the High Court was whether
the State legislature had the competence to impose entertainment tax
payable under s. 3 of the Act and the High Court held that s. 3 was a c
valid piece of legislation. The argument of the appellants was that tax
imposed by s. 3 was discriminatory and it violated Art. 14 of the
Constitution. The High Court held that the differentia made ins. 3 had
a rational relation to the object sought to be achieved by the statute.
The last submission was whether the persons enjoying the same
facilities had been treated differently as the section had imposed a D
maximum tax of 15% on amount paid or payable by the customer. The
High Court held that since a distinction had to be maintained between
s. 2(b) ands. 2(c), the learned counsel's argument on discrimination
could not be acceded to. The appeal was accordingly dismissed, but
certificate of fitness to appeal was granted.
E
The contentions raised in this appeal are the same as were raised
in Civil Appeal No. 406 of 1976 which has just been dismissed. In East
India Hotels Ltd. v. State of West Bengal, AIR 1990 SC 2029 this Court
held that whatever has been said by this Court in relation to s. 4 of the
Act will be equally applicable to s. 3 of the Act. Consequently, for the
above reason and for the reasons stated in our Judgment in Civil F
Appeal No. 406 of 1976, we dismiss this appeal also with costs
quantified at Rs.5,000 (Rupees five thousand).

G.N. Appeal dismissed.