Holding

Entry 62 of List II permits a tax on hotel lodging services and the impugned statutes are constitutionally valid.

Summary

Express Hotels and other petitioners challenged the constitutional validity of luxury taxes imposed by Gujarat, Tamil Nadu, Karnataka and West Bengal on hotel and lodging services, arguing that Entry 62 of List II of the Constitution only permits taxes on tangible goods, not services, and that the statutes violated Articles 19(1)(g) and 301. The Supreme Court held that the legislative entry must be given its fullest, liberal meaning and can encompass services and activities; price can validly be used as an indicator of luxury, and the statutes' definitions, deeming provisions and finality clauses are not vague or unreasonable. The tax does not directly restrict interstate trade or commerce, nor does it infringe the fundamental rights claimed. Consequently, all challenges were rejected.

Issues considered

Whether Entry 62 of List II of the Seventh Schedule authorises a tax on services such as hotel lodging.
Whether the definition of "luxury" based solely on price is constitutionally valid.
Whether the statutes violate Article 19(1)(g) (freedom of trade, commerce and intercourse).
Whether the statutes violate Article 301 (inter‑state trade, commerce and intercourse).
Whether provisions like "and the like", the finality of the State Government's decision, and the deeming provision in s. 4(3) are vague, unreasonable or ultra vires.

Legislation cited

Constitution of Indias. Art. 246, s. Art. 301, s. Schedule VII List II Entry 62
Gujarat Tax on Luxuries (Hotels & Lodging Houses) Act, 1977s. 2, s. 3, s. 4
Karnataka Tax on Luxuries (Hotels & Lodging Houses) Act, 1979
Tamil Nadu Tax on Luxuries in Hotels & Lodging Houses Act, 1981
West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972

Subjects

luxury taxEntry 62constitutional validityArticle 19(1)(g)Article 301hotel taxationstatutory interpretationprice as indicator of luxuryservices taxvagueness doctrinedeeming provision

Judgment

EXPRESS HOTELS PRIVATE LIMITED
A
v.
STATE OF GUJARAT & ANR.

MAY 2, 1989

[R.S. PATHAK, CJ, SABYASACHI MUKHARJI, B
S. NATARAJAN, M.N. VENKATACHALIAH AND
S. RANGANATHAN, JJ.)

Gujarat Tax on Luxuries (Hotels & Lodging Houses) Act, 1977/
Tamil Nadu Tax on Luxuries in Hotels & Lodging Hn11ses Acr. /C/81/
J:arnataka Tax on Luxuries (Hotels & Lodging Houses) Act, 1979/
West Bengal Entertainments and Luxuries (Hotels & Restaurants) Tax c
Act, 1972: Tax on luxury provided in hotels, lodging houses and
restaurants-State Legislations-Competency of-Tax on means of
providing luxury-Permissibility of.

Constitution of India, 1950: Articles 246, 301 and Schedule V ll. D
List II 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 construed
widely and liberally to include ancillary and subsidiary matters.
E
Words and Phrases: 'Luxury'-Meaning and scope of.

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 F
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 G

• 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. H
893
894 SUPREME COURT REPORTS [1989] 2 S.C.R.

A It was contended for the appellants that Entry 62 of List JI of ~
Schedule VII to the Constitution providing for taxes on luxuries con-
templates 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,
B therefore, ultra vires the State power under the said entry; that the real
criterion distinguishing luxury being a special attribute or quality of the
commodity llr the services, as the case may be, and not the quantitative
difference in the price, the impost has no relation to the concept oi.
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,
C the levy on such composite subject matter was bad; that the expression
"and the like" in the definition of "charges for lodging" ins. 2(a) was
vague and irrational and read with the explanation thereto, which 'f,'
renders the decision of the State Government on what constitutes
"lodging charges" final, was an unreasonable restriction, violative of
Article 19(l)(g), that s. 4(3), which provides that the luxury provided
D free or at concessional rates be taxed as if the full charges were deemed
to have been received was unreasonable and offends Article 19(I)(g),
and that the luxury tax imposed on the charges for lodging has the
direct and immediate effect of restricting the freedom under Article
30 I of the Constitution as it directly impedes the right of intercourse •
E throughout the territories of India.

Similar contentions were raised in the writ petitions'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.

F In the writ petition challenging s. 4 of the West Bengal Entertain- ~
ments and Luxuries (Hotels and Restaurants) Tax Act, 1972 which fixes . .
the liability to pay tax on the proprietor of the hotel and 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 between the taxing
power and the subject of tax, and that the power to levy a tax on the
G 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(l)(g).

Dismissing the appeals and writ petitions,
H
EXPRESS HOTELS v. STATE OF GUJARAT 89)
......
j HELD: I.I The entries in the Legislative List should not be read
A
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 com-
prehended in them. [906F]
• ~.
1.2 So read, the concept of a tax on 'luxuries' in Enlry 62, List II B
~annot be limited merely to tax things tangible and corporeal in their
aspect as 'luxuries'. The entry encompasses all the manifestations or

- l
'
emanations, the notion of 'luxuries' can fairly and reasonably be said to
comprehend. The element of extravagance or indulgence that differen-
tiates '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
c
"" )" 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 Kera/a, [1976] 2 SCR 690;
( Western India Theatres Ltd. v. The Cantonment Board. Poona Canton- D
ment, [19591 2 Supp. SCR 63 and State of Bomhay v. R.M.D.
Chamarbaugwalia, [1957] SCR 874, referred to.

Spences Hotel Private Ltd. & Anr. v. State of West Bengai, [1975]
TLR 1890, approved.
E
A.S. Bava v. State of Kera/a, [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 con- F
sidered a necessity a decade or so later. A number of factors have to be
taken into account in adjudging a luxury.: [91 IH, 912C]

A:B. Abdul Kadir & Ors. v. State of Kera/a, [1976] 2 SCR 690,
referred to.
G
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 quality is attributable to goods and services through the means
of the price. Quality and price, in the legislative assessment can thus be H
896 SUPREME COURT REPORTS [1989] 2 S.C.R.

A 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 necessarily be a comprehen-
sive idea taking into account the various components of the services.
B 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 i.1to components so as to distinguish '
some components as necessities, some others as comforts and yet others

c
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]

D 3. I 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 con- 1
ferment of power per-se unreasonable and arbitrary rendering the -"-
provision unconstitutional. [913F]
E
Babu Bhai v. State of Gujarat, [1985] 2 SCC 732, referred to.

Corporation of Calcutta v. Calcutta Tramways Co., [1964] 5 SCR
25, cjistinguished.
>
F 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 f- \...
items envisaged by the precedicg words was not exhaustive of the
genus. The Legislature, therefore, has supplied these words so as to
bring in any other item of the same class of genus. This, by itself, is
G a clear guide for the exercise of the power. [914B] ·+.-
3.3 Another relevant consideration is the identity and status of V
the repository of the power. The power in the instant case is given to a
high authority like the State Government. It cannot, therefore, be said
that the power is an uncanalised power and is an arbitrary or unreason-
H able one so as to fall under Article 19(1)(g). There are statutory guides.
EXPRESS HOTELS "· STATE OF GUJARAT 897

).governing its exercise and the guidelines are covered by well-settled
principles of interpretation. [914C]
A

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 B
.1"1ging accommodation, tax shall he payable as if the usual charges had
been collected is a provision against evasion. It cannot, therefore, be
s;iid 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 c
restrictions must stem from the provisions of the law imposing the tax
which could he 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 D
luxuries enjoyed by a person in a hotel was either discriminatory or has
the direct and immediate effect of impeding the freedom of intercourse.
J. It cannot thus he said to offend Article 301 of the Constitution. [916G]

Atiabari Tea Co. v. State of Assam, [1961] I SCR 809; Firm
A. T.B. Mehtab Majid & Co. v. State of Madras, [1963] Supp. 2 SC~ E
435; Gratwick v. Johnson, [1945] 70 CLR I; Baldwin v. GAF Inc.,
[1934] US 511 and Grannallv. Marrickville Margarine Pty. Ltd., [1955]
93 CLR 55, referred to .

.J. 6.1 Section 4 of the West Bengal Act cannot he said to be beyond
~ the legislative entry. The taxable event need not necessarily be the p
~actual utilisation or the actual consumption, as the case may be, of the
·luxury. So long as the legislation has reasonable nexus with the concept
of ''luxuries" in the broad and general 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 legislation. In the
~ instant case, provision for 'luxury' in a hotel or restaurant amenable to G
a potential consumption does provide the nexus. [909C, 910F, E, HJ

Bhagwan Dass Jain v. Union of India, AIR 1981 SC 907, referred
to.

Ramesh Waman Toke & Ors. v. The State of Maharashtra, AIR H
1984 Bombay 345, overruled.
898 SUPREME COURT REPORTS [1989] 2 S.C.R.

6.2 If the provider of the luxury is also independently amenable ~
A
to the tax, the further restriction on the power would tend 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 said taxing
power under the Entry cannot be limited or conditioned in any manner
B whatsoever. [911A) >'--

6.3 Once the legislative competence and the nexus between the
taxing power and the subject of taxation is established the other inci-
•
dents are matters of fiscal policy behind the taxing law. The actual
measure of the tax, which is a matter of legislative policy and conveni-
ence, is not the same thing as, and must be kept distinguished from, the
c subject of the tax. [9118) -('

6.4 The mere excessiveness of a tax or the fact that it affects the
earnings cannot pre-se be held to violate Article 19(l)(g). [911C]

D CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 338
and 339 of 1981.

From the Judgment and Order dated 23.7.1980 of the Gujarat A
High Court in S.C.A. Nos. 405 of 1979 and 1263 of 1978.

E 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, San jay 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.

F K. Parasaran, Attorney General B. Datta, Additional Solicitor ._,,.
General P.S. Poti, G.A. Shah, Dr. V. Gauri Shankar, 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.
G The Judgment of the court was delivered by
VENKATACHALIAH, J. In these civil appeals and writ peti-
tions 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
H VII Schedule to the Constitution of India is challenged.
EXPRESS HOTELS 1·. STATE OF GUJARAT [VENKATACHAL!AH. J.] 899

;J Civil Appeal Nos. 338 and 339 of 1981, writ-petition NC!s. 7990, A
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 cf 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 B
~ corresponding Karnataka Legislation viz., the Karnataka Tax on
I~xuries (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 taxing-
- statutes, except for certain aspects individual to them, are analogous
and the scheme of the legislation is substantially similar. The varia-
tions are in the differences in the criteria of classification of the hotels C
)- to which the Act is applied and the rates of taxes. The grounds of
challenge are substantially the same. An examination of the conten-
tions urged in support of the challenge to one statute would cover the
cases of the other statutes as well.
D
2. We might take up for consideration, the provision; of the
Gujarat Act which may be considered as representative of the legisla-
tions 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. E

3. The statement of objects and reasons in the Gujarat Legisla-
tive Bill states:

"With a view to augmenting the financial resources of
the State it is proposed to levy a tax on luxury provided in F
hotels and lodging houses at the rate of certain percentages
of lodging charges recovered 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 G
treated as a luxury. This bill seeks to achieve that object."

Section 2 is the interpretation clause and defines, inter a/ia, the
expressions Bcharges for lodging", "hotel", "luxury provided in
hotel", "proprietor" occurring in clauses (a) (d) (e) and (g) respectively.
The definitions are as follows: H

•i
900 SUPREME COURT REPORTS [1989] 2 S.C.R.

"(a) "charges for lodging" include charges for aircondi- ~
A
tioning, telephone, television, 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
B lodging accommodation, with or without board is, by
way of business provided for a monetary considera- )•<
tion, and includes 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, tele-
c phone, television, 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."

D Section 3 is the charging section which provides:

"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
E him in a hotel, at the following rates, namely:

(a) Where the charges for 10 per cent "of such charges.
lodging are thirty five
rupees or more but not
more than fifty rupees per
F day per person.

(b) Where the charges for
lodging are more than
Rs.5 plus 20 per cent of
such charges in excess of ...
r
fifty rupees but not more Rs.SO per person per day.
than one hundred rupees
G per day per person.

(c) Where the charges for Rs.15 plus 30 per cent of
lodging are more than one such charges in excess of
hundred rupees per day Rs.100 per person per day:
per person.
H
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J.I 901

-i Provided that where charges for lodging are levied
otherwise than on daily basis or person, then, for the
.A
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 B
.A custo.m 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 stay-
c
ing as guests in India of any Government or of any Corpo-
ration or Company owned or controlled by Government,
or such other person as in the opinion of the State Govern-
ment it is expedient in the public interest to exempt, then
such person or persons shall be exempt from the payment D
of the tax.

(2) Where luxury is provided in a hotel to representatives
_J or employees of any company and charges for such luxury
are to be borne by the company, there shall be levied and
collected the tax from such company. E

Explanation: In this sub-section "Company" means any
body corporate and includes a firm or other association of
persons.

t- (3) The tax payable under this section shall be collected by F
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." G

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) H
902 SUPREME COURT REPORTS [ 1989] 2 S.C.R.

of section (2)), then the Collector may, from time to time, ~
A after giving the proprietor an opportunity of being heard,
fix separate rates of charges for such luxury and for food or
drink or other amenities, if any, being amenities referred to
in clause (e) of section 2 for the purpose of calculating the
tax under this Act.
B
(2) Where, in addition to the charges for luxury provided K
in a hotel, service charges are levied and appropriated t°'.
the proprietor and not paid to the staff, then, such charges
shall be deemed to be part of the charges for luxury pro-
vided in the hotel. :...
c (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 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
D 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 pro- ~
vided to the specified number of persons, there shall be
E 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
F from the person to whom the luxury was provided and who -k
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
G 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 documents and of search and seizure.
Sec. 21 confers the power to make Rules.
H
EXPRESS HOTELS v. STATE "OF GUJARAT IVEN KA TACHALIAH, J. I 903

4. The Gujarat Act seeks to levy a tax at certain percentages of
the lodging charges recovered by the proprietors of the hotels and
A
lodging houses from persons lodging therein treating the lodging-
accommodation 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 B
'recovered from persons lodging in the hotels, 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 Government a luxury tax by the c
proprietor of every hotel and restaurant in which there is
provision for luxury and such tax shall be calculated-

(a) in the case of a restaurant at the rate of an annual
sum of rupees three hundred for every ten square D
metres or part thereof in respect of so much of
the floor area of restaurant which is provided
with luxury, and

(b) in the case of a hotel at such rate not exceeding
fifteen per centum on the daily charges of a room E
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. F

5. We have heard Shri Soli J. Sorabjee, Senior Advocate, Shri
R.F. Nariman, Shri Harish Salve, Advocates for petitioners and Shri
P .S. Poli, and Shri Shah, learned Senior Advocates, for the res-
pondents.
G
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 II 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 H
904 SUPREME COURT REPORTS [1989] 2 S.C.R.

dose not include "services" or "activities''. The levy on the
A
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-
B 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 services, as the case
may be, and not the price-factor simpliciter. The essential distin-
guishing attribute is a qualitative one. Distinction based purely
on the quantitative difference in the price is not a rational crite-
c rion to identify 'luxuries'. The impost based on the mere crite-
rion 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
D 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 disting-
uishable, from 'luxuries'. Levy on such composite subject-matter
is bad.

E (e) The expression 'and the like' in the definition of
"charges for lodging" in sec. 2(a) is vague and irrational 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 (f) Sec. 4(3) which provides that tax in respect of accom-
tnodation provided free or at concessional rates be taxed as if the
full charges were deemed to have been received, is unreasonable
and offends Article 19( l)(g).

(g) The "luxury" tax imposed on the charges for lodgings
G 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 territories of India.

5. Re: Contention (a)

H The arguments of learned counsel on the first three contentions
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J.] 905

f require to be considered together as these contentions themselves A
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 secondly, 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 B
-~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 sub-
ject of taxation. The Gujarat High Court dealing with this cont,ention
held that the contention, if accepted, would diminish the content of
the Entry and reduce its scope from "taxes on luxuries" to "taxes on c
)' 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. Chamarbaugwalia & Ors., AIR 1956Bom. D
1 at page 11:

I "With regard to luxuries it is significant to note that the :-\•
~ plural and not the singu_lar is used, and the luxuries in
respect of which a tax can be imposed under entry 62 is a tax
~m goods or articles which constitute luxuries, and it is again E
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 contemp-
lated 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 F
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 G
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 \his Court in the case, the observations of the
learned Chief Justice of the Bombay High Court excerpted are re-
ndered 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 H
*
906 SUPREME COURT REPORTS [1989] 2 S.C.R.

II was taken by the Kerala High Court in A.S. Bava v. State of Kera/a,
A
[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
B Bengal, [1975] TLR 1890 at 1892 it is held:
)<._

"In these premises, we are of opinion that 'luxuries' 1

c
in Entry 62 of List II should not be confined to articles or
objects of luxury alone. In view of the social and economic
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 i
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
D 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 legisla-
ture is competent to impose a tax on this luxury." _,l

E 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 -"'-
F all ancillary and subsidiary 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 Legi~lature under Sec. 100 of
G 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 includ-
ing 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
H on persons who provide the luxuries, entertainment or amusements. It

!1
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH,J.J 907

.J- was contended that those who provide the luxury·etc., did not them- A
selves receive or enjoy the luxury or entertainment or amusement, but
were simply carrying on their profession or trade and were not amen-
able to be taxed under that Entry. Rejecting the argument it was said:

" ..... In view of this well established rule of interpreta-
tion, there can be no reason to construe the words 'taxes on B
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 amuse-
·ments as objects on which the tax is to be imposed. If the
words are to be so regarded, as we think they must, there c
can be no reason to differentiate between the giver and the
receiver of the luxuries, entertainments, or amusements
and both may, with equal propriety, be made amenable to
the tax ..... "
(Emphasis supplied) D

The concept of ;luxuries' as a subject of tax was not confined to those
who received or enjoyed the luxury. It could be on.those who provided
it.

. In Encyclopaedia Britannica the meaning of' the word 'luxury- E
tax' is set-out thus:

"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,
perfume and tobacco." F

• In Webster's Comprehensive Dictionary, International Edition,
the word 'luxury' is defined:

"Luxury : 1. A free iQdulgence in the pleasures that gratify
the senses. 2. Anything that ministers to comfort or plea- G
sure that is expensive or rare, but is not necessary to life,
health subsistence, etc; a delicacy."

Luxury connotes extravagance or indulgence, as distinguished
from the needs and necessities of life.
.H
908 SUPREME COURT REPORTS [1989] 2 S.C.R.

'The New Dictionary of Thoughts' has these thoughtful things to
A
say of "luxury":

"On the soft bed of luxury most kingdoms have
expired.-Young.

B 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.
c
The concept of a tax on 'luxuries' in Entry 62, List II cannot be •f
limited merely to tax things tangible and corporeal 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,
D intoxicating-liquor, tobacco, etc., could be called articles of luxury.
But the legislative entry cannot be exhausted by these cases, illustra-
tive of the ·concept. The entry encompasses all the manifestations or
emanations, the notion of 'luxuries' can fairly and reasonably be
said to comprehend. The element of extravagance or indulgence that ,..l
differentiates 'luxury' from 'necessity' can not be confined to goods
E 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 Kera/a, [1976] 2 SCR 690
at 699-700 Khanna J. said:

F " .... 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 some-
G thing which conduces enjoyment over and above the neces-
saries 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
H luxury although the expenditure may be of a nature which
)
EXPRES~HOTELS" STATEOFGUJARAJ[VENKATACHALIAH,JJ 909

is incurred by a large nurn~er of people, including those not
economically well-off .. i ."
)
A

The submission of Shri Sorabjee, '_if accepted, will unduly restrict the
scope of the legislative-Entry whic. should otherwise have the widest
l. and the most-liberal meaning and c nnotation given to it. Contention
~ (a), in our opinion, is unacceptable. B

)8. Re: Contention (b):
This contention pertains to a p ovisiori particular to the West
Bengal legislation. It is urged that in s 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 luxur is not utilised by any person, C
•· 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 pro :vi ding 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 D
under Article 19(1)(g).

Reliance was also placed on certain bservations in Western
'-. India Theatres Ltd. 's case (supra). The passage in the judgment relied
1
upon by Shri Sorabjee merely says that both th~iver and the receiver
of the luxuries are amenable to be taxed. THe decision cannot be E
understood as laying down the proposition tha 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 poten~ial utilisation of the
luxury. \
i
In support of the proposition that a tax on luxluries must relate to F
and be based on an actual utilization of the luxury ,jnd not on the mere
• existence of the means of providing 'luxury' Sri So1·abjee 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
l List II imposing a tax on entertainment held: G

" ..... In our opinion, this is not a tax on entertainmen.t at
all which the State Legislature is entitled to .levy undOir item
62 of the State List. In order that the entertainment'i:!uty
should amount to a tax on entertainment it should be levied
on entertainment which is actually held and not on enter- H
(
910 SUPREM~ COURT REPORTS [1989] 2 S.C.R.

A tainment which is \heoretically capable of being held.
Looking to the prO\ 'isions which have been examined in
+
detail it is clear to u;1 that. the said provisions do not take
into account entertai. nment that is actually held by the
owner of the touringr cinema or the owner of the video ~
exhibition. The batisn which tax can be validly levied is ,
B the fact of entertai ent. The taxing event is the entertain-
ment. If there is n entertainment at all, the question of
levying entertain ent tax in exercise of the legislativef.
powers conferred pon the State Legislature does not arise
at all. If the Act p rports to levy tax on notional entertain-
ment then the ex ;rcise of that taxing power must be held
to be ultra vires e Constitution. This is exactly what has
c happened in the· nstant case."

There might possibly be s e distinction between the ideas of 'enter-
tainment' and 'luxuries'. With due respect to the High Court, the
interpretation that com nded itself to the High Court would unduly
D restrict the scope of the 1 gislative Entry. On such an interpretation, it
might be possible for a erson to go further and also contend that no
'entertainment' was ac aliy derived. The concept of 'luxuries' in the
legislative Entry takes ithin it everything that can fairly and reason-
ably be said to be co prehended in it. The actual measure of the levy
is a matter of legislati•~e policy .and convenience. So long as the legisla-
E tion has reasonable r/iexus with the concept of 'luxuries' in the broad
and general sense in/i:vhich the expressions in legislative tests are com-
prehended, the le!j!!slative competence extends to all matters 'with
respect to' that fielcll of topic of legislation.

The taxable /event need not necessarily be the actual utilisation
F or the actual con~umption, 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 ancL.there must be an actual and not merely a notional or
potential, cons.umption or utilisation of the luxury. As an instance of
what can be said to be fairly and reasonably comprehended in a legisla-
G tive 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 per.mnal occupation or a property not actually let. In that context
this Court said "that which can be converted into an income can be
reasonabiy regarded as giving rise to income" (See: Bhagwan Dass
Jain v. Union of India, AIR 1981 SC 907). A luxury which can reason-
H ably be said to be amenable to a potential conception does provide the
nexus.
EXPRESS HOTELS v. STA TE OF GUJARAT [VENKATACHALIAH, J.] 911

If the provider of the luxury is also independently amenable to
the tax, the further restriction on the power suggested by the.argument A
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 conditioned in the
manner suggested. Once the .legislative competence and the nexus bet- B
ween 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 disting-
uished 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 C
its actual utilisation, is concerned it is settled law that the mere exces-
siveness 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.
D
8. Re: Contentions (c) and fd):

These contentions were somewhat attractively presented and
bear close scrutiny. Shri Sorabjee urged that the concept of "luxuries"
is a relative or comparative idea, distinguishable from "necessities" by
the special attribute or quality of distinction inherent in them. The E
articles or activities of luxury could be identified as such only 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 clas-
sed as luxury is on the sole basis of the price alone, then the legislative F
definition or the means of identification of the luxury becomes ,irra-
tional as it has the effect of substituting price in place of the special
quality. The two ..are not the samething. 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.
G
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 certairi 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 contemporary H
912 SUPREME COURT REPORTS [1989] 2 S.C.R.

standards of living. What might have been a 'luxury' some decades ago
A
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:

B "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- i
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
another country or for those living in a different climate. A
c number of factors may ·have to be taken into account in
ad judging 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
D luxurious by contemporary standards by reason of the higher stan-
dards of charges payable for the accommodation. Legislature has
chosen to identify the luxury by the statutory standards prescribed by
it. According to the legislative assumption, price does become evi-
dence of the special quality on the basis of which 'luxuries' could be
distinguished and that some special quality is attributable to goods and
E services through the means of the price. Quality and price, in the
legislative assessment, can be assumed to have a logical inter-rela-
tionship. 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
F accommodation, the means of identification so adopted cease to dis-
tinguish 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 luxuries 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
G 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 accommoda-
tion 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
H which have to them the additional element of undue elegance to a
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J. I 913

i point of extravagance and indulgence might become luxuries. Though
the arguments on these contentions were not without their interesting
A
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 answered
against the petitioners and the appellants. B

.~ 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-Explana-
tion to the provision. Sec. 2(a) defines "charges for lodging" to include
'charges for airconditioning, telephone, television, radio, music,
c
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 unde-
fined 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 calle~ in question in D
any court aggravates the arbitrariness and constitutes an unreasonable
restriction and is violative of Article 19(l)(g). Reliance was placed on
the decision of this Court in Corporation of Calcutta v. Calcutta Tram-
ways Co., [1964]5SCR25.

We are afraid, the argument overlooks certain relevant factors E
bearing on the point. It is, no doubt, true that it has been held in
several cases that the absence of a provision for a corrective-
machinery, by way of appeal or revision, 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 F
found in the provisions for conferment of the power themselves. 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 provision unconstitutional. In Babu Bhai v. State of
Gujarat, [1985] 2 SCC 732 at 736 this Court said: G

" ..... in other words mere absence of a corrective
machinery 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 H
914 SUPREME COURT REPORTS [1989) 2 S.C.R.

conferred-whether .on a high official or a petty officer, ~·
A
what is the nature of the power-whether the exercise
thereof 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 ...... "
B
There are in-built checks on the power under Explanation to
sec. 2(a). The expression 'and the like' would require to be construed f
ejusde.m-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 itself, is a
c clear guide for the exercise of the power. Another relevant considera-
tion 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
D guides governing its exercise and the guide-lines are governed by well
settled principles of interpretation. There is no substance in conten-
tion (e ).

11. Re: Contention (f):

E 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 concessional rates are charged. The deem-
ing provision does not apply to cases where accommodation is pro-
vided free or at commercial rates to the employees of the hotel. No
fault can be found with this provision which merely states that where
F 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. Contentio!J (f) requires to be
rejected.

G 12 Re: Contention (g):

Shri R.F. Nariman, learned counsel, who addressed arguments
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
H the freedom of "trade, commerce and inter-course" and offends Art.
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH,J.] 915
·~··
301. Learned counsel submitted "that business undoubtedly is com'
A
merce but is. something more., it is intercourse". Th~ word "inter-
course" 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 Presiqential sanction B
6 had been obtained for the introduction of the legislative measure arose
· for consideration. It has been held that only such taxes as are directly
and .immediately restrictive of trade, commerce and inl~rcourse 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 C
learned author may be recalled:

"The lengthy series qf judicial decisions on the mean-
ing 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 political D
slogan rather than a legal pr~cept. Rich J once pithily
described the lot of the High Court in relation to s. 92 as
being "to explain the elliptical and expound the unexpres-
sed", 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 E
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 Australian High Court in F
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 commonwealth to any other State without a
permit from a commonwealth 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". G

In Atiabari Tea Co. v. State of Assam, [1961] 1SCR809 at 860-61
this Court said:

" ..... in determining the limits of the width and amplitude
of the freedom guaranteed by Art. 301 a rational and work- H
)
916 SUPREME COURT REPORTS [1989] 2 S.C.R.

A 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 directrestrictions on the
very movement of such goods it attracts the provisions of
B 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 restric-
tions on trade, commerce and intercourse, if they hamper
c 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
E under Art. 301. But the restriction 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,
F one of the utmost significance to economic unity of the nation. Under-
lying the need for and the recognition of the freedom.of inter-State
trade, con1merce and intercourse, one is tempted to refer to the lofty
sentime.nts of Justice Cardozo in Baldwin v. GAF Inc., I1934 I US 511
that "it was framed upon the theory that peoples of several States must
sink or swim together and that in the long run the prosperity and
G 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 isolation".

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
H has the direct and immediate effect of impeding the freedom of inter-
EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J.] 917

+ course. In Granna/l v. Marrickville Margarine Pty. Ltd., [1955] 93 A
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. Repel-
ling the challenge, it was held:
B
"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 impor- C
talion 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). D

13. In the result, for the foregoing reasons, the writ petitions
and the appeals are dismissed. But, in the circumstances, there will be
no order as to costs.

P.S.S. Appeals dismissed. . E