M SRINIVAS Vs. UNION OF INDIA

JUDGEMENT

(1.) The constitutionality of the amendments made to Sections 2 to 5,7 and 15 of the Expenditure Tax Act, 1987 (for short "the Act") by the Finance (No.2) Act, 1991 is under challenge in this batch of writ petitions. Except in W.P. No.14175 of 1991, the petitioners in the other writ petitions are hoteliers; in W.P.No.14175 of 1991, the petitioner is a practising advocate. Because of commonality of questions involved for adjudication, we are inclined to dispose of all the writ petitions by this common judgment.

(2.) The Act of 1987, as it stood prior to the amendment Act of 1991, was enacted to provide for the levy of a tax on expenditure incurred in certain hotels. Section 3 laid down that the Act shall apply:

(3.) The constitutionality of the Act fell for consideration before a Constitution Bench of the Supreme Court in Fedrn. of Hotel & Restaurant Assn. vs. Union of India. On three grounds the Act was attacked: (i) In its true nature and character it is not an Act relating to expenditure tax, but in pith and substance, it is a tax on luxuries falling within Entry 62 of List II of the Seventh Schedule or a tax envisaged in Entry 54 of List II and, therefore, dearly outside the legislative competence of the Union Parliament, (ii) It was violative of Article 14 in that the classification of hotels for the purpose of imposition of tax was arbitrary and unintelligible without any rational nexus with the taxing policy; and (iii) the Act was violative of the fundamental right guaranteed under Article 19(1)(g) as it imposed unreasonable and onerous restrictions on the petitioners - hoteliers - to carry on their business. All the three contentions were negatived by the Supreme Court.