I.K. Kotwal, J.
1. This judgment will dispose of Writ Petitions Nos. 286, 343, 250, 341, 342, 337, 362, 363, 332 and 283 of 1980 and Writ Petition No. 77 of 1981, the decision whereof turns upon the constitutional validity of the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980, hereinafter to be referred to as the Act.
2. By enacting the Act, the State of Jammu and Kashmir, respondent No. 1 herein, seeks to impose tax on amenities and services provided to customers, resident or casual, by a hotel-keeper. This tax, in terms of Section 3, which is the charging section, is to be charged on the basis of tariff at the rates specified in the schedule to the Act. Sub-section (2) of Section 3 makes provision for exemption in favour of the Government and certain banks and institutions. Tariff has been denned by Clause (u) of Section 2 to mean 'rent or other charges, by whatever name called, received or receivable by the hotel-keeper in consideration of amenities and services to a resident or casual visitor and where no rent or other amount is charged it shall mean the amount at which such amenities and services can be ordinarily provided in the hotel'. Every hotel-keeper who is liable to pay tax under the Act has to obtain a certificate of registration in accordance with the Rules made under the Act. He has to furnish quarterly returns of the tariff to the Taxation Officer, and every such return must accompany the proof of payment of the tax due on such return. Besides, he has to furnish annual return of tariff in respect of every accounting year within sixty days from the expiry of such year. In case the Taxation Officer finds that a hotel-keeper has not furnished any such return, he shall issue a notice to him requiring him to furnish the same within fifteen days from the date of service of the notice. On the hotel-keeper's failure to furnish the return pursuant to the service of the said notice, the Taxation Officer may himself make ex parte assessment order after taking into account the material which is on the record or which he has gathered. This assessment he has to make in accordance with the best of his judgment. But, even before making such assessment, he shall again issue a notice to the assessee requiring him to produce such accounts or documents before him, as the Taxation Officer may require for the purpose of assessment. A hotel-keeper who has not furnished the return within the time allowed to him by the Taxation Officer, may still furnish the return for any accounting year at any time before the end of two years after the expiry of the relevant assessment year. But, in that case he will be liable to pay interest on the sum due in terms of Sub-section (3) of Section 12 of the Act. In case the Taxation Officer is satisfied that the annual return furnished under Section 5 is correct and complete, he shall make assessment and determine the sum payable on the basis of such assessment, and where he finds that an excess amount has been paid by way of tax along with the quarterly returns, he shall order refund of that amount to the assessee. In case he is not satisfied with the return, he may make further enquiry after issuing a prior notice to the assessee. Section 24 of the Act gives a right of appeal to the assessee who is aggrieved by an order passed by the Taxation Officer. Section 26 empowers the Commissioner to revise.an order passed by any authority subordinate to him, in case he is not satisfied with the correctness, legality or propriety of the order passed by it. Section 13 authorises the hotel-keeper to charge the tax payable under the Act from his customers and enjoins upon him to pay to the Government the tax collected by him within a period of thirty days from the expiry of each quarter, and where he fails to do so, he is liable to pay interest on it in terms of Section 12. This, in brief, is the scheme of the Act.
3. The petitioners are doing hotel business at various places in the State of Jammu and Kashmir under different names and styles. They provide to their customers all the necessary facilities of lodging and boarding, and some of them also provide luxuries like hair-dressing, beauty-parlour, central air-conditioning and piped channel music. They have taken a number of grounds in support of their petitions but have relied upon only some of them during the course of final arguments giving up the rest. Their case, as put forth during the course of arguments, is that the Jammu and Kashmir General Sales Tax Act, 1962, has been suitably amended and the Act enacted by the Government merely to circumvent certain decisions given by the Supreme Court excluding the imposition of sales tax on the food supplied by a hotel-keeper or other services and amenities provided by him to his customers. To levy such a tax was beyond the competence of the State Legislature, for it in fact is a tax on the gross receipts of a hotel-keeper and, therefore, a tax on his income, which Parliament alone could have imposed in terms of entry No. 82 of' List I of the Seventh Schedule to the Constitution of India-. The levy of the tax was also bad, in that, it amounted to double taxation as tax was being charged twice on the same subject-matter, i. e., once under the Jammu and Kashmir General Sales Tax Act, 1962, and again under the Act.
4. It also affected the petitioners' fundamental right to carry on trade and business guaranteed to them under Article 19(1)(g) of the Constitution, and the same not being a reasonable restriction imposed in the interests of the general public, was not saved under Clause (6) thereof. Section 3, which is the charging Section, is also violative of Article 14 of the Constitution, inasmuch as, it subjects the petitioners who are running hotels on commercial basis to hostile discrimination, by exempting from the payment of the tax hotels run on similar basis by educational, charitable and religious institutions, as also those run by the scheduled, chartered or nationalised banks, and guest-houses run by the Government. The hotel-keeper being himself liable to pay the tax out of his gross receipts, the same was confiscatory in character. Section 3, which is the charging section, being constitutionally invalid, the entire Act is unconstitutional, for the Act can no more remain workable, once Section 3 is taken out of it.
5. The State has defended the Act by pleading that the tax sought to be recovered is not a tax on income, but a tax on amenities and services to be charged on the basis of tariff. Entry No. 82 of List I of the Seventh Schedule not being attracted to such a tax, and List II of the Seventh Schedule not having been made applicable to the State of Jammu and Kashmir, it had under Section 5 of the Constitution of Jammu and Kashmir ample powers to impose the impugned tax. This power has not been exercised to circumvent any Supreme Court decision, nor is the tax confiscatory in nature, as the incidence of the tax is not upon the hotel-keeper, but upon the customer himself. A hotel-keeper would be liable to pay it only in case he has failed to realise it from his customer. Section 3 is not discriminatory in character because the Government, the banks, and the institutions exempted under it from payment of the tax are different classes in themselves. The plea of double taxation is also without substance. The Government by issuing SRO No. 490 dated 17th September, 1980, has exempted amenities and services from sales tax under the Jammu and Kashmir General Sales Tax Act, 1962, with effect from 1st July, 1980, in case the same have been already taxed under the Act.
6. Section 3, which is the main target of attack, is reproduced as below :
3. Charge of tax.-(1) In accordance with and subject to the provisions of this Act, every hotel-keeper shall pay for each accounting year tax on amenities and services provided to resident or casual visitors on the basis of tariff at the rates specified in the schedule annexed to this Act.
(2) Notwithstanding anything contained in Sub-section (1), nothing in this Act shall apply to the following classes of hotels :-
(i) boarding and lodging houses run by educational, charitable and religious institutions,
(ii) guest-houses belonging to the State Government or Central Government for the use of departmental officials only,
(iii) guest-houses maintained by a nationalised or a scheduled bank, nationalised insurance company or a-university or legislator's hostels.
7. The principal contention raised on behalf of the petitioners is that the tax sought to be imposed being a tax on income, which Parliament alone is competent to impose by enacting a law in terms of entry No. 82 of List I of the Seventh Schedule, the Act was beyond the competence of the State Legislature, There can be no quarrel with the proposition. But, it is equally true that any other tax the power to impose whereof does not exclusively vest in Parliament, may be imposed by the State Legislature by enacting a law to that effect in exercise of its powers under Section 5 of the Constitution of Jammu and Kashmir. Section 5 reads as under :
5. Extent of executive and legislative power of the State.-The executive and legislative power of the State extends to all matters except those with respect to which Parliament has power to make laws for the State under the provisions of the Constitution of India.
8. Basing their case on the view taken by the Supreme Court in State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. : 1SCR379 that supplying material in execution of a works contract treating it as a sale of goods by the contractor was not a 'sale', the petitioners in Mithan Lal v. State of Delhi : 1SCR445 had challenged the legislative competence of the State of West Bengal to enact the Bengal Finance (Sales Tax) Act, 1941, in exercise of the powers vested in it under entry No. 48 of List II of the Seventh Schedule to the Government of India Act, 1935, which had been made applicable to the Union Territory of Delhi by Parliament by enacting the Part C States (Laws) Act, 1952. The contention raised on behalf of the petitioners was that in the absence of a distinct agreement to that effect, a Provincial Legislature in exercise of its powers under entry No. 48, as held by the Supreme Court in State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. : 1SCR379 had no power to tax a transaction relating to supply of materials in works contract by merely denning such a transaction as a sale when in fact it was not. The plea raised in reply on behalf of the State was that even though the State Legislature had no such power under entry No. 48, yet the Parliament in terms of Article 246(4) of the Constitution had plenary powers to enact any law for, Part C States and this power was untrammelled by the three lists of the Seventh Schedule to the Constitution. Their Lordships accepted the plea raised on behalf of the State and distinguishing their earlier decision in State of Madras v. Gannon Dunkerley and, Co. (Madras) Ltd. : 1SCR379 held :.It is with reference to the corresponding entry in the Government of India Act, 1935, entry 48 in List II, that we have held in Civil Appeal No. 210 of 1956 [State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd.] : 1SCR379 that the power to tax sale of goods conferred by that entry has reference only to sales as defined in the Sale of Goods Act, 1930. But here, we are concerned not with a law of a State mentioned in Part A or Part B but with that of a State in Part C. Under Article 246(4) it is Parliament that has the power to legislate for Part C States, and that power is untrammelled by the limitations prescribed by Article 246, Clauses (2) and (3), and entry 54 of List II, and is plenary and absolute, subject only to such restrictions as are imposed by the Constitution, and there is none such which is material to the present question. It would therefore be competent to Parliament to impose tax on the supply of materials in building contracts and to impose it under the name of sales tax, as has been done by the Parliament of the Commonwealth of Australia or by the Legislatures of the American States. The decision in Civil Appeal No. 210 of 1956 [State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd.] : 1SCR379 , which was given on a statute passed by the Provincial Legislature under the Government of India Act, 1935, has therefore no application to the present case.
9. Article 246(4) which was relied upon by their Lordships is reproduced as below :
Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.
10. Section 5, it is manifest, is infiari materia with Article 246(4). Power of the State to enact law imposing a tax which is not the exclusive domain of Parliament is, therefore, absolute and untrammelled by what is contained in Lists II and III of the Seventh Schedule. If the impugned tax cannot be said to be a tax on income, then there can be no manner of doubt, that the State Legislature had ample powers to enact the Act imposing the same. A similar view was taken by this Court in M. S. Naqashbandi v. State of Jammu and Kashmir AIR 1968 J & K 105.
11. The tax is said to be a tax on income : firstly because it is imposed on the tariff which in other words is the gross income of a hotel-keeper and, secondly, because the hotel-keeper himself has been made liable to pay the tax. In J. K. Jute Mills v. State of Uttar Pradesh : 2SCR1 , the legislative competence of the State of Uttar Pradesh in enacting Section 3 of the U. P. Sales Tax (Validation) Act, 1958, was challenged; The Government of U. P. had issued a notification on 31st March, 1956, imposing sales tax on jute goods in exercise of its powers under Section 3-A of the U. P. Sales Tax Act, 1948. The notification was challenged with success in the Allahabad High Court in Adarsh Bhandar v. Sales Tax Officer : AIR1957All475 on the ground that the same was null and void as Section 3-A under which it had been issued came into force a day later, i. e., on 1st April, 1956. Another amendment making Section 3-A effective from 31st March, 1956, was also held by the same court to be insufficient to validate the notification, as a consequence whereof Section 3 was enacted by virtue of the Validation Act of 1958, which declared that all notifications, including the impugned one, issued in exercise of the powers conferred retrospectively by Section 3, Section 3-A and Section 4 of the U. P. Sales Tax Act, 1948, shall be deemed to have been issued under these Sections, as if these were in force on the day the notification came to be issued. Since Section 3 of the Validation Act, 1958, sought to validate the impugned notification which pertained to a period much anterior to it, i.e., the period between 1st April, 1956, and 31st July, 1956, it was urged on behalf of the petitioners that the Validation Act was beyond the legislative competence of the State of U. P., as the taxing event therein could not be the sale that had already taken place. Reliance was placed upon the observations made in Province of Madras v. Boddu Paidanna and Sons AIR 1942 FC 33, that sales tax was a tax on the occasion of sale, which could not be imposed with retrospective operation. It was also contended that sales tax being an indirect tax, its necessary characteristic was that it could be passed on by the seller to the purchaser. Since Section 3 sought to impose tax on sales which had taken place more than two years back, affording no opportunity to the seller to pass on the burden of the tax to the purchaser, it lacked both the characteristics of a sales tax. The court rejected both the contentions and held that the the words 'on the occasion of sale' occurring in Province of Madras v. Boddu Paidanna and Sons AIR 1942 FC 33 in the context the same were used, referred to its character and not to the point of time of the transaction, and in case the transaction was a sale then the legislature had ample powers to levy the tax even retrospectively. Whether the incidence of the tax in such an event should fall on the seller, or on the buyer, was a matter of policy, which did not affect the competence of the legislature to enact the law. Power of the legislature to enact a law on a topic entrusted to it was unqualified and subject only to the limitations imposed on it by the Constitution. Repelling the petitioners' aforesaid contentions, their Lordships observed :.It is no doubt true that a sales tax is, according to accepted notions, intended to be passed on to the buyer, and provisions authorising and regulating the collection of sales tax by the seller from the purchaser are a usual feature of sales tax legislation. But it is not an essential characteristic of a sales tax that the seller, must have the right to pass it on to the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making a provision for sellers to collect the tax from the purchasers. Whether a law should be enacted, imposing a sales tax, or validating the imposition of sales tax, when the seller is not in a position to pass it on to the consumer, is a matter of policy and does not affect the competence of the legislature....
12. And, again :
The power of a legislature to enact a law with reference to a topic entrusted to it is, as already stated, unqualified subject only to any limitation imposed by the Constitution. In the exercise of such a power, it will be competent for the legislature to enact a law, which is either prospective or retrospective. In Union of India v. Modem Gopal : 25ITR58(SC) , it was held by this court that the power to impose tax on income under entry 82 of List I in the Seventh Schedule to the Constitution, comprehended the power to impose income-tax with retrospective operation even for a period prior to the Constitution. The position will be the same as regards laws imposing tax on sale of goods....
13. A similar view was taken by the Supreme Court in S. Kodar v. State of Kerala : 1SCR121 . In that case the constitutional validity of the Tamil Nadu Additional Sales Tax Act (14 of 1970) was challenged on the grounds : firstly, that the additional sales tax being in effect a tax on income, the State Legislature was not competent to enact it; secondly, that the additional tax being recoverable from the dealer himself as confiscatory in nature, and its imposition created an unreasonable restriction on the dealer's right to carry on business and to acquire or hold property guaranteed by Clauses (f) and (g) of .Article 19(1) of the Constitution; and thirdly, that the Act was also violative of Article 14, as it fixed two different rates for realisation of the tax from the dealers similarly situated. The Act sought to impose additional sales tax at the rate of 5 per cent from dealers whose turnover for a year exceeded ten lakhs of rupees. There was also a provision in the Act that forbade the dealer from charging the additional tax from the purchaser. Repelling the contention that the tax was in effect a tax on income, their Lordships held :
As regards the contention that the State Legislature has no power to pass the measure, we are of the view that the additional tax is really a tax on the sale of goods. The object of the Act, as is clear from its provisions, is to increase the tax on the sale or purchase of goods imposed by the Tamil Nadu General Sales Tax Act, 1959, and the fact that the quantum of the additional tax is determined with reference to the sales tax imposed would not alter its character. It may be noted that the additional tax is to be imposed only if the turnover of a dealer exceeds Rs. 10 lakhs. It is in reality a tax on the aggregate of sales effected by a dealer during a year. The additional tax, therefore, is an enhancement in the rate of the sales tax when the turnover of a dealer exceeds Rs. 10 lakhs a year and it is a tax on the aggregate of the sales effected by the dealer during the year. The decision in Ernakulam Radio Company v. State of Kerala  18 STC 445, which was affirmed by a Division Bench of the Kerala High Court in Kilikar v. Sales Tax Officer  21 STC 252 took that view. The same view was taken by the Andhra Pradesh High Court in A. S. Rama-chandra Rao v. State of Andhra Pradesh  24 STC 133. This is the correct view. Entry 54 in List II authorises the State Legislature to impose a tax on the sale or purchase of goods. So, the contention of the appellants that the additional sales tax is not a tax on the sales but on the income of the dealer is without any basis.
14. The court also negatived the other contentions that the sales tax imposed an unreasonable restriction on the right of the dealer to carry on business and that the Act was confiscatory in nature because the burden of the tax could not be shifted on to the purchaser. In holding so, the court relied upon its earlier decision in J. K. Jute Mills Co. Ltd. v. State of Uttar Pradesh : 2SCR1 . The following observations made by their Lordships make the position abundantly clear :
As regards the second contention that the provisions of the Act areviolative of the fundamental rights of the appellants under Article 19(1)(f) and 19(1)(g), as the tax is upon the sale of goods and is not shown to be confiscatory, it cannot be said that the provisions of the Act impose any unreasonable restrictions upon the appellants' right to carry on trade. It is, no doubt, true that every tax imposes some restriction upon the right to carry on a business; but it would not follow that the imposition of the tax in question is an unreasonable restriction upon the appellants' fundamental right to carry on trade. Generally speaking, the amount or rate of a tax is a matter exclusively within the legislative judgment and as long as a tax retains its avowed character and does not confiscate property to the State under the guise of a tax, its reasonableness is outside the judicial ken.
* * *The legal incidence of a tax on sale of goods under the Tamil Nadu General Sales Tax Act, 1959, falls squarely on the dealer. It may be that he can add the tax to. the price of the goods sold and thus pass it on to the purchaser. But it is not necessary that the dealer should be enabled to pass on the incidence of the tax on sale to the purchaser in order that it might be a tax on sales of goods.
In J.K. Jute Mills Co. v. State of U.P. : 2SCR1 , this court said, although it is true that sales tax is, according to accepted notions, intended to be passed on to the buyer, and provisions authorising and regulating the collection of sales tax by the seller from the purchaser are a usual feature of sales tax legislation, it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making a provision for sellers to collect the tax from the purchasers.
* * *As we said, the additional tax is a tax upon sales of goods and not upon the income of a dealer and so long as it is not made out that the tax is confiscatory, it is not possible to accept the contention that because the dealer is disabled from passing on the incidence of tax to the purchaser, the provisions of the Act impose an unreasonable restriction upon the fundamental rights of the appellants under Article 19(1)(g) or 19(1)(f).
15. As regards the last contention that the Act was violative of Article 14, it was held that the dealers whose yearly turnover exceeded rupees ten lakhs constituted a superior class on the basis of their economic superiority and economic wisdom of a tax was within the exclusive province of legislature.
16. These authorities provide a complete answer to almost all the contentions raised on behalf of the petitioners, including the one, that the impugned tax is a tax on income. It is no doubt an indirect tax, but the legislature has taken care to confer a right on the hotel-keeper to charge it from his customers. It is clearly borne out from Section 13 of the Act, which says that a registered hotel-keeper shall be authorised to charge the tax due on the tariff under the provisions of the Act. If a hotel-keeper recovers the tax from his customers along with his other dues, then he fails to understand as to how such a tax can be said to be a tax on his income, even if it were to be assumed for the moment that income necessarily includes gross income. It is only in the event of his failure to charge it from his customer that a hotel-keeper shall have to pay the tax himself. Here he voluntarily takes the burden of the tax upon himself, which he could have under Section 13 easily passed on to his customer. In such a case he shall have to take the burden, for that is the only way in which the Government can safeguard its rights to recover the tax due to it. It is not supposed to run after the customer for its recovery where the hotel-keeper has failed to recover the tax from him. If he has to pay the tax for such default, he only suffers for the default.
17. Nor can the tax be said to be a tax on the income on the other ground that it is chargeable on the basis of tariff. Tariff, which is undoubtedly the gross income of a hotel-keeper, has not in fact been taxed, but has been merely used as a measure to quantify the tax payable under the Act. To be more precise the taxing event is not the receipt of gross income by a hotel-keeper, but it is in fact the provision of amenities and services by him to his customers. The language employed in Section 3 is quite distinct and unambiguous which does not admit of any equivocation. There is nothing in the Constitution of India, or for that matter in the Constitution of the State of Jammu and Kashmir, which detracts from or otherwise limits the powers of the State Legislature to enact a law imposing such a tax in exercise of its powers under Section 5 of the Constitution of Jammu and Kashmir. The impugned tax would not have lost its true character and become a tax on income, even if there were to be no provision in the Act authorising a hotel-keeper to recover the same from his customers, for in that event it would have in their Lordships' words been a matter of sheer policy not affecting the competence of the State Legislature to enact the Act. The State Legislature acting within its own legislative field had undoubtedly the power of a Sovereign Legislature to enact the Act forbidding the hotel-keeper to pass on the incidence of the tax to his customer. I am, therefore, clearly of the opinion that the impugned tax is not a tax on income, but is on the other hand a tax on the amenities and services, which a hotel-keeper provides to his customer, and the State Legislature was thus competent to enact the Act imposing the same in exercise of its plenary powers under Section 5 of the Constitution of Jammu and Kashmir.
18. Needless to repeat, the other contentions of the petitioners that the Act creates unreasonable restrictions on the right of the petitioners to carry on trade or business or to hold or acquire property, guaranteed to them under Article 19, are wholly untenable and have been clearly repelled by their Lordships as is obvious from their observations reproduced heretofore. The petitioners have failed to show as to how the Act is confiscatory. The mere fact that a hotel-keeper may have to pay the tax out of his gross receipts on his failure to charge the same from his customers can hardly make the Act confiscatory. Provisions in a taxing statute that are aimed at preventing evasion of tax cannot per se be confiscatory, nor do they constitute any unreasonable restriction within the meaning of Article 19(1) (f) and (g) of the Constitution. Equally untenable is the contention that the Act is a measure of double taxation as it proceeds to tax the same subject-matter twice, i. e., once under the Jammu and Kashmir General Sales Tax Act, 1962, and again under the Act. In exercise of the powers conferred by Section 5 of the Jammu and Kashmir General Sales Tax Act, 1962, the Government by issuing a notification (SRO No. 490 dated 17th September, 1980) has exempted amenities and services in a hotel, which are liable to be taxed under the Act, from the levy of sales tax with effect from 1st July, 1980, leaving no room for double taxation. That apart, unless it has any other constitutional infirmity inherent in it, there is no prohibition for taxing the same subject-matter twice. Section 114 of the Constitution of Jammu and Kashmir, which corresponds to Article 265 of the Constitution of India, does not create any such bar. This is borne out from the following observations made by their Lordships in Avinder Singh v. State of Punjab : 1SCR845 :.A feeble plea that the tax is bad because of the vice of double taxation and is unreasonable because there are heavy prior levies was also voiced. Some of these contentions hardly merit consideration, but have been mentioned out of courtesy to counsel. The last one, for instance, deserves the least attention. There is nothing-in Article 265 of the Constitution from which One can spin out the constitutional vice called double taxation. (Bad economics may be good law and vice versa). Dealing with a somewhat similar argument, the Bombay High Court gave short shrift to it in Western India Theatres : AIR1954Bom261 . Some undeserving contentions die hard, rather survive after death. The Only eiptaph we may inscribe is : Rest in peace and don't be reborn ! If on the same subject-matter the legislature chooses to levy tax twice over there is no inherent invalidity in the fiscal adventure save where other prohibitions exist.
19. This brings me to the last contention relating to the discriminatory character of the Act. Even though class legislation does not, yet reasonable classification' does survive the attack of Article 14. It is well-settled that like any other law a taxing law also cannot claim immunity from the equality class of the Constitution. But, it is equally well-settled that as compared to other laws, the discretionary powers of the legislature to make classifications in laws dealing with taxation matters is much wider. While dealing with the question of the application of Article 14 to taxation laws, their Lordships in Khandige Sham Bhat v. Agricultural Income-tax Officer : 48ITR21(SC) held :.Taxation law is not an exception to this doctrine vide Purshottam Govindji v. B.M. Desai : 1956CriLJ129 and K. T. Moopil Nair v. State of Kerala : 3SCR77 . But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the legislature to classify is of 'wide range and flexibility' so that it can adjust its system of taxation in all proper and reasonable ways.
20. The object of the Act, as appears from the statement of its objects and reasons, is twofold : firstly, to develop tourist spots in the State of Jammu and Kashmir and, secondly, to provide better amenities to the tourists visiting the State. The revenue needed to meet these requirements is also to come from the tourists themselves, as the primary incidence of the impugned tax in terms of Section 13 is on them. However, on his failure to recover the tax from his customers, the hotel-keeper has to pay it from his own income. Tourists, by and large, live in hotels which are run on commercial basis with the object of earning profit. They, as well as the hotel-keepers are supposed to bear the burden of the tax imposed under the Act. As against this, the boarding and lodging houses run by educational, charitable or religious institutions are run on no-profit basis, generally for the benefit of the students, the poor and the destitute. The same is true of university or legislator's hostels, guest-houses belonging to the State or the Central Government which are meant for the use of departmental officials, only and guest-houses maintained by nationalised or scheduled banks, or by nationalised insurance companies. All these are also run on no-profit basis. These guest-houses are usually occupied by the Government, university of bank employees and legislators who are on official duty. They are not tourists. In view of the fixed amount which these employees or legislators get by way of travelling allowance, they are not supposed to bear the additional burden of the tax. Government, institutions : educational, charitable or religious, universities, legislators and banks, of which Sub-section (2) of Section 3 speaks, constitute a distinct class in themselves. Their classification is based on a differentia reasonably related to the object of the Act, viz., to tax those who run or make use of hotels, which are run on commercial basis-to earn profit. This classification manifestly advances the aforesaid object of the Act and is quite reasonable. Those whose activity is not aimed at earning any profit can be reasonably placed in a class, distinct from those whose activity is aimed at earning profit. I am supported in taking this view from a Bench decision of the Allahabad High Court in Firm Jaswant Rai Jai Narain v. Sales Tax Officer : AIR1955All585 , wherein the departments of the State and Central Governments and two more specified institutions carrying on industrial activity on no-profit basis were exempted from payment of sales tax, and the exemption was held to have been based upon reasonable classification and, therefore, not violative of Article 14. The following observations made by the court are pertinent :
In our opinion, the State in carrying on a commercial or industrial activity, not from a business or profit-making motive but purely with the object of encouraging cottage industries, may legitimately claim to be a class apart from the dealers who carry on their business with the object of profit-making. There is no evidence on the record to show that the Central Government acts in any different manner in the matter of sale of handloom cloth.
In our opinion, the legislature could validly classify the State and Central Governments for the purposes of the Sales Tax Act as a separate class different from ordinary dealers. Similar remarks apply to the cases of the Spinners Association and the Gandhi Ashram, Meerut. It is well-known that both these institutions are dedicated to the object of encouragement of cottage industries in hand-woven and hand-spun yarn and cloth.
21. All the contentions raised on behalf of the petitioners having failed, their writ petitions also fail, which are dismissed with costs accordingly.
22. Mufti Baha-ud-Din Farooqi, Ag. C.J. The main question involved in these cases is whether the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980 (shortly 'the Act'), is intra vires the powers of the State Legislature. My learned brother, Kotwal, J., has answered the question in the affirmative. I agree but I have my own reasons for this. Before dealing with the question, let me consider the relevant provisions of the Act. By its preamble, the Act seeks to provide for the levy of tax on the amenities and services in a hotel in the State. Section 2(c) of the Act defines the expression 'amenity and service' as including lodging, boarding, massaging, bathing, hair-dressing, and beauty parlour facilities, whether charged or chargeable jointly or separately. Section 2(j) defines hotel as meaning any premises or part of premises including a hut, house-boat, tent, guest-house, rest-house or a club occupied by resident or casual visitors with or without board, services and amenities in consideration of tariff and includes a restaurant excluding the portion used as a bar for service or supply of liquor. Section 2(k) defines hotel-keeper as meaning a person who carries on the business of a hotel as owner, lessee or otherwise including an agent of the owner, or lessee, by whatever name called; Section 2(v) defines tariff as meaning rent or other charges, by whatever name called, received or receivable by the hotel-keeper in consideration of amenities and services to a resident or casual 'visitor and where no rent or other amount is charged it shall mean the amount at which such amenities and services can be ordinarily provided in the hotel. Section 3 is the charging Section providing as under :
3. Charge of tax.-(1) In accordance with and subject to the provisions of this Act, every hotel-keeper shall pay each accounting year tax on amenities and services provided to resident or casual visitors on the basis of tariff at the rates specified in the schedule annexed to this Act.
(2) Notwithstanding anything contained in Sub-section (1), nothing in this Act shall apply to the following classes of hotels :-
(i) boarding and lodging houses run by educational, charitable and religious institutions,
(ii) guest-houses belonging to the State Government or Central Government for the use of departmental officials only,
(iii) guest-houses maintained by a nationalised or a scheduled bank, nationalised insurance company or a university or legislator's hostels.
23. It has been urged before us by Mr. Chitaley that the impugned levy is outside the legislative competence of the Jammu and Kashmir State Legislature. His contention is that Section 3 read with Section 2(c) and 2(v) of the Act clearly contemplates that the levy is payable on the gross receipts of a hotel-keeper from boarding, lodging and other services and amenities provided to visitors at a hotel and consequently the levy, though purporting to be on amenities and services, is in truth and substarite a levy on income which could be imposed only by the Union Parliament, acting under entry 82 in List I of the Seventh Schedule of the Constitution : 'Taxes on income other than agricultural income.' He urged that the word 'income' occurring in this entry is of sufficient amplitude to include any profit or gain which is actually received. His alternative contention is that, in any case, the impugned tax is a tax on business activity and, therefore, the total amount of tax in respect of anyone hotel-keeper could not, by reason of Article 276(2) of the Constitution of India, exceed Rs. 250 per annum.
24. In R. R. Engineering Co. v. Zita Parishad, Bareilly : 3SCR1 , the question arose whether tax on 'circumstances and property' was tax on income. It was held as under :
It is trite that income-tax can only be levied on income, that is to say, it can be levied provided the assessee is in receipt of an income. If there is no income, there can be no income-tax. In contrast, the relevant consideration in the case of a tax on 'circumstances and property' can be the total turnover of the assessee from his trade or calling or the fact of his having an interest in a property. This consideration assumes relevance because the tax on circumstances and property is a tax, so to say, on the status of the assessee.... For the levy of tax on circumstances and property, it is not necessary that there should be income in the hands of the assessee, in the sense of the Income-tax Act. The outgoings, the deductions, the carry forward losses, the development rebate and the like may leave no income in the hands of an assessee which could be brought to tax under the Income-tax Act. But a person can be subjected to tax on circumstances and property in relation to his haisiat, that is to say, the status which he occupies by reason of the fact of the pursuit by him of a beneficial calling or the possession by him of an interest in property. While determining the status of an individual for the purposes of the tax on circumstances, the total turnover of his business or avocation may therefore be legitimately taken into consideration.
It may be, and is often so, that the tax on circumstances and property is levied on the basis of income which the assessee receives from his profession, trade, calling or property. That is, however, not conclusive on the nature of the tax. It is only as a matter of convenience that income is adopted as a yardstick or measure for assessing the tax...the measure of the tax is not a true test of the nature of the tax. Therefore, while determining the nature of a tax, though the standard on which the tax is levied may be a relevant consideration, it is not a conclusive consideration. One must have regard in such matters...not to the name of the tax but to its real nature, its pith and substance, which must determine into what category it falls. Applying these tests, the tax on 'circumstances' will fall in the category of a tax on 'a man's financial position, his status taken as a whole and includes what may not properly be comprised under the term 'property' and at the same time ought not to escape assessment'...the tax on circumstances and property is fundamentally distinct from and cannot be equated with income-tax, that it is not covered by item 82, List I, Seventh Schedule, of the Constitution, and that it is essentially a tax on status or financial position combined with a tax on property.
25. Applying this test, it is not difficult to say that the impugned tax cannot be equated with tax on income. For, the impugned tax is leviable irrespective of the consideration whether the hotel-keeper has earned any income in the sense of the Income-tax Act. All that is necessary is the fact that he has received the visitor at his hotel and provided him all or any of the amenities and services comprehended by the Act.
26. But even though the impugned tax is not a tax on income, it will be still necessary to investigate what is its real nature and character. Firstly, because without such investigation it will not be possible to determine whether the State Legislature was competent to impose the impugned tax and, secondly, because the alternative contention of Mr. Chitaley is that the impugned tax can be equated with the tax on hotel business and, consequently, by reason of Article 276(2) of the Constitution, the total amount of tax in respect of anyone hotel-keeper could not exceed Rs. 250 per annum. In this connection, it is to be noticed that by virtue of the impugned Act a hotel-keeper is subjected to tax on amenities and services provided to the visitors at his hotel. In order to determine the real nature of the tax, therefore, it will be necessary to know as to what is the true status of a hotelier with reference to the amenities and services provided by him to the visitors at his hotel. The matter is no longer res Integra, In State of Himachal Pradesh v. Associated Hotels of India Ltd. : 2SCR937 the Supreme Court has observed:
In England, a hotel under the Hotel Proprietors Act, 1956, is an establishment held out by the proprietor as offering food, drink, and if so required, sleeping accommodation, without special contract, to any traveller presenting himself and who appears able and willing to pay a reasonable sum for the services and facilities provided. This definition, which is also the definition of an inn, still excludes, as formerly, boarding houses, lodging houses and public houses which are merely ale-houses and in none of which there is the obligation to receive and entertain guests. An innkeeper, that is to say, in the present days a hotel proprietor in his capacity as an innkeeper is, on the other hand, bound by the common law or the custom of the realm to receive and lodge in his inn all comers who are travellers and to entertain them at reasonable prices without any special or previous contract unless he has some reasonable ground of refusal (Halsburys' Laws of England, 3rd Edn., Vol. 21, pages 445-446). The rights and obligations of hotel proprietors are governed by statute which has more or less incorporated the common law. The contract between such a hotel proprietor and a traveller presenting himself to him for lodging is one which is essentially a contract of service and facilities provided at reasonable price.
27. Adverting to this case, in the later case of Northern India Caterers (India) Ltd. v. Ltd. Governor of Delhi : 1SCR557 the court has again observed as under :
In the case of an hotelier this court proceeded on the footing that his position in law was assimilable to that of an innkeeper. At common law an innkeeper was a person who received travellers and provided lodging and necessaries for them and their attendants, and employed servants for this purpose and for the protection of travellers lodging in his inn and of their goods (Halsbury's Laws of England, 3rd Edn., Vol. 21, page 442, para 932). It was hospitality that he offered, and the many facilities that constituted the components of that hospitality determined the legal character of the transactions flowing from them. Long ago, in Crisp v. Pratt (1639) C. C. 549, it was pointed out that innkeepers do not get their living by buying and selling, and that although they buy provisions to be spent in their house, they do not sell them but what they do is to 'utter' them. 'Their gain', it was added, 'is not only by uttering of their commodities, but for the attendance of their servants, and for the furniture of their house, rooms, and lodgings, for their guests...'. This test went to the root, and we find it repeated in Parker v. Flint (1699) 12 M. R. 254. In Newton v. Trigg (1691) 3 M. R. 327, Holt, C. J., defined the true status of an innkeeper by reference to the services afforded by him, that he was an 'hospitator' and was 'not paid upon the account of the intrinsic value of his provisions, but for other reasons : the recompense he- receives is for care and pains, and for protection and security...but the end of an innkeeper in his buying, is not to sell, but only a part of the accommodation he is bound to prepare for his guests'.
28. In this background it will be reasonable to conclude that the position in law of a hotelier is identifiable with that of an innkeeper in England and that the true status of an innkeeper, by reference to the services rendered by him, is that of a 'hospitator' and that many services and amenities provided by him are components of the hospitality that he offers and the amount that he receives is a reward for the care and protection given by him. There is no reason to take a different view in respect of a hotel-keeper with reference to the amenities and services comprehended by the Act. It necessarily follows that the impugned tax is a tax on the hospitality of a hotel-keeper and is not a tax on his business activity.
29. For the contention that the impugned tax is a tax on the business activity of an hotel-keeper. Mr. Chitaley relied on the decision of the Supreme Court in Karnani Properties Ltd. v. Commissioner of Income-tax, West Bengal : 82ITR547(SC) . In that case, the assessee-company owned the Karnani Mansion consisting of numerous residential -flats and over a dozen shops. All these were let out to tenants who made monthly payments which included charges for electric current, for the use of lifts, for the supply of hot and cold water, for the arrangement for scavenging, for providing watch and ward facilities as well as other amenities. It purchased high voltage current in bulk, converted the same into low voltage current in its own power house within the- premises and supplied the power to the tenants. It also maintained a separate water pump-house and a boiler for the supply of hot and cold water to the tenants. The company provided electric lifts for the benefit of the tenants. For all these purposes the assessee maintained a large number of permanent staff. The company claimed that the entire receipts from the tenants should be treated as income from business as it had been formed for carrying on the business of letting out flats and shops. The Income-tax Officer rejected its claim but split the receipts into two parts, one part being treated as rent and the other as 'income from other sources' taxable under Section 12 of the Income-tax Act, 1922. The Appellate Tribunal held that the second part was assessable as income from business under Section 10. Neither the department nor the assessee contended that that part was assessable under Section 9. On a reference the High Court held that the latter part of the receipts was also assessable as income from property under Section 9. On appeal to the Supreme Court:
Held, reversing the decision of the High Court, (i) that the department having all along proceeded on the basis that the income of the assessee was from two different sources, it should not have been allowed by the High Court to change its case;
(ii) that, on the facts, the services rendered by the assessee to its tenants were the result of its activities carried on continuously in an organised manner, with a set purpose and with a view to earn profits; those activities were business activities and the income arising therefrom was assessable under Section 10.
30. Clearly it was not a case of a hotelier rendering services to the visitors at his hotel and as such it cannot be said to have any bearing on the present case.
31. The question still remains whether hospitality is a matter covered by the legislative field of our State. In this connection it will be pertinent to note that unlike legislatures of other States in India, the Jammu and Kashmir State Legislature enjoys the residuary powers of legislation and consequently it has power to legislate in respect of any matter falling outside the purview of Lists II and III of the Seventh Schedule provided such matter is not covered by any entry in List I of the said schedule. The tax on hospitality is not however relatable to any entry in List I of the Seventh Schedule to the Constitution of India and therefore the State Legislature has power to impose tax on hospitality even if the matter does not find place in Lists II and III of the said schedule. Accordingly it must be held that the State Legislature was competent to impose the impugned tax.
32. On other points I generally agree with the views expressed by my learned brother Kotwal, J., except that I would say that an activity taxable under one statute cannot, by artificial device, be described as a different activity and made the subject of tax under another statute and consequently there is merit in the objection that the activity of providing amenities and services in a hotel which is the subject of tax under the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980, could not, by artificial device, be described as sale and subjected to tax under the Jammu and Kashmir General Sales Tax Act, 1962. But, in view of the fact that by SRO No. 490 of 1980 dated 17th September, 1980, the Government has directed that the amenities and services in a hotel which are liable to tax under the provisions of the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980, shall be exempt from the levy of tax under the provisions of the Jammu and Kashmir General Sales Tax Act, 1962, this argument has lost its validity and can no longer prevail.
33. In the result, I agree with my learned brother Kotwal, J., that the writ petitions should be dismissed with costs. I order accordingly. The interim orders of stay shall stand vacated.