TMI Blog1994 (3) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... presentations made for waiver of the sales tax in respect of the assessment years in question. The period of assessment, no doubt, differs from assessee to assessee as also the writ petitions filed by them. But, the legal submissions and basis of challenge, at the time of hearing of these writ petitions are common and identical and consequently are dealt with together. 2.. The history of the statutory provisions pertaining to the levy of sales tax in all these cases and the law declared by the Supreme Court of India and this High Court (as also some of the other High Courts) require to be dealt with in some detail to have a better understanding and appreciation of the grievance espoused on behalf of the petitioners and the legal contentions raised by the several learned counsel appearing on either side. 3.. Originally the turnover relating to hotels and restaurants in respect of sales and supply of food in restaurants was being subjected to the levy of sales tax, subject to any notification for exemption in force, under the general charging provisions of the Act in the State of Tamil Nadu. In G.O. P. No. 977, Commercial Taxes and Religious Endowments, dated October 4, 1980, pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Amendment) Act, 1982, Tamil Nadu Act 4 of 1982, published in the Tamil Nadu Government Gazette dated February 20, 1982. In G.O. Ms. No. 11 86, C.T. R.E. Department, dated October 22, 1982, published in the Tamil Nadu Government Gazette dated November 24, 1982, the Government, in exercise of its powers under section 17(1) of the Act granted exemption on and from October 6, 1980, in respect of (a) the tax if any, due on the sales incidental or ancillary to the sales of food and drinks; (b) purchase tax payable under section 7-A of the Act; and (c) the additional tax due under the Tamil Nadu Additional Sales Tax Act, 1970 and surcharge due under the Tamil Nadu Sales Tax (Surcharge) Act, 1971, payable under the respective Acts by any hotel or restaurant other than those specified in entry No. 150 of the First Schedule to the Act. 4.. While so, the Constitution (Forty-sixth) Amendment Act, 1982, was enacted and published in the Gazette of India dated February 3, 1983, providing for among other things, insertion of clause (29-A) to article 366 of the Constitution of India, defining "tax on the sale or purchase of goods" and also validating and exempting certain levy. The relevant po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or collected under any such law before the commencement of this Act shall be deemed always to have been validly levied or collected in accordance with law; (ii) no suit or other proceeding shall be maintained or continued in any court or before any tribunal or authority for the refund of, and no enforcement shall be made by any court, tribunal or authority of any decree or order directing the refund of, any such aforesaid tax which has been collected; (iii) recoveries shall be made in accordance with the provisions of such law of all amounts which would have been collected thereunder as such aforesaid tax if this section had been in force at all material times. 2.. Notwithstanding anything contained in sub-section (1), any supply of the nature referred to therein shall be exempt from the aforesaid tax- (a) where such supply has been made, by any restaurant or eating house (by whatever name called), at any time on or after the 7th day of September, 1978, and before the commencement of this Act and the aforesaid tax has not been collected on such supply on the ground that no such tax could have been levied or collected at that time; or (b) where such supply, not being any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of its power under section 17(1) of the Act directed the grant of exemption in respect of tax payable under the Act by a dealer whose total turnover does not exceed rupees two lakhs per annum on the sale of food and drinks in a hotel, restaurant, sweet stall or any other eating house and also reduced the tax payable by a dealer whose total turnover exceeds rupees two lakhs but does not exceed five lakhs per annum, on such turnover, at a compounded rate (exceeding two lakhs but not exceeding three lakhs per annum: Rs. 7,500, exceeding three lakhs but not exceeding four lakhs: Rs. 11,250 and exceeding four lakhs but not exceeding five lakhs: Rs. 15,000). Again in G.O. P. No. 570, C.T. and R.E. Department, dated June 10, 1987 the Government, in exercise of its powers under section 17(1) of the Act granted exemption in respect of tax payable on the sale of food and drinks other than those falling under the First Schedule to the Act, by any hotel, restaurant, sweet stall or any other eating house, other than those classified or approved by the Department of Tourism, Government of India with effect from March 31, 1987. In G.O. Ms. No. 198, C.T. R.E. dated March 25, 1989, the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r does not exceed Rs. 15 lakhs per annum" in the place of the words "whose total turnover does not exceed Rs. 10 lakhs per annum". 6.. The sale and supply of food and drinks and other eatables in hotels and restaurants were originally being subjected to sales tax under the general charging provisions of the Act, subject to any notification relating to exemption in force. In the year 1972, the Supreme Court in State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474; AIR 1972 SC 1131 took the view that the supply of meals by hotelier to the resident guests is not sale of food liable to sales tax on the basis that the supply of food was essentially an indivisible transaction of receiving and accommodating a customer in the hotel, to stay. It was also held that even if such indivisible transaction is to be disintegrated, there is no question of supply of meals during the period of stay of a customer constituting a separate contract of sale as no intention on the part of parties to sell and purchase of food-stuffs supplied during meal times can be spelt out. The next decision in the series is that of the Supreme Court reported in [1978] 42 STC 386 in what is known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of this Court had an occasion to review the position in the light of the said constitutional amendment and Tamil Nadu Act 28 of 1984 and observed that the very intention of the constitutional amendment was to validate only the laws levying tax on supply of food and drinks and it does not have the effect of altering the definition of "sale" in the various State legislations. While adverting to the fact that the Supreme Court decisions are to the effect that "sale" will not comprehend within it supply of food and drinks in a hotel or restaurant for a customer for consumption therein and if any State law included such transactions, it would be ultra vires on the ground of want of legislative competence, the Division Bench also held that if any State sales tax law had included any transactions of works contract, hire-purchase, supply of food and drinks in a hotel or transfer for consideration of controlled commodities in the definition of "sale", then such a provision, though lacked legislative competence at the time when it was enacted, shall stand validated by the Constitution (Forty-sixth Amendment) Act so that the levy and collection of tax under those provisions would become le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly challenged before a Division Bench of this Court and in the decision reported in Sangu Chakra Hotels Private Ltd. v. State of Tamil Nadu [1985] 60 STC 125, the same was struck down as violative of article 14 of the Constitution of India by the judgment dated January 21, 1985. The decision reported in [1986] 63 STC 18 (Mad.) (Sree Annapoorna v. State of Tamil Nadu), was rendered on January 21, 1986. But the Supreme Court of India, in the decision reported in Kerala Hotel Restaurant Association v. State of Kerala [1990] 77 STC 253 delivered on February 21, 1990, held that the substituted entry No. 150 was intra vires the Constitution and reversed the decision reported in [1985] 60 STC 125 (Mad.) (Sangu Chakra Hotels Private Ltd. v. State of Tamil Nadu). In another batch of cases, a challenge against entry 150 of the First Schedule, as introduced by Tamil Nadu Act 7 of 1981 with effect from October 6, 1980, came up for consideration before yet another Division Bench and the judgment of this Court is reported in [1994] 94 STC 577 supra; [1993] 3 MTCR 362 [Hotel Parisutham (P) Ltd. v. State of Tamil Nadu] to which one of us (Raju, J.) was a party. The Division Bench while rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely no need for making any provision to bifurcate the so-called service elements and charges said to have been incurred therefor from the total turnover relating to supply of goods (food articles or drinks as the case may be) and that the transaction as a whole became subject to levy of tax as sales with the amendment to the Constitution as also the amendment by Tamil Nadu Act 28 of 1984. 9.. The current batch of cases is yet another series devised by the assessees to challenge the levy not only urging certain new points or aspects pertaining to the constitutional validity of the levy under entry No. 150 of the First Schedule to the Act, but also for reiterating the points earlier urged and rejected. 10.. Mr. C. Natarajan, learned counsel appearing for some of the petitioners, contended that the power to amend the Constitution under article 368 is for the exercise of its constituent power and the ordinary legislative power cannot be exercised under article 368 of the Constitution of India. It was further contended that it was impermissible for the Parliament under article 368 of the Constitution of India to legislate on a topic relating to State Legislature or for valida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood deleted on March 23, 1987 and since there was no legislative enactment dealing with the deletion of the said entry, it should be construed that entry No. 150 was not in the statute on and after March 23, 1987 and that the subsequent deletion with effect from March 25, 1989 was of no consequence. The next submission of the learned counsel is that the supply of food and its actual value alone can be taxed and not the element of service price since the State Legislature is not competent to do so. According to the petitioners to tax service and supply of food as part of service done/effected is in the nature of works contract, and therefore the value reasonably allocable to the goods alone can be taxed. The levy of sales tax under entry No. 150 of the First Schedule on the sales of icecream at 10 per cent after June 15, 1981, is said to be illegal since ice-cream as a milk food was taxable only at 4 per cent under item 24 of the First Schedule up to July 1, 1983, and again from March 17, 1986, it could be taxed only at 4 per cent on account of the reduction of rates granted. Finally, it has been contended that the authorities have not specifically adverted to undertake the exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjected to levy of tax applying entry No. 150 of the First Schedule to the Act, since according to the learned counsel the said assessee was only a lessee during the relevant period and they have been running in their own right the restaurant in the hotel and they have not themselves been separately recognised as a star hotel or restaurant by the concerned or competent authority. It was also submitted by the learned counsel that subsequently, the respondents themselves have not treated the said assessee as falling within entry No. 150 of the First Schedule to the Act. 14.. Mr. V.T. Gopalan, learned Senior Standing Counsel for the Union of India, while inviting our attention to some of the earlier constitutional amendments such as 7th, 14th, 30th, 31st and 38th Amendments, contended that it was not unusual for the constitutional amendments themselves making certain other provisions which may not really be incorporated as part of any of the existing provisions of the Constitution, but can stand apart and alone as part of the Constitution Amendment Acts themselves, and the making of such a provision would not render the exercise of power any the less than relating to the constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the contrary on the alleged infirmities in applying entry No. 150 of the First Schedule to the Act have been already dealt with and rejected by more than one Division Bench judgments of this Court and the points raised for the petitioners stood fully answered therein. The learned counsel adverted to some of the decisions in this regard to which reference will be made at the appropriate stage. With reference to the claim made by Mr. Ramanathan, learned counsel for one of the petitioners, the learned Additional Government Pleader submitted that the lease deed under which the assessee concerned undertook to run the restaurant of a particular standard itself would suffice to make the assessee liable and the contention to the contrary could not be sustained in law. 16.. The contention on behalf of the petitioners that in exercise of the power to amend the Constitution under article 368 of the Constitution of India, a provision of the nature and form of section 6 of the Constitution (Forty-sixth Amendment) Act could not have been enacted amounting to virtually legislating on the topic relating to State Legislature or validation of the State law, may now be considered. In support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was said that they related to land which was covered by item 18 of List II of the Seventh Schedule and that the State Legislatures alone had the power to legislate with respect to that matter. The answer is that, as has been stated, articles 31-A and 31-B really seek to save a certain class of laws and certain specified laws already passed from the combined operation of article 13 read with other relevant articles of Part III. The new articles being thus essentially amendments of the Constitution, Parliament alone had the power of enacting them. That the laws thus saved relate to matters covered by List II does not in any way affect the position. It was said that Parliament could not validate a law which it had no power to enact. The proposition holds good where the validity of the impugned provision turns on whether the subject-matter falls within or without the jurisdiction of the Legislature which passed it. But to make a law which contravenes the Constitution, constitutionally valid is a matter of constitutional amendment, and as such it falls within the exclusive power of Parliament. The question whether the latter part of article 31-B is too widely expressed was not argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as disqualified, his nomination could not be said to have been properly accepted by the Returning Officer and if, on the other hand, he was not disqualified, his nomination would have to be regarded as properly accepted by the Returning Officer. The primary question before the High Court, therefore, was whether or not the appellant was disqualified at the date of scrutiny of the nomination papers and it is difficult to see how the determination of this question could be made on any principle other than that governing the determination of a similar question under clause (a) of section 100(1). If, as laid down in Manni Lal's case AIR 1971 SC 330 the returned candidate cannot be said to be disqualified at the date of the election, if before or during the pendency of the election petition in the High Court his conviction is set aside and he is acquitted by the appellate Court, it must be held, on the application of the same principle, that, in like circumstances, the returned candidate cannot be said to be disqualified at the date of the scrutiny of the nomination papers. On this view, the appellant could not be said to be disqualified at the date of scrutiny of the nomination paper si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious provisions in the body of the text would equally be one made in exercise of the power of amendment and become part and parcel of the text of the constitutional document, as a whole, and the contentions to the contrary have no merit of acceptance. The body of the Constitution cannot be given such a restricted meaning. Validation of an erstwhile enacted invalid law considered to be unconstitutional is as much part of the process or purpose of constitutional amendment as the amendment itself and the dichotomy sought to be created on the basis of those which are incorporated as part of the existing articles and those which have been allowed to remain distinctly and separately has no relevance in the process of identifying what really forms part of a constitutional amendment. 19.. The next issue that requires to be considered is as to the consequences flowing from the Constitution (Forty-sixth Amendment) Act as also the amendments introduced by the Tamil Nadu Act 28 of 1984 and the plea on behalf of the petitioners that the Constitution (Forty-sixth Amendment) Act could operate or be availed of only when there was already a provision for a levy on supply as part of service or by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amendment) Act, there should have been a separate charging provision enacted or that in the absence of such a provision made afresh, there is no scope for levy of sales tax on sales of food and drinks in hotels and restaurants. The plea of the nature has been rejected by this Court on more than one occasion by different Division Bench rulings and we are unable to persuade ourselves to either agree with the submissions on behalf of the petitioners or take a different view at this stage. 20.. Equally untenable and devoid of merits is the challenge that entry No. 150 of the First Schedule to the Act as amended from time to time, introducing changes thereto, was a still-born legislation. The Division Bench decision reported in [1994] 94 STC 577 supra; [1993] 3 MTCR 362 [Hotel Parisutham (P) Ltd. v. State of Tamil Nadu] is a complete answer to the said plea and we are once again unable to countenance the plea on behalf of the petitioners in this regard. The decisions of the other High Courts which have taken a different view have been already distinguished by this Court in the earlier Division Bench judgments and consequently, it is futile for the petitioners to seek to derive any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 MTCR 362 [Hotel Parisutham (P) Ltd. v. State of Tamil Nadu]. Applying the ratio of the said decisions, viz., Sree Annapoorna v. State of Tamil Nadu [1986] 63 STC 18 (Mad.), K. Damodarasamy Naidu Bros. v. State of Tamil Nadu [1990] 76 STC 427 (Mad.) and Hotel Parisutham (P) Ltd. v. State of Tamil Nadu [1994] 94 STC 577 supra; [1993] 3 MTCR 362, the challenge on this ground is liable to be and shall stand hereby rejected as of no merit. 23.. The contention on behalf of the petitioners that the deletion of entry No. 150 of the First Schedule by G.O. P. 291, C.T. and R.E. dated March 20, 1987 was not followed up by any legislation, though bills were introduced and Acts were passed in respect of other matters and should be construed that after March 23, 1987, there was no entry No. 150 in the First Schedule, has no merit. Entry No. 150 of the First Schedule to the Act is part of the Act itself. To bring about change in any of the entry in the Schedules pending regular legislative implementation of the decision for a change or a modification of the decision, the Government have been conferred with power under section 59 of the Act by notification to alter, add or cancel any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when such Bill becomes law, then the notification would be subject to the terms of the legislation and modification, if any of the earlier notification. But, there is no material or information placed before this Court by the respondents that the necessary Bill to give effect to G.O. P. No. 291, C.T. R.E. dated March 20, 1987, in the next session following the issue of the notification. In the absence of any such information and also in view of the stipulation in the second proviso to section 59(2) that where for any reason a Bill as aforesaid does not become law within six months from the date of its introduction in the Legislature the notification shall cease to have effect on the expiration of the said period of six months, the notification dated March 20, 1987, shall be held to have ceased to have effect with the expiry of September 19, 1987 and entry No. 150 shall be considered to be restored or revived automatically and continued in force and operation till it was ultimately deleted with effect from March 25, 1989. The notification dated March 20, 1987, could not be considered to have effaced once and for all entry No. 150 of the First Schedule from the statute book in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been completed, the authorities must be directed to take up such consideration also, forthwith and pass orders. Some of the learned counsel contended that without specifically returning a finding in terms of section 6 that there was in fact such collection of tax by the assessees concerned for the period up to February 2, 1983, there could not be any liability fixed in the process of assessment and this exercise must be directed to be undertaken along with and at the time of assessment to tax and quantification liability. Reference was also made to the order dated November 1, 1991 in W.P. Nos. 15349 and 15350 of 1991 of S. Ramalingam, J., and the decision of the Division Bench dated July 30, 1987 in W.A. Nos. 915 and 916 of 1987 and W.P. Nos. 7712 of 1984 and 848 of 1985. In the first of the decisions referred to above, the court was concerned with the claim of the assessee therein for waiver of tax on the sales of food and drinks in hotels made by the assessee in an application filed under section 17(4) of the Act. The learned Judge while adverting to the decision in W.A. Nos. 915 and 916 of 1987 directed the assessing authority to pass orders on merits of the application for wai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of any court the tax under the law which was passed or made before the commencement of the Amendment Act shall be deemed to have been validly levied and collected in accordance with law. In sub-section (2) of section 6, it was also stipulated that notwithstanding anything contained in sub-section (1) which provided as above, any supply of the nature dealt with under section 6 shall be exempt from such levy of tax if for the period prior to the commencement of the Amendment Act, as specified therein, tax has not been collected on such supply on the ground that no such tax could have been levied or collected during that time. The burden of proving that the aforesaid tax was not collected in such circumstances was squarely laid on the person claiming exemption under the provisions of section 6. A careful analysis of the said provisions would, therefore, show that section 6 of the Amendment Act does not deal with any waiver but provides for an exemption itself by means of an overriding clause subject to the assessee claiming such an exemption proving that he had not himself collected any tax on such transactions. While that be the position, the liability has to be necessarily quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... described therein. There is no dispute as such of the fact that the hotel in question answers the description of entry No. 150 of the First Schedule but the claim of the petitioners is that they are only lessees of the restaurant portion of the hotel and they themselves not having been recognised or classified by the Tourism Department of Government of India, they cannot be subjected to levy under entry No. 150 of the First Schedule to the Act. We are unable to persuade ourselves to accept the stand taken on behalf of the petitioners. The recognition or classification or approval contemplated by entry No. 150 of the First Schedule is of the hotel as such and not of the person who happens to provide any service or supply of food and drinks by any internal arrangement. In substance, the sale or supply of food effected in the premises of a hotel which has been recognised, classified or approved by the Tourism Department of the Government of India would attract levy under entry No. 150 of the First Schedule to the Act and the petitioners cannot escape their liability so long as the hotel as such answers the description. In our view, it matters little as to who sells but the criteria is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. (v) So for as the levy and collection of sales tax on the sales turnover of ice-cream is concerned, it shall be under the charging section and entry No. 24 or entry No. 150 or entry No. 103 of the First Schedule to the Act, at such rates as were in force from time to time and as are applicable to the class or category of ice-cream actually dealt with and sold by the particular assessee concerned and the reduction notification stipulating concessional rates, if any, for any particular period; (vi) The applicability of entry No. 150 of the First Schedule to the transaction of an assessee would depend upon the place of sale/supply of food and drinks and not upon the proprietor concerned who actually runs or manages the place of catering or supply; (vii) The eligibility of the assessees concerned for exemption under section 6(2) of the Constitution (Forty-sixth Amendment) Act, 1982, shall be considered and determined while assessing and quantifying the tax liability itself of the assessees, after giving due and sufficient opportunity in accordance with law. (viii) The orders of assessment, if any, made in respect of the petitioners/ assessees concerned before this Court, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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