Madras High Court
Oberoi Associated Hotels Limited vs Commercial Tax Officer And Others on 7 March, 1994
Author: A.R. Lakshmanan
Bench: A.R. Lakshmanan
JUDGMENT Raju, J.
1. These writ petitions have been filed by several hoteliers which are recognised and classified as three star, four star and five star hotels by the Department of Tourism, Government of India and restaurant owners, challenging the levy of sales tax under the Tamil Nadu General Sales Tax Act, 1959, in respect of supply of food and drinks in their hotels for the assessment years 1980-81 to 1988-89. Some of these writ petitions are filed for writs of declaration, declaring entry No. 150 of the First Schedule to the TNGST Act, while some others are filed for writs of mandamus, forbearing the authorities of the Sales Tax Department from subjecting the turnover relating to supply of food and drinks to tax under entry No. 150 of the First Schedule to the Act and several other writ petitions are filed for writs of mandamus, forbearing the respondents from levying sales tax on such transactions till the State Government passes orders on the representations 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, published in the Tamil Nadu Government Gazette dated October 6, 1980, by way of amendment to the First Schedule to the TNGST Act, 1959, in exercise of powers under section 59(1) of the Act, entry No. 150 was added in the following terms :
"150. Articles of food and drink, sold to At the point of 10%."
customers in three star, four star, and first sale in five star hotels as recognised by Tourism the State. Department, Government of India, whether such articles are meant to be consumed in the premises or outside.
As required, legislative affirmation was also given to the same by enacting the Tamil Nadu General Sales Tax Laws (Amendment and Repeal) Act, 1981, Tamil Nadu Act 7 of 1981. The Government also issued, in exercise of its powers under section 17(1) of the Act, an exemption Notification in G.O. P. No. 1001, Commercial Taxes and Religious Endowments Department, dated October 6, 1980, exempting with effect from October 6, 1980, the tax payable by any dealer under the Act on the sale of food and drinks in any hotel or restaurant other than those specified in entry No. 150 of the First Schedule to the Act. Subsequently, in G.O. Ms. No. 660, Commercial Taxes and Religious Endowments Department, dated June 12, 1981, published in the Tamil Nadu Government Gazette dated June 15, 1981, invoking the powers of section 59(1) of the Act for the entry in column No. 2 of entry No. 150 of the First Schedule, the following was substituted :
"Articles of food and drink other than those specified elsewhere in this Schedule, sold to customers in hotels classified or approved by the Government of India, Department of Tourism."
In and by the very same Notification, G.O. Ms. No. 660, Commercial Taxes and Religious Endowments Department, dated June 12, 1981, the Government, in exercise of its powers under section 17(1) and (3) of the Act and in cancellation of the earlier notification dated October 6, 1980, granted exemption in respect of the tax payable under the said Act by any hotel or restaurant other than those specified in entry No. 150 of the First Schedule to the Act on the sale of food and drinks other than those falling under the First Schedule to the Act. Legislative affirmation was also given to the substitution ordered to entry No. 150 of the First Schedule by G.O. Ms. No. 660, C.T. and R.E. Department, dated June 12, 1981, by the Tamil Nadu General Sales Tax (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. 1186, 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 7A 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 portion of clause (29-A) in so far as it concerns the cases before us, is sub-clause (f) which reads as hereunder :
"(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service, is for cash, deferred payment or other valuable consideration.
and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made."
The provisions of section 6, on which much controversy has been raised, read as hereunder :
"6. Validation and exemption. - (1) For the purposes of every provision of the Constitution in which the expression 'tax on the sale or purchase of goods' occurs, and for the purposes of any law passed or made, or purporting to have been passed or made, before the commencement of this Act, in pursuance of any such provision, -
(a) the said expression shall be deemed to include, and shall be deemed always to have included, a tax (hereafter in this section referred to as 'the aforesaid tax') on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) for cash, deferred payment or other valuable consideration; and
(b) every transaction by way of supply of the nature referred to in clause (a) made before such commencement shall be deemed to be, and shall be deemed always to have been, a transaction by way of sale, with respect to which the person making such supply is the seller and the person to whom such supply is made, is a purchaser.
and notwithstanding any judgment, decree or order of any court, tribunal or authority, no law which was passed or made before such commencement and which imposed or authorised the imposition of, or purported to impose or authorise the imposition of, the aforesaid tax shall be deemed to be invalid or ever to have been invalid on the ground merely that the Legislature or other authority passing or making such law did not have competence to pass or make such law, and accordingly -
(i) all the aforesaid taxes levied or collected or purporting to have been levied 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 such supply by any restaurant or eating house (by whatever name called), has been made at any time on or after the 4th day of January, 1972, 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 :
Provided that the burden of proving that the aforesaid tax was not collected on any supply of the nature referred to in clause (a) or, as the case may be, clause (b), shall be on the person claiming the exemption under this sub-section.
(3) For the removal of doubts, it is hereby declared that, -
(a) nothing in sub-section (1) shall be construed as preventing any person -
(i) from questioning in accordance with the provisions of any law referred to in that sub-section, the assessment, reassessment, levy or collection of the aforesaid tax, or
(ii) from claiming refund of the aforesaid tax paid by him in excess of the amount due from him under any such law; and
(b) no act or omission on the part of any person, before the commencement of this Act, shall be punishable as an offence which would not have been so punishable if this Act had not come into force."
The Tamil Nadu State Legislature also enacted Tamil Nadu General Sales Tax (Fourth Amendment) Act, 1984, Tamil Nadu Act 28 of 1984 amending some of the provisions of the Tamil Nadu General Sales Tax Act, 1959, viz., section 2(n), 2(g), 2(r), etc., to incorporate the provisions of clause (29-A) of article 366 of the Constitution of India into the Act.
5. In G.O. Ms. No. 291, Commercial Taxes and Religious Endowments Department, dated March 20, 1987 published in the Tamil Nadu Government Gazette, dated March 20, 1987, the Government in exercise of its powers under section 59(1) of the Act ordered the omission of entry No. 150 and all entries relating thereto with effect from March 23, 1987. No legislative provision as such has been enacted to affirm the omission of entry No. 150 of the First Schedule to the Act, though two amending Acts were introduced for other purposes. The very same notification also ordered, in exercise of the powers under section 17(3), the cancellation of the earlier exemption notification issued in G.O. Ms. No. 660, Commercial Taxes and Religious Endowments Department, dated June 15, 1981, as subsequently amended. But at the same time, the Government in exercise 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 Government, in exercise of its powers under section 59(1) of the Act ordered to omission of entry No. 150 and the entries relating thereto of the First Schedule with effect from March 25, 1989 and simultaneously in exercise of the powers under section 17(1) and (3) of the Act, in supersession of the earlier notifications ordered the grant of an 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, whose total turnover does not exceed rupees ten lakhs per annum, with effect from March 25, 1989. By another notification, under the very same orders, in exercise of the powers under section 17(3) of the Act, a proviso was ordered to be added, by way of amendment, to the order made earlier in G.O. Ms. No. 1186, C.T. & R.E., dated October 24, 1982, published in the Tamil Nadu Government Gazette, dated November 24, 1982, providing that the exemption granted in the earlier notification published on November 24, 1982, shall not apply to any hotel, restaurant, sweet stall or any other eating house, whose total turnover exceeds rupees ten lakhs per annum. By the Tamil Nadu General Sales Tax (Amendment) Act, 1989, Tamil Nadu Act 17 of 1989, entry No. 150 of the First Schedule to the Act has been deleted with effect from March 25, 1989. Thereafter, by the Tamil Nadu General Sales Tax (Amendment) Act, 1989, Tamil Nadu Act 17 of 1989, section 7B was introduced providing for compounded rate of tax payable by hotels and restaurants, at their option, whose total turnover is not less than ten lakhs but not more than fifteen lakhs on the sales of food and drinks in their hotels and restaurants, subject to the terms and conditions stipulated therein. Thereafter, the Government in exercise of their powers under section 17(1) of the Act passed G.O. P. No. 332, C.T. and R.E. dated May 30, 1990, reducing the rate from eight per cent single point under flat rate system to five per cent in respect of tax payable on the sale of food and drinks by hotel, restaurants, sweet stall or any other eating house. Under the very same orders, by another notification, the Government in exercise of its powers under section 17(1) and (3) of the Act, ordered the amendment of G.O. P. No. 198, C.T. & R.E., dated March 25, 1989, by substituting the words "whose total turnover does not exceed 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. 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 as Northern India Caterer's case. It was held therein as follows :
"The court pointed out that the supply of meals was essentially in the nature of a service provided to them and could not be identified as a transaction of sale. The court declined to accept the proposition that the Revenue was entitled to split up the transaction into two parts, one of service and the other of sale of food-stuffs. If that be true in respect of hotels, a similar approach seems to be called for on principle in the case of restaurants. No reason has been shown to us for preferring any other. The classical legal view being that a number of services are concomitantly provided by way of hospitality, the supply of meals must be regarded as ministering to a bodily want or to the satisfaction of a human need......"
On a review of this decision, the order made by the apex Court has been reported in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1980] 45 STC 212, and it was observed as follows :
"It seems to us that having regard to the facts upon which our judgment rests - undisputed as they have remained throughout the different stages of the litigation - and the considerations which they attract, no such apprehension can be reasonably entertained. Indeed, we have no hesitation in saying that where food is supplied in an eating house or restaurant, and it is established upon the facts that the substance of the transaction, evidenced by its dominant object, is a sale of food and the rendering of services is merely incidental, the transaction would undoubtedly be exigible to sales tax. In every case, it will be for the taxing authority to ascertain the facts when making an assessment under the relevant sales tax law and to determine upon those facts whether a sale of the food supplied is intended."
In view of the above, this Court has been issuing directions in cases which were brought before it to analyse, the nature of transactions in individual cases in accordance with the principles laid down by the Supreme Court and other decisions of this Court.
7. While matters stood thus, the Constitution (Forty-sixth Amendment) Act, 1982, came into force and to which a detailed reference has already been made above. Following this, the Tamil Nadu State Legislature also carried out certain amendments to the Act by Tamil Nadu Act 28 of 1984 as noticed supra. A Division Bench 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 legally valid. In the decision reported in [1990] 76 STC 427 (Damodarasamy Naidu & Bros. v. State of Tamil Nadu), a Division Bench of this Court had an occasion to consider a challenge to the constitutional validity of G.O. P. No. 198, C.T. & R.E. dated March 25, 1989, granting exemption in respect of hoteliers/restaurants having total annual turnover less than 10 lakhs and not falling within First Schedule and subjecting those who are above the same, to tax. While upholding the validity of the said orders, the Division Bench also held that the contention on behalf of the petitioners therein that there was no charging section authorising the levy of the sales tax on the supply of food and drinks in eating houses/restaurants/hotels in the TNGST Act, 1959, has to be stated only to be rejected and it was futile to contend that after the Constitution (Forty-sixth Amendment) Act and TNGST Act 28 of 1984, section 3 which is the charging section does not cover the supply of food and drinks in hotels/restaurants. The further plea that notwithstanding those amendments, the powers of State are circumscribed by entry No. 54 of List II and by the definition of "sale" under the Sale of Goods Act has also been rejected by making reference to the provisions in sub-clause (f) of clause (29-A) of article 366 of the Constitution of India which enabled the levy of sales tax on the supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration, by deeming such transfer, delivery or supply of any goods to be a sale of those goods. The other contention that there are no guidelines to separate the service portion from the supply of material and the attempt to tax the entire turnover is illegal has also been rejected holding there is no such distinction made between the supply part and service part in the supply of food and drinks in a hotel or restaurant and there is no scope for countenancing such a submission, at any rate after the Constitution amendment followed by the amendment to the Act, mentioned above.
8. While that be the position, entry No. 150 of the First Schedule in the TNGST Act as substituted by Tamil Nadu Act 4 of 1982 with effect from June 15, 1981, was 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 repelling the challenge in those cases, held that though entry No. 150 was omitted with effect from March 23, 1987, the same was restored by Tamil Nadu Act 31 of 1987 with effect from March 23, 1987, and again omitted from March 25, 1987, by virtue of Tamil Nadu Act 17 of 1989 and consequently the entry was in force when the Constitution amendment came into force on February 2, 1983. In the said decision, the larger issue that was under consideration was the state of law as on the date of the coming into force of the constitutional amendment. The question as to what provision has to be applied during the period subsequent to March 23, 1987, was not directly put in issue for consideration, as in these cases now before us. Thus it was construed per Abdul Hadi, J., in that decision that considering the entry read with the charging sections and the relevant definitions of "sale" and "turnover", etc., under section 2 of the Act, it cannot be contended that there was no express law imposing tax on the supply of food and drinks and, therefore, the validation provision under section 6 enured for the purpose of levying sales tax on the supply of food and drinks. It was also held therein that there was no necessity for any separate charging section in respect of sales of food and drinks in hotels and restaurants and the revival theory, propounded to resurrect G.O. P. No. 570, C.T. and R.E. dated June 10, 1987. One of us (Raju, J.) while concurring with Abdul Hadi, J., expressed the view that the Supreme Court only declared in the cases prior to such constitutional amendment that under certain circumstances, the supply of food and drinks in hotels and restaurants cannot satisfy the definition of sale and therefore cannot be legitimately brought to tax under the local sales tax law of a State and thereby merely restricted the operation of the provisions to specified circumstances and the hurdles so created was got cleared for the State Legislatures with the enactment of the Constitution (Forty-sixth Amendment) Act and that it was absolutely not necessary that there should be a fresh or separate provision to bring to levy the class of transactions covered by sub-clause (f) to clause (29-A) of article 366 of the Constitution of India once again after the Constitution (Forty-sixth Amendment) Act. It was also held in both the opinions rendered in the said decision that there is 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 validating a State law with or without retrospective effect. Argued the learned counsel further by elaborating the said contentions that section 6 of the Constitution (Forty-sixth Amendment) Act cannot be considered to have been made in exercise of the power of an addition, variation or repeal of any provision in the Constitution and that the very fact that section 6 of the said Act was not incorporated in the body of the Constitution, per se, is proof of the fact that the said provision related to the area of legislation otherwise than by way of amendment to the Constitution. The learned counsel contended that section 6 of the Constitution (Forty-sixth Amendment) Act can operate only when there was already a provision authorising a levy on supply as part of service or by way of service and since there was no provision for levy on supply by way of or part of service of food and drinks prior to Tamil Nadu Act 28 of 1984, the validating provisions cannot be availed of to levy tax even invoking entry No. 150 of the First Schedule prior to Tamil Nadu Act 28 of 1984, namely, prior to October 1, 1984. Entry No. 150 of the First Schedule to the Act as introduced by Tamil Nadu Act 7 of 1981 is said to be beyond the scope of entry No. 54 of List II of the Seventh Schedule to the Constitution and consequently was a still-born legislation at the time of enactment prior to the Constitution (Forty-sixth Amendment) Act and for the very same reason Tamil Nadu Act 4 of 1982 substituting entry No. 150 of the First Schedule is also a still-born legislation. The further submission of the learned counsel is that the period of validation covered by section 6 concluded on February 2, 1983 and item 150 of the First Schedule cannot be availed of to levy tax in respect of transactions after February 3, 1983, in the absence of a fresh and independent enactment authorising such levy of tax for the period subsequent to February 3, 1983 even under item 150. This submission is sought to be high-lighted on the basis of the fact that Tamil Nadu Act 28 of 1984 merely amended the definition in section 2(n) and 2(g), etc., and did not provide any independent charging section for taxing what the petitioners would contend to be "deemed sales" by way of supply and service in hotels and restaurants. The next submission of the learned counsel for the petitioners is that entry 150 of the First Schedule stood 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 ice-cream 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 required to find out the factum of collection or non-collection of tax for the period up to February 2, 1983 and the levy of assessment and demand up to February 2, 1983 without a finding about the collection or non-collection of tax by the assessees which is a condition precedent stood vitiated and have to be re-examined.
11. Mr. R. L. Ramani, learned counsel appearing for the petitioners in some of the writ petitions, contended that the petitioners as also the hoteliers association have presented representations on May 17, 1990 to the State Government for waiver of the tax during the relevant period under consideration and that till orders are passed by the State Government on such representations, no proceedings should be taken under the Act to assess or recover the tax due from the petitioners since according to the learned counsel their clients have not collected tax during the period. Earlier instances of grant of such waiver when the assessees have not collected the tax have also been highlighted by the learned counsel. This submission was made in addition to the submissions of the other learned counsel, which he adopted for himself.
12. Mr. C. Venkataraman, one of the learned counsel appearing for the petitioners, contended in addition to the submission made by the other learned counsel that the respondents must be directed to take up the question of assessment to tax and also waiver as well as the consideration to be undertaken in respect of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, simultaneously and pass combined orders before the demand is raised for recovery of tax and the passing of separate and belated orders on the entitlement of the assessees under section 6 of the said Act, places the assessees into great inconvenience and prejudice. In support of the claim, reliance has also been placed on the directions issued in W.A. Nos. 915 and 916 of 1987 dated July 30, 1987. Mr. Sivanandam, one of the learned counsel, without even realising the limitations on him has chosen to reagitate the points which were specifically raised, rejected and concluded by earlier judgments of the Division Benches without making out any legal justification for such course of action.
13. Mr. Ramanathan, learned counsel appearing in some of the writ petitions, contended that the petitioners in W.P. Nos. 17198 to 17200 of 1990, cannot be subjected 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 constitutional amendment. While contending that the provisions of section 6 of the Constitution (Forty-sixth Amendment) Act also has undergone the process prescribed under article 368 of the Constitution of India, it was also contended that there was no procedural lapse which could invalidate such a provision. It was also contended that a constitutional amendment can be challenged only on the ground that the required procedure has not been followed and the amendment affects or undermines the basic structure of the Constitution of India and in the absence of any such challenge in this case, it is not given to the petitioners to challenge the amendment including section 6 of the said amendment Act. Argued the learned Senior Counsel further that the constitutional amendment as well as certain necessary consequential amendments when made equally would form part and parcel of the Constitution amendment and to contend to the contrary would lead to startling results, since the consequences arising out of a constitutional amendment cannot be provided for and declared by an ordinary enactment of the Parliament. While inviting our attention to the additional grounds raised in the pleadings, attacking section 6 of the Amendment Act, as affecting the federal structure, it has been contended for the respondents that there is no basis for such a claim and that no such infirmity or irregularity has been substantiated for the petitioners. It was also contended that the validity of a provision once upheld cannot be allowed to be challenged piecemeal under the pretext of raising some or other grounds and that such practice has been deprecated by the Supreme Court in the decision (T. Govindaraja Mudaliar v. State of Tamil Nadu). Finally, it has been contended that the very Constitutional Amendment Act was brought about at the request of some of the States as a device to protect the State laws and thereby assist the State and not to act in a manner derogatory of the powers and authority of the States under the Constitution of India.
15. Mrs. Chitra Venkataraman, learned Additional Government Pleader, while adopting the submissions of Shri V. T. Gopalan, contended that in the light of the expanded definition of "sale" brought about by the Constitution Amendment Act, the levy in question is well within the jurisdiction of the authorities and the submissions made 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 of the stand taken for the petitioners, the learned counsel relied upon the decisions (Kesavananda Bharati v. State of Kerala), (Smt. Indira Nehru Gandhi v. Shri Raj Narain), AIR 1951 SC 458 (Shankari Prasad v. Union of India), (Sarju Prasad v. State of Bihar) and (Sasanka Sekhar Maity v. Union of India). In the decision of the Supreme Court (Smt. Indira Nehru Gandhi v. Shri Raj Narain), Mathew, J., held as hereunder :
"....... Article 368 does not confer on the amending body the competence to pass any ordinary law whether with or without retrospective effect.......
....... I do not think that under article 368 the amending body was competent to pass an ordinary law with retrospective effect to validate the election. It can only amend the Constitution by passing a law of the rank of which the Constitution is made of."
In the very same decision, Ray, C.J., expressed the view that the constituent power is sui generis and different from legislative power. Such or similar observations quoted in our view out of context have been alone relied upon for the petitioners.
17. The learned counsel read and referred to some of the passages from the decisions referred to above declaring the position that article 368 of the Constitution of India does not confer on the amending body the competence to pass any ordinary law whether with or without retrospective effect and it can only amend the Constitution by passing a law of the rank of which the Constitution is made of. Reliance was also placed on the observation that under article 368 of the Constitution of India, the amending body was not competent to pass an ordinary law to validate an election. The learned Senior Counsel for the Central Government invited our attention to some of the passages from the decisions reported in AIR 1951 SC 458 (Shankari Prasad v. Union of India), (L. Jagannath v. Authorised Officer, Law Reforms, Madurai) and (Sasanka Saikhar Maity v. Union of India). In the decision reported in AIR 1951 SC 458 (Shankari Prasad v. Union of India), the apex Court held as hereunder :
"The other objection that it was beyond the power of Parliament to enact the new articles is equally untenable. 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 31A and 31B 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 31B is too widely expressed was not argued before us and we express no opinion upon it."
The Constitution Bench as could be seen from the passage extracted above has held in unmistakable terms that no make a law which contravenes the Constitution constitutionally valid is a matter of constitutional amendment and as such it squarely falls within the exclusive power of the Parliament. In the decision (Jagannath v. Authorised Officer, Land Reforms), the Constitution Bench of seven learned Judges held as hereunder :
"Apart from the question as to whether fundamental rights originally enshrined in the Constitution were subject to the amendatory process of article 368 it must now be held that article 31B and the Ninth Schedule have cured the defect, if any, in the various Acts mentioned in the said Schedule as regards any unconstitutionality alleged on the ground of infringement of fundamental rights, and by the express words of article 31B such curing of the defect took place with retrospective operation from the dates on which the Acts were put on the statute book. These Acts even if void or inoperative at the time when they were enacted by reason of infringement of article 13(2) of the Constitution, assumed full force and vigour from the respective dates of their enactment after their inclusion in the Ninth Schedule read with article 31B of the Constitution. The States could not, at any time, cure any defect arising from the violation of the provisions of Part III of the Constitution and therefore the objection that the Madras Ceilings Act should have been re-enacted by the Madras Legislature after the Seventeenth Constitutional Amendment came into force cannot be accepted."
In the decision (Sasanka Sekhar Maity v. Union of India), the apex Court held as hereunder :
"It is true that in order to adjudicate upon the validity of the challenge to the appellant's election under clause (d)(i) of section 100(1), what was required to be determined by the High Court was whether the nomination of the appellant was properly or improperly accepted by the Returning Officer. But, in order to determine this question, it was necessary for the High Court to decide, as a preliminary step, whether the appellant was disqualified at the date of scrutiny of the nomination papers, for if he was 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 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 since his conviction was set aside in appeal by this Court and if that be so, the conclusion must inevitably follow that the nomination of the appellant was properly accepted by the Returning Officer. The position is analogous to that arising where a case is decided by a Tribunal on the basis of the law then prevailing and subsequently the law is amended with retrospective effect and it is then held by the High Court in the exercise of its writ jurisdiction that the order of the Tribunal discloses an error of law apparent on the face of the record, even though having regard to the law as it then existed, the Tribunal was quite correct in deciding the case in the manner it did, vide Venkatachalam v. Bombay Dyeing and Mfg. Co. Ltd. ."
A careful consideration of the opinions rendered by the apex Court as noticed supra would lead to the inescapable conclusion that enacting of the provision of the nature contained in section 6 of the Constitution (Forty-sixth Amendment) Act, is an inevitable exercise necessarily to be made as part and parcel of the move for a retrospective amendment of the Constitution as part of its rights and need to declare the consequences arising out of the Constitution amendment itself and the challenge to the competency of the Parliament functioning as the constituent assembly to enact such a provision has no merit whatsoever.
18. The plea on behalf of the petitioners that because section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, has not been incorporated in and as part and parcel of the Constitution of India as such, the same cannot answer the description of an amendment within the meaning of article 368 of the Constitution of India, deserves mention only to be rejected. An amendment to the Constitution which has been made in accordance with the procedure laid down under article 368 would answer the description of an amendment to the Constitution and there is no other principle of law which requires that such provision should also form part of an already existing provision. Every Constitution amendment for that matter, whether incorporated or not individually into the various provisions in the body of the text would equally be one made in exercise of the power if 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 way of service and in the absence of enactment of any new specific provision, the amending Acts referred to above cannot be availed of to levy tax. To very submission in this regard on behalf of the petitioners proceeds on a fallacious basis or assumption that there was no law imposing a charge or levy of sales tax on the sales of food and drinks in hotels and restaurants either as part of or by way of service. Assumptions of the nature merely attempt only to wishfully ignore the indisputable fact situation prevailing in the State prior to the judgment of the Supreme Court in what is known as Northern India Caterers (India) Ltd. case [978] 42 STC 386, that except in cases of exemption granted by the statutory notifications issued under section 17(1) of the Act, the hoteliers and restaurant holders were being subjected to tax when the authorities found as a fact that the sales of food and drinks in such places amounted to sales within the meaning of the Act and that the dominant object was sales and the service was either incidental or not the main object and such a thing was possible even on the general charging provisions read with the relevant definitions of "dealer", "sale" and "turnover". It is common knowledge that the decision of the Supreme Court in Northern India Carteres (India) Ltd. case [1978] 42 STC 386 only necessitated a restrictive construction, implementation and enforcement of the provisions of the Act which otherwise were sufficiently wide enough to cover even cases visualised by the apex Court and with the passing of the Constitution (Forty-sixth Amendment) Act, the rigour, scope and extent of the charging sections already in existence in the Act got revived and resurrected with the necessary power to the assessing authorities functioning under the Act to bring to assessment and levy tax thereupon, the sales of food and drinks in hotels and restaurants without any impediment or restrictions whatsoever. In substance, the cloud or the eclipse which surrounded the charging provisions automatically waned and disappeared, leaving no impediment to bring to sales tax such transactions even without and fresh move by the Legislature to introduce a separate charging provision to cover the transactions of the nature under consideration. There is no meaning whatsoever in the plea on behalf of the petitioners that after the Constitution (Forty-sixth 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 assistance or support from such decisions even at this stage for the stand taken by them in this batch of cases.
21. The contention on behalf of the petitioners that the amendments introduced to entry No. 150 of the First Schedule by the Tamil Nadu Act 7 of 1981 and Tamil Nadu Act 4 of 1982 are beyond the legislative competency of the State Legislature and, therefore, are to be treated as "still-born" are incorrect and untenable. The text or purport or object of the entry as it was added or subsequently amended before it got deleted in 1989 deals with articles of food and drinks sold to customers and the same, as on the date of their enactment were capable of being construed so as to confine or enlarge to their application to such of those sales which conformed to the definition of "sale" in force from time to time, both before and after Constitution (Forty-sixth Amendment) Act and what was operating in a limited filed by itself got enlarged with wider ambit and scope with the enlarged meaning given to the definition of "sale" by clause (29-A) of article 366 of the Constitution of India. The plea of lack of legislative competency itself has no force if the provision is so construed as above in a restricted manner at the relevant points of time which it is capable of, prior to the Constitution (Forty-sixth Amendment) Act, 1982. In any event, with the passing of the Constitution (Forty-sixth Amendment) Act and the validation provisions contained therein life has been infused into the provisions of the Act and the provision of entry No. 150 of the First Schedule to the Act got ignited as also enlarged without necessity for any further move in this regard, and the plea of the nature is not merely hypothetical but a matter of mere surmise than of stable basis or firm ground.
22. The submission on behalf of the petitioners that in the absence of independent charging provisions to levy sales tax on the sales/supply of food and drinks in hotels and restaurants and supply of food as part of service having been held to be in the nature of works contract only that portion of the value reasonably allocable to the value of goods can be taxed has no basis in law. These aspects have been already considered in the earlier Division Bench decisions of this Court and finally repelled in the last of the series of those decisions, reported in [1994] 94 STC 577 supra; (1993) 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 entries to the Schedules, but the life and validity of such notifications issued under section 59 of the Act very much depended upon the passing of an Act giving effect to the alteration, addition or cancellation, if any, made. The second proviso to section 59 also declares the consequence of any failure to bring an Act, giving effect to the alteration, addition or cancellation introduced by a notification so issued by the Government and it shall cease to have effect on the expiry of the period stipulated in the second proviso to section 59 of the Act, but, without prejudice to the validity of anything previously done. The stand taken for the respondents in this regard is that inasmuch as the State Legislature has given effect to the omission only with effect from March 25, 1989 and not from March 20, 1987, by enacting the Tamil Nadu General Sales Tax (Amendment) Act, 1989 (Tamil Nadu Act 17 of 1989), the deletion must be considered to be effective only with effect from March 25, 1989 and consequently, the petitioners cannot dispute the right of the respondents to assess and levy tax relying upon entry No. 150 of the First Schedule for the period from March 20, 1987 to March 25, 1989.
24. The decision relied upon for the petitioners and (Atlas Cycle Industries Ltd. v. State of Haryana) has no relevance to a situation of the nature under consideration. As noticed earlier, the power under section 59 is peculiar in nature enabling amendment of the Schedules in anticipation and subject to the statutory giving effect to of a notification so issued under section 59. That apart, the provisions contained in section 59 provides for the manner of statutory implementation of the notification as well as the consequences thereof. If powers to amend the statutory Schedules are conditioned upon a legislation also following the notification in the manner stipulated and also lay down the consequences of not bringing out a legislation to so give effect to the notification, there is hardly any scope for considering even a claim on the basis of general principles of construction or interpretation. The facts and circumstances of the case are such as to attract squarely the second proviso to section 59(2). The stand taken for the respondents is also misconceived. If only the legislation came to be introduced in the "next session" as stipulated and 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 teeth of the specific stipulation contained in the provisions of section 59(2) and the provisos thereto. Consequently, the petitioners could not be validly or properly assessed to sales tax under entry No. 150 of the First Schedule during the period between March 23, 1987 and September 19, 1987. The liability, if any, has to be considered for the abovesaid period under the general charging provisions subject to the notification relating to grant of exemption, if any, issued under section 17(1) and in force. There shall be a direction to the respondents and particularly the assessing authority concerned in this regard, to reassess on the above lines where assessments have been completed.
25. The further general plea raised is that based upon the rate of tax applicable to sales of ice-cream. Indisputably the sales of ice-cream appear to have been subjected to tax at the rate of 10 per cent, but the petitioners would contend that on and after June 15, 1981, sales of ice-cream which is claimed to be a milk food is only taxable at 4 per cent under entry 24 of the First Schedule to the Act up to July 1, 1983 when entry 24 was deleted. The sales of ice-cream were liable to sales tax for different periods and relating to different category only at the following rates :
"The position is -
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Ice-creams unregistered and without Ice-creams with registered brand
trade mark. name taxable under entry 103.
Up to 1-7-1983 under entry 24 4% From 15-6-1981 to 1-3-1982 8%
under entry 103
From 1-7-83 to 16-3-1986 under From 1-3-1982 to 17-3-1986 10%
entry 150 10% (entry 103)
From 17-3-1986 under GOP 253 From 17-3-1986 under GOP 253 4%
up to 26-9-1991 4%
From 26-9-1991 under section 3(1) 8% From 26-9-1991 (entry 103) 10%"
In cases where there was already completed assessments, the respondents/assessing authorities shall reassess by reopening wherever necessary, the respective assessees on the above lines.
26. Finally, it has been contended on behalf of the petitioners, as part of the general submissions that the assessing authorities are indifferent and also avoiding the undertaking of an exercise in terms of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982 and that not only there shall be a direction in this regard to consider the claims as well as the levy of tax in terms of section 6 of the said Act but in cases where the assessments have already 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 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 waiver made under section 17(4) within the stipulated period and keep in abeyance the orders of assessment, if any, passes till such time. In the decision of the Division Bench, the assessees therein claimed for an opportunity to satisfy the assessing authority that they are entitled to waiver and the learned Additional Government Pleader representing the Government conceded the position by undertaking to have a fresh determination of the claim upon which the Division Bench directed the Commercial Tax Officer to decide the question of waiver also before a final demand is made, within the time stipulated therein. Both the above orders would go to show that the learned Judges were inclined to grant certain directions to the authorities on the very undertaking or the assurance given by the learned Additional Government Pleader appearing in court for the respondents.
27. We have carefully considered the said submissions of the learned counsel appearing on either side. Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, is a combined provision dealing with validation as also according exemption. In our view, the scheme underlying section 6 of the said Amendment Act and the claim for waiver generally made or made under section 17(4) of the Act are wholly distinct and separate and there is no comparison of the two for equal treatment. Section 17(4) deals with the remission of the whole or any part of the tax or penalty or fee and which may normally be an event following actual assessment and determination of the liability and raising of the demand. Of course, in the unreported decisions referred to supra, a direction was issued to determine the question of waiver also before actually raising the demand. But so far as the provisions of section 6 of the Constitution (Forty-sixth Amendment) Act are concerned, it is peculiar and has a mandate of its own. While enacting that for the purposes of the Constitution and any law passed or made prior to the amendment Act, the expression "tax on the sale or purchase of goods" shall include and be deemed to have included a tax on the supply, by way of or as part of any service or in any other manner whatsoever of goods being food or any other article for human consumption or any drink and every such transaction shall be deemed always to have been a transaction of sale and notwithstanding any judgment, decree or order 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 quantified after dealing with the eligibility or otherwise of the assessee concerned for exemption whenever claimed and proved by the assessee as in the case of any other claim of exemption under the Act. Therefore, inevitably such an exercise has to be undertaken at the time of assessment and as part of the assessment process itself. This conclusion of ours, it is made clear, is confined to the language and also the scheme underlying section 6 of the Amendment Act, and cannot be construed to be of universal application in all cases where an assessee projects a claim for waiver. Consequently, the assessing authority shall consider the claims for exemption at the time of assessment itself of such of those assessees who claim for exemption in terms of the above provisions. But at the same time, we are unable to countenance the claim made on behalf of some of the petitioners that till such time, the Government passes general orders of waiver on the request said to have been made either individually or through South India Hotels and Restaurants Association, no action can be taken for assessment of levy and collection of tax since such a claim has no basis in law and no such embargo can be imposed upon the statutory authorities under the Act by restraining them from discharging their legitimate powers and duties. It is for the petitioners to prove and substantiate their claim for exemption before the assessing authorities if they want to avoid their liability and the Government, in our view, cannot be compelled to exercise their powers in the matter of grant of any waiver, as claimed by these petitioners nor could the making of assessments be conditioned upon the passing of such orders by the State Government.
28. The petitioner in W.P. Nos. 17198 to 17200 of 1990 claimed that for a particular assessment period, they were assessed under the Act applying entry No. 150 of the First Schedule though, according to them, they, who are running restaurants as lessees of the restaurant in the hotel, have not been recognised as star hotel or classified or approved by the Department of Tourism, Government of India. Though the claim appears to be attractive at first look, in our view, it cannot withstand a close scrutiny or careful, analysis, when made. The liability to pay tax in terms of entry No. 150 of the First Schedule is attracted to sales in such category of hotels as 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 ia 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 as to where it is sold for purposes of entry No. 150 of the First Schedule to the Act. The fact that for a particular period, the claim of the petitioner has been acceded to by the assessing authority is no ground for us to interpret the scope of the entry in the manner the petitioner claims, when we are unable to countenance such a plea on the language or scheme of the levy inbuilt in entry No. 150 of the First Schedule to the Act. The claim of the petitioner in these writ petitions therefore fails and shall stand rejected.
29. For all the reasons stated above, we summarise our conclusions and the nature of relief granted in these batch of writ petitions as hereunder :
(i) The provisions of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, is constitutionally valid as within the amending powers of the Parliament in exercise of its powers under article 368 of the Constitution of India.
(ii) The provisions of section 6 saved and infused life into the provisions of the Tamil Nadu General Sales Tax Act, 1959, as they existed prior to the Constitution (Forty-sixth Amendment) Act, 1982, with retrospective effect so as to enlarge their scope and ambit and the State Government and the authorities functioning under the Act are entitled to assess, levy and collect tax due under the relevant provisions in force and applicable to the assessee concerned from time to time - general charging provisions as well as entry No. 150 of the First Schedule to the Act, as the case may be, giving full effect and force to the expanded definition as envisaged under sub-clause (f) of clause (29-A) of article 366 of the Constitution of India and section 6 of the Constitution (Forty-sixth Amendment) Act, 1982.
(iii) For the period between March 23, 1987 and September 19, 1987, entry No. 150 of the First Schedule shall be considered and treated as not in force and available for levy of sales tax and the liability, if any, for that period could be assessed, levied and collected under the general charging provisions and subject to the exemption notifications, if any, in force from time to time.
(iv) For the period from September 20, 1987 onwards, till March 24, 1989, entry No. 150 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, stood revived and was in force and the assessment and levy for the said period shall be in terms of clause (ii) above.
(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, to the extent of inconsistency with the conclusions and directions contained in this order, shall stand hereby quashed and the respondents or the concerned assessing authorities shall be at liberty to revise the orders already passed by reassessment or by rectification and correction of such orders already passed, as the case may be. Any assessment to be made hereinafter shall be in accordance with the conclusions and directions issued in this order.
(ix) These writ petitions shall stand partly ordered and allowed in the above terms and conditions and there shall be no order as to costs.
30. Writ petitions partly allowed.