Valid tax classification in hotel food levy upheld where higher-end sales were distinguished from modest eating houses.

Taxation of cooked food sold in luxury or higher-status hotels was upheld because the State may select a revenue source and confine the levy to costlier sales without taxing all cooked food. The distinction between expensive hotel food and food sold in modest eating houses was treated as a real and intelligible differentia, and the classification was found to have a rational nexus with revenue collection and economic equality. Applying the settled test of valid classification, the scheme based on hotel status and turnover was held within legislative discretion and not arbitrary under Article 14.

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Issues: Whether the levy of sales tax on cooked food sold in luxury or higher-status hotels while exempting cooked food sold in modest eating houses violates Article 14 of the Constitution.

Analysis: The classification was upheld on the footing that taxation need not extend to everything and that the State may select a revenue source and confine the levy to costlier food sold in places where higher tariffs are charged. The distinction between costly hotel food and food sold in modest eating houses was treated as a real and intelligible differentia, and the choice to tax only the more affluent consumers was held to have a rational nexus with the object of raising revenue while promoting economic equality. The Court applied the settled test of valid classification in taxation, giving wide latitude to legislative judgment and rejecting the contention that place of sale or hotel status made the scheme arbitrary. The use of existing hotel classification and turnover-based or status-based differentiation was held to be within legislative discretion and not palpably arbitrary.

Conclusion: The impugned tax classification was held valid and not violative of Article 14, so the challenge to the levy failed in relation to the taxed hotels and eating houses.

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