Article 14 and sales tax classification: tourism approval could not justify taxing only approved hotels' food and drink sales.

Item 150 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 created a classification between hotels approved or classified by the Government of India's Tourism Department and other hotels selling food and drink. The Court held that this distinction had no rational nexus with the object of sales tax, which is to tax the sale or purchase of goods, and that tourism approval was not an intelligible differentia relevant to taxation. Applying Article 14 principles, the special levy on approved hotels was invalid for the period before 2 February 1983, and recovery notices based on that entry were liable to be quashed.

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Issues: Whether item 150 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, read with section 3(2), was constitutionally valid under article 14 when it subjected only hotels classified or approved by the Government of India, Department of Tourism, to sales tax on food and drink supplied to customers.

Analysis: The levy created a classification between hotels approved by the Tourism Department and other hotels engaged in the same business of selling food and drink. The Court held that the object of the sales tax law was to tax the sale or purchase of goods, and the approval granted by the Government of India's Tourism Department had no rational connection with that object. The classification was not based on any distinguishing feature relevant to taxation, and the supposed advantages of approval, such as tourism incentives or better facilities, did not supply the required nexus. Applying the settled article 14 doctrine, a taxation measure must rest on an intelligible differentia having a rational relation to the statutory object; here that test was not satisfied.

Conclusion: Item 150, insofar as it singled out approved hotels for tax on food and drink sales, was violative of article 14 and invalid for the period prior to 2 February 1983. The recovery notices and connected proceedings founded on that entry were liable to be quashed.

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