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of <h1>Luxury Tax Laws Valid: Court Defines Luxuries, Allows Tax on Unutilized Services</h1> <h3>Express Hotels Pvt. Limited Versus State Of Gujarat And Another (with Writ Petitions)</h3> Express Hotels Pvt. Limited Versus State Of Gujarat And Another (with Writ Petitions) - [1989] 178 ITR 151, [1989] 74 STC 157 (SC), 1989 AIR 1949, 1989 ... Issues Involved:1. Constitutional validity of legislations imposing a tax on 'luxuries' under entry 62 of List II of the Seventh Schedule to the Constitution of India.2. Scope of entry 62 of List II regarding taxes on 'luxuries.'3. Validity of Section 4 of the West Bengal Act imposing tax on the mere existence of luxury provision.4. Criteria for distinguishing 'luxury' based on price.5. Legitimacy of taxing composite services that include necessities, comforts, and luxuries.6. Vagueness and arbitrariness of the phrase 'and the like' in Section 2(a) of the Gujarat Act.7. Reasonableness of taxing accommodation provided free or at concessional rates under Section 4(3) of the Gujarat Act.8. Impact of luxury tax on the freedom of 'trade, commerce, and intercourse' under Article 301 of the Constitution.Detailed Analysis:Issue 1: Constitutional Validity of LegislationsThe judgment addresses the constitutional validity of luxury tax legislations enacted by the States of Gujarat, Tamil Nadu, Karnataka, and West Bengal. These legislations impose a tax on luxury accommodations in hotels and lodging houses. The Gujarat High Court had upheld the constitutional validity of the Gujarat Act, which was under appeal.Issue 2: Scope of Entry 62 of List IIThe court analyzed whether 'luxuries' under entry 62 of List II includes services or is limited to goods and articles. The court held that the term 'luxuries' should be given a broad interpretation, encompassing both goods and services. The court cited previous judgments and dictionaries to support that luxury can include extravagant services, not just tangible goods.Issue 3: Validity of Section 4 of the West Bengal ActSection 4 of the West Bengal Act imposes a tax on the mere provision of luxury, even if not utilized. The court held that the taxable event need not be actual utilization but can include potential provision. The court rejected the argument that such a tax is an unreasonable restriction on the freedom under Article 19(1)(g).Issue 4: Criteria for Distinguishing 'Luxury' Based on PriceThe court examined whether price alone can be a criterion for identifying luxury. It held that price can be evidence of quality and that legislative assessment of luxury based on price does not suffer from irrationality. The court noted that what constitutes luxury can change over time and context.Issue 5: Taxing Composite ServicesThe court addressed the argument that taxing composite services, which include necessities and comforts, is unconstitutional. It held that in the context of lodging, the concept of luxury is comprehensive and includes various components of services. The court rejected the argument that the tax should distinguish between necessities, comforts, and luxuries.Issue 6: Vagueness and Arbitrariness of 'and the like'The phrase 'and the like' in Section 2(a) of the Gujarat Act was challenged as vague and arbitrary. The court held that the phrase should be construed ejusdem generis, meaning it includes items of the same class as those listed. The court found that the power to define 'charges for lodging' is not arbitrary as it is conferred on a high authority like the State Government.Issue 7: Taxing Free or Concessional AccommodationSection 4(3) of the Gujarat Act taxes accommodation provided free or at concessional rates as if full charges were received. The court upheld this provision, stating it is a measure against evasion and does not violate Article 19(1)(g).Issue 8: Impact on Freedom of Trade, Commerce, and IntercourseThe court addressed the argument that luxury tax restricts the freedom under Article 301. It held that only taxes that directly and immediately restrict trade, commerce, and intercourse fall within Article 301. The court found no evidence that the luxury tax on hotel accommodations restricts this freedom.ConclusionThe court dismissed the writ petitions and appeals, upholding the constitutional validity of the luxury tax legislations. It found no merit in the arguments that the legislations were beyond the scope of entry 62, List II, or that they imposed unreasonable restrictions on fundamental rights. The court emphasized that the legislative entries should be given the widest possible interpretation to include all ancillary matters.
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