EXPRESS HOTELS PRIVATE LIMITED v. STATE OF GUJARAT & ANR

Citation: [1989] 2 S.C.R. 893

Court: Supreme Court of India

Bench: R.S. PATHAK, SABYASACHI MUKHERJI, S. NATARAJAN, M.N. VENKATACHALIAH, S. RANGANATHAN

Case summary

luxuries' under Entry 62 of List II of VII Schedule to the Constitution of India is challenged. The Gujarat High Court dealing with this cont,ention held that the contention, if accepted, would diminish the content of the Entry and reduce its scope from "taxes on luxuries" to...

Judgment text

The Judgment of the court was delivered by VENKATACHALIAH, J. In these civil appeals and writ petitions the constitutional validity of legislations of different States viz. , State of Gujarat, State of Tamil Nadu, State of Karnataka and State of West Bengal, imposing a tax on '. luxuries' under Entry 62 of List II of VII Schedule to the Constitution of India is challenged. EXPRESS HOTELS 1·. STATE OF GUJARAT [VENKATACHAL! AH. J. ] 899 ;J Civil Appeal Nos. 338 and 339 of 1981, writ-petition NC! s. 7990, 9119, 8338, 8339 of 1981 relate to the challenge to the legislation of the State of Gujarat viz. , the Gujarat Tax on Luxuries (Hotels & Lodging Houses) Act, 1977. Writ Petition No. 162 of 1982 pertains to the corresponding legislation cf the State of Tamil Nadu viz. , Tamil Nadu Tax on Luxuries in Hotels & Lodging Houses Act, 1981. Writ petition Nos. 1271 and 1272 of 1982 pertain to the challenge to ~ corresponding Karnataka Legislation viz.

, the Karnataka Tax on I~xuries (Hotels and Lodging Houses) Act, 1979. W. P. No. 5321 of 1985 pertains to the challenge to West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972. All these taxingstatutes, except for certain aspects individual to them, are analogous and the scheme of the legislation is substantially similar. The variations are in the differences in the criteria of classification of the hotels )- to which the Act is applied and the rates of taxes. The grounds of challenge are substantially the same. An examination of the contentions urged in support of the challenge to one statute would cover the cases of the other statutes as well. 2. We might take up for consideration, the provision; of the Gujarat Act which may be considered as representative of the legislations on the topic. The constitutional validity of the Gujarat Act had been assailed before the High Court of Gujarat, which by its judgment dated 23. 7.

1980 upheld its constitutional validity. The judgment of the High Court is under appeal in C. A. Nos. 338 and 339 of 1981. 3. The statement of objects and reasons in the Gujarat Legislative Bill states: "With a view to augmenting the financial resources of the State it is proposed to levy a tax on luxury provided in hotels and lodging houses at the rate of certain percentages of lodging charges recovered by the proprietors of such hotels and lodging houses from persons lodging therein. Every accommodation provided in a hotel or . lodging house the charges for which are not less than rupees thirty-five per day per person is, for the purposes of the tax, to be treated as a luxury. This bill seeks to achieve that object. " Section 2 is the interpretation clause and defines, inter a/ia, the expressions Bcharges for lodging", "hotel", "luxury provided in hotel", "proprietor" occurring in clauses (a) (d) (e) and (g) respectively.

The definitions are as follows: • i "(a) "charges for lodging" include charges for aircondi- ~ tioning, telephone, television, radio, music and extra" beds and the like but do not include any charges for food, drink or other amenities. (d) "hotel" means a building or part of a building where lodging accommodation, with or without board is, by way of business provided for a monetary considera- )• , -~concept of a tax on 'luxuries' contemplates a tax on articles and goods, like jewellery, perfumes, liquors, tobacco etc. , in their character and attribute as articles of luxury. The idea, it is urged, does not include services or activities as falling within the concept of luxuries as a subject of taxation. The Gujarat High Court dealing with this cont,ention held that the contention, if accepted, would diminish the content of the Entry and reduce its scope from "taxes on luxuries" to "taxes on )' articles of luxuries".

Shri Sorabjee, however, submitted that the High Court was in error in its understanding of the import of the concept of 'luxuries' in Entry 62 as a subject of tax. The learned counsel also referred to the following observations of the High Court of Bombay in State ofBombay v. R. M. D. Chamarbaugwalia & Ors. , AIR 1956Bom. 1at page 11: I "With regard to luxuries it is significant to note that the :-\• ~ plural and not the singu_lar is used, and the luxuries in respect of which a tax can be imposed under entry 62 is a tax ~m goods or articles which constitute luxuries, and it is again significant to note that the topic of luxuries, only is to be found in entry 62 in the taxation power and not in either entry 33 or 34. That clearly shows that, what was contemplated was a tax on certain articles or goods constituting ),_ luxuries and not legislation controlling an activity which may not be a necessary activity but may be necessary and in that sense a luxury.

" ~ (Emphasis supplied) It is to be noticed that the decision of the Bombay High Court in which the above observation occurs was over-ruled by this Court in State of Bombay v. R. M. D. Chamarbaugwalia, [1957] SCR 874. The --' impugned State Legislation which the High Court had struck down was held to be a valid piece of legislation under Entry 62, List II. In the light of the decision of \his Court in the case, the observations of the learned Chief Justice of the Bombay High Court excerpted are rendered inapposite. Indeed, a view similar to the one taken by the Bombay High Court as to the concept of 'luxuries' in Entry 62 of List II was taken by the Kerala High Court in A. S. Bava v. State of Kera/a, * [1971] Tax L. R. 512. However, the views of the Bombay and Kerala High Courts were referred to and dissented from by the Calcutta High Court. In Spences Hotel Private Ltd. and another v. State of West Bengal, [1975] TLR 1890 at 1892 it is held: )<.

_ "In these premises, we are of opinion that 'luxuries' 1 in Entry 62 of List II should not be confined to articles or objects of luxury alone. In view of the social and economic structure of our country there can be no doubt that an air-conditioned space whether in a hotel or in a restaurant is a luxury by itself. People enter into these spaces for enjoyment of a luxury. In fact, the ambit of Entry 62 which i includes taxes on entertainments_, amusements, betting and gambling, shows that a tax levied under Entry 62 cannot be restricted to certain articles only but may also be extended to things incorporeal. The comfort that a person derives in a hot summer day in an airconditioned space is a luxury particularly in the context of the conditions in which the masses live in India today. In our opinion, the State legisla- _,l ture is competent to impose a tax on this luxury. " For reasons we shall state presently, we approve the view taken by the Calcutta High Court. 6.

We are dealing with an Entry in a Legislative List. The entries should not be read in a narrow or pedantic sense but must be given their fullest meaning and the widest amplitude and be held to extend to -"'all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in them. ~ In the Western India Theatres Ltd. v. The Cantonment Board, Poona Cantonment, [1959] 2 Supp. SCR 63, this court was dealing with the scope of the power of the Provincial Legi~lature under Sec. 100 of the Govt. of India Act, 1935, with respect to Entry 50 in Schedule VII ~ of the said Act, to make laws with respect to "taxes on luxuries including taxes on entertainments, amusements, betting and gambling". The contention of the appellant in that case was that the entry authorised a law imposing taxes on persons who received or enjoyed the luxuries etc.

and that no law made with respect to that Entry could impose a tax on persons who provide the luxuries, entertainment or amusements. It ! 1 EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH,J. J 907 . J- was contended that those who provide the luxury·etc. , did not themselves receive or enjoy the luxury or entertainment or amusement, but were simply carrying on their profession or trade and were not amenable to be taxed under that Entry. Rejecting the argument it was said: " ..... In view of this well established rule of interpretation, there can be no reason to construe the words 'taxes on luxuries or entertainments or amusements' in entry 50 as having a restricted meaning so as to confine the operation of the law to be made thereunder only to taxes. on persons receiving the luxuries, entertainments, or amusements. The . entry contemplates luxuries, entertainments, and amuse- ·ments as objects on which the tax is to be imposed.

If the words are to be so regarded, as we think they must, there can be no reason to differentiate between the giver and the receiver of the luxuries, entertainments, or amusements and both may, with equal propriety, be made amenable to the tax ..... " (Emphasis supplied) The concept of ;luxuries' as a subject of tax was not confined to those who received or enjoyed the luxury. It could be on. those who provided it. . In Encyclopaedia Britannica the meaning of'the word 'luxurytax' is set-out thus: "Luxury tax: A tax on commodities or services that are considered to be luxuries rather than necessities. Modern . ·examples are taxes levied on the purchase of jewelry, perfume and tobacco. " • In Webster's Comprehensive Dictionary, International Edition, the word 'luxury' is defined: "Luxury : 1. A free iQdulgence in the pleasures that gratify the senses. 2.

Anything that ministers to comfort or pleasure that is expensive or rare, but is not necessary to life, health subsistence, etc; a delicacy. " Luxury connotes extravagance or indulgence, as distinguished from the needs and necessities of life. . H 'The New Dictionary of Thoughts' has these thoughtful things to say of "luxury": "On the soft bed of luxury most kingdoms have expired. -Young. Unless we are accustomed to them from early youth, splendid chambers and elegant furniture had best be left to "'people who neither have nor can have any· thoughts. ~ Goethe. " "War destroys men, but luxury destroys mankind at once, corrupts the body and the mind. "-Crown. The concept of a tax on 'luxuries' in Entry 62, List II cannot be •f limited merely to tax things tangible and corporeal in their aspect as 'luxuries'. It is true that while frugal or simple food and medicine may be classified as. necessities; articles such as jewellery, perfume, intoxicating-liquor, tobacco, etc.

, could be called articles of luxury. But the legislative entry cannot be exhausted by these cases, illustrative of the ·concept. The entry encompasses all the manifestations or emanations, the notion of 'luxuries' can fairly and reasonably be said to comprehend. The element of extravagance or indulgence that ,.. l differentiates 'luxury' from 'necessity' can not be confined to goods and articles. There can be elements of extravagance or indulgence in the quality of services and activities. In A. B. Abdul Kadir & Ors. v. State of Kera/a, [1976] 2 SCR 690 at 699-700 Khanna J. said: " .... The word "luxury" in the above context has not been used in the sense of something pertaining to the exclusive preserve of the rich. The fact that the use of an article is ' popular among the poor sections of the population would not detract from its description or nature of being an article of luxury.

The connotation of the word "luxury" is something which conduces enjoyment over and above the necessaries of life. It denotes something which is superfluous and not indispensable and to which we take with a view to enjoy, amuse ·or entertain ourselves. An expenditure on something which is in excess of what is required for economic and personal well-being would be expenditure on luxury although the expenditure may be of a nature which ) EXPRES~HOTELS" STATEOFGUJARAJ[VENKATACHALIAH,JJ 909 is incurred by a large nurn~er of people, including those not economically well-off .. i . " ) The submission of Shri Sorabjee, '_if accepted, will unduly restrict the scope of the legislative-Entry whic. should otherwise have the widest . and the most-liberal meaning and c nnotation given to it. Contention ~ (a), in our opinion, is unacceptable. )8. Re: Contention (b): This contention pertains to a p ovisiori particular to the West Bengal legislation.

It is urged that in s far as Section 4 of the West Bengal Act envisages a tax on the mere existence of the provision for the luxury and is levied even if the luxur is not utilised by any person, •· it was beyond the scope of the legislative entry. It was submitted that there must be both a giving and receiving of the luxury and that a tax on the mere existence of the means of pro :viding the luxury would be insufficient to support a law imposing a tax thereon. It would, in any event,·it is urged, constitute an unreasonable restriction on the freedom under Article 19(1)(g). Reliance was also placed on certain bservations in Western '-. India Theatres Ltd. 's case (supra). The passage in the judgment relied 1 upon by Shri Sorabjee merely says that both th~iver and the receiver of the luxuries are amenable to be taxed.

THe decision cannot be understood as laying down the proposition tha if there is no actual utilisation of the luxury, no tax can be levied on the mere existence of the provisions made for the prospective or poten~ial utilisation of the luxury. \ i In support of the proposition that a tax on luxluries must relate to and be based on an actual utilization of the luxury ,jnd not on the mere • existence of the means of providing 'luxury' Sri So1·abjee placed strong reliance on the observations of the High Court of Bombay in Ramesh Waman Toke and others v. The State of Maharashtra, AIR 1984 Bombay 345, which while dealing with the legislation under Entry 62 l List II imposing a tax on entertainment held: " ..... In our opinion, this is not a tax on entertainmen. t at all which the State Legislature is entitled to. levy undOir item 62 of the State List. In order that the entertainment'i:!

uty should amount to a tax on entertainment it should be levied on entertainment which is actually held and not on enter- ( 910 SUPREM~ COURT REPORTS [1989] 2 S. C. R. tainment which is \heoretically capable of being held. + Looking to the prO\'isions which have been examined in detail it is clear to u;1 that. the said provisions do not take into account entertai. nment that is actually held by the owner of the touringr cinema or the owner of the video ~ exhibition. The batisn which tax can be validly levied is , the fact of entertai ent. The taxing event is the entertainment. If there is n entertainment at all, the question of levying entertain ent tax in exercise of the legislativef. powers conferred pon the State Legislature does not arise at all. If the Act p rports to levy tax on notional entertainment then the ex ;rcise of that taxing power must be held to be ultra vires e Constitution. This is exactly what has happened in the· nstant case.

" There might possibly be s e distinction between the ideas of 'entertainment' and 'luxuries'. With due respect to the High Court, the interpretation that com nded itself to the High Court would unduly restrict the scope of the 1 gislative Entry. On such an interpretation, it might be possible for a erson to go further and also contend that no 'entertainment' was ac aliy derived. The concept of 'luxuries' in the legislative Entry takes ithin it everything that can fairly and reasonably be said to be co prehended in it. The actual measure of the levy is a matter of legislati•~e policy. and convenience. So long as the legislation has reasonable r/iexus with the concept of 'luxuries' in the broad and general sense in/i:vhich the expressions in legislative tests are comprehended, the le! j!! slative competence extends to all matters 'with respect to' that fielcll of topic of legislation.

The taxable /event need not necessarily be the actual utilisation or the actual con~umption, as the case may be, of the luxury. The contention, in substance, is that the means of providing luxury, by , itself, does not provide the nexus between the taxing power and the subject of tax ancL. there must be an actual and not merely a notional or potential, cons. umption or utilisation of the luxury. As an instance of what can be said to be fairly and reasonably comprehended in a legislative Entry, reference may be made to the "notional" income, for purposes of a tax on income, of a person, from a house-property in his own per. mnal occupation or a property not actually let. In that context this Court said "that which can be converted into an income can be reasonabiy regarded as giving rise to income" (See: Bhagwan Dass Jain v. Union of India, AIR 1981 SC 907). A luxury which can reasonably be said to be amenable to a potential conception does provide the nexus. EXPRESS HOTELS v.

STATE OF GUJARAT [VENKATACHALIAH, J. ] 911 If the provider of the luxury is also independently amenable to the tax, the further restriction on the power suggested by the. argument tends to cut into the plenitude of the field of legislation. If the idea of "luxuries" is required to be so wide as to comprehend in it, every aspect which can fairly and reasonably be said to be embraced by it, then, the taxing power cannot be limited to or conditioned in the manner suggested. Once the . legislative competence and the nexus between the taxing-power and the subject of taxation is established, the • other incidents are matters of fiscal policy behind the taxing law. The measure of the tax is not. the same thing as, and must be kept distinguished from, the subject of the tax.

So far as the argument that fundamental rights under Article 19(1)(g) are violated by a levy on a mere provision for luxury, without its actual utilisation, is concerned it is settled law that the mere excessiveness of a tax or the fact that it affects the earnings cannot, per-se, be held to violate Article 19(1)(g). Contention (b) is not substantial either. 8. Re: Contentions (c) and fd): These contentions were somewhat attractively presented and bear close scrutiny. Shri Sorabjee urged that the concept of "luxuries" is a relative or comparative idea, distinguishable from "necessities" by the special attribute or quality of distinction inherent in them. The articles or activities of luxury could be identified as such only by reason of that inherent distinguishing special-quality or attribute. The price factor, says learned counsel, might be, prima facie, an index of that special quality or attribute; but the price is not itself a substitute for "the special quality or attribute.

Therefore, if what is legislatively classed as luxury is on the sole basis of the price alone, then the legislative definition or the means of identification of the luxury becomes ,irrational as it has the effect of substituting price in place of the special quality. The two.. are not the samething. There is nothing in the law, it · is urged, which identifies or distinguishes 'luxury' on the basis of any special attribute apart from the price-factor. This argument itself recognises that price might be, and very often is, evidence of quality. The statute proceeds on the premise that any accommodation in a hotel which is priced above a certairi level · could reasonably be held to be of a particular quality distinguishing it from others. These ideas of luxury or necessity are necessarily relative ideas and require to be understood in the context of the contemporary standards of living. What might have been a 'luxury' some decades ago might cease to partake of the character now.

What is luxury today might be considered a necessity a decade or so later. In Abdul Kadir's case (supra) it was observed: "It may be added that there is nothing static about what constitutes an article of luxury. The luxuries of yesterday can well become the necessities of today. Like- i wise, what constitutes necessity for citizens of one country or for those living in a particular climate may well be looked upon as an item of luxury for the nationals of another country or for those living in a different climate. A number of factors may ·have to be taken into account in adjudging a commodity as an article to luxury ...... " We are presently concerned with the question whether the quality or standards of lodging accommodation in hotels can be called luxurious by contemporary standards by reason of the higher standards of charges payable for the accommodation. Legislature has chosen to identify the luxury by the statutory standards prescribed by it.

According to the legislative assumption, price does become evidence of the special quality on the basis of which 'luxuries' could be distinguished and that some special quality is attributable to goods and services through the means of the price. Quality and price, in the legislative assessment, can be assumed to have a logical inter-relationship. This cannot be held to suffer from the vice of irrationality. 9. The further contention is that when the price factor is made . the sole criterion for imparting the quality of luxury to the lodging accommodation, the means of identification so adopted cease to distinguish areas in the services which are not luxuries but are really necessities and comforts and the subject of the tax would come to ; include, not merely luxuries but necessities and comforts also.

The answer is that in the context of lodging accommodation and the services that go with it, the concept of luxury would necessarily be a comprehensive idea taking into account the various components of the services. Differences of degree can at particular stage become differences of kind. The composite elements of lodging accommodation and services associated with it cannot be broken into components so as to distinguish some components as necessities, some others as comforts and yet others as luxuries. Even necessities and comforts which have to them the additional element of undue elegance to a EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J. I 913 point of extravagance and indulgence might become luxuries. Though i the arguments on these contentions were not without their interesting facets, we must, however, express our inability to accept them as valid arguments against the constitutionality of the provisions.

Contentions (c) and (d) are accordingly held and answered against the petitioners and the appellants. . ~ 10. Re: Contention (e): The point sought to be put across arises out of the definition of the expression 'charges for lodging' in sec. 2(a) read with the-Explanation to the provision. Sec. 2(a) defines "charges for lodging" to include 'charges for airconditioning, telephone, television, radio, music, extra beds" and the like''. It is contended that the expression 'and the like' is vague and confers an arbitrary power to bring to tax an undefined entity. It is further contended that the Explanation appended to Section 2(a) to the effect that the decision of the State Government on any dispute in that behalf is final and shall not be calle~ in question in any court aggravates the arbitrariness and constitutes an unreasonable restriction and is violative of Article 19(l)(g). Reliance was placed on the decision of this Court in Corporation of Calcutta v. Calcutta Tramways Co.

, [1964]5SCR25. We are afraid, the argument overlooks certain relevant factors bearing on the point. It is, no doubt, true that it has been held in several cases that the absence of a provision for a correctivemachinery, by way of appeal or revision, to rectify an adverse order made by an authority on whom power is conferred, might indicate that the power so conferred is unreasonable or arbitrary. But the corrective-machinery may itself take several forms and be inherent or found in the provisions for conferment of the power themselves. The mere absence of a corrective machinery or the existence of a provision imparting finality, by themselves, would not be conclusive so as to render the conferment of power per-se unreasonable and. arbitrary rendering the provision unconstitutional. In Babu Bhai v. State of Gujarat, [1985] 2 SCC 732 at 736 this Court said: " .....

in other words mere absence of a corrective machinery by way of appeal or revision by itself would not make the power unreasonable or arbitrary, much less would render the provision invalid. Regard will have to be had to several factors, such as, on whom the power is conferred-whether . on a high official or a petty officer, ~· what is the nature of the power-whether the exercise thereof depends upon the subjective satisfaction of the authority or body on whom it is conferred or is it to be exercised objectively by reference to some existing facts or tests ...... " There are in-built checks on the power under Explanation to sec. 2(a). The expression 'and the like' would require to be construed f ejusde. m-generis. The genus or the class of items envisaged by the preceding words not having been exhaustive of the genus or the class, the legislature, therefore, has supplied the words 'and the like' so as to bring in any other item of the same class or genus.

This, by itself, is a clear guide for the exercise of the power. Another relevant consideration is the identity and status of the repository of the power. The power is given to a high authority like the State Government. In these circumstances, it cannot be said that the power is an uncanalised power and is an arbitrary or unreasonable one. There are statutory guides governing its exercise and the guide-lines are governed by well settled principles of interpretation. There is no substance in contention (e). 11. Re: Contention (f): What is assailed here is the deeming provision in sec. 4(3) which brings to charge at the normal rates cases where no charge is collected at all for lodging or where concessional rates are charged. The deeming provision does not apply to cases where accommodation is provided free or at commercial rates to the employees of the hotel.

No fault can be found with this provision which merely states that where the usual lodging charges are not collected for providing the lodging accommodation, tax shall be payable as if the usual charges had been collected. This is a provision against evasion. There is no merit in the challenge to the validity of this provision. Contentio! J (f) requires to be rejected. 12 Re: Contention (g): Shri R. F. Nariman, learned counsel, who addressed arguments with particular emphasis on this contention submitted that tax laws are not outside the purview of Part XIII of the Constitution and that the present tax on lodgings and accommodations in hotels is violative of the freedom of "trade, commerce and inter-course" and offends Art. EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH,J. ] 915 ·~·· 301. Learned counsel submitted "that business undoubtedly is com' merce but is. something more. , it is intercourse". Th~ word "intercourse" specifically occurs in Art.

301 intending to give the largest connotation to the concept of commerce. The question is whether the impugned tax imposes a restriction on the freedom under Article 301. If it does, the further questions whether the restriction is reasonable ·and is required in public interest and whether Presiqential sanction 6had been obtained for the introduction of the legislative measure arose · for consideration. It has been held that only such taxes as are directly and . immediately restrictive of trade, commerce and inl~rcourse that fall within the purview of Art. 301. On the several facets of the similar-some say deceptively similar-provisions of sec. 92 of the Commonwealth of' Australia Constitution Act 1901 comments of a learned author may be recalled: "The lengthy series qf judicial decisions on the meaning and scope of the immunity afforded by s.

92 is ample testimony to the difficulty involved in giving some precise meaning to a provision which in reality expresses a political slogan rather than a legal pr~cept. Rich J once pithily described the lot of the High Court in relation to s. 92 as being "to explain the elliptical and expound the unexpressed", and he emphasized that the practical necessity of determining precisely what impediments were no longer to obstruct inter-State trade "obliged the court to attempt the impossible task of supplying an exclusive and inclusive definition of a conception to be discovered only in the silences of the Constitution. " ;.. On the significance of the word 'intercourse' in sec. 92 of the Australian Constitution, it was held by the Australian High Court in Gratwick v.

Johnson, [1945] 70 CLR 1 that an order which provided that no person should travel by rail or commercial passenger vehicle from any State in the commonwealth to any other State without a permit from a commonwealth official would violate the freedom of 'intercourse' under sec. 92. It was held that ,the prohibition showed "an indifference to, if not a disdain of, the terms of sec. 92". In Atiabari Tea Co. v. State ofAssam, [1961] 1SCR809 at 860-61 this Court said: " ..... in determining the limits of the width and amplitude of the freedom guaranteed by Art. 301 a rational and work- ) able test to apply would be: Does the impugned restriction operate directly or immediately on trade or its movement? ... It is the free movement of the transport of goods from one part of the country to the other that is intended to be saved, and if any Act imposes any directrestrictions on the very movement of such goods it attracts the provisions of Art. 301 ...... " In Mehtab Majid & Co. v.

State of Madras, [1963] Supp. 2 SCR •· 435 this Court said: "It is now well settled that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulating measures. Sales tax, of the kind under consideration, cannot be said to be a measure regulating any trade or a compensatory tax levied for the use of trading facilities, sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free flow of trade and it will then offend against Art. 301 ...... " Taxes can and do sometimes, having regard to their effect and impact on the. free flow of trade, constitute restrictions on the freedom under Art. 301. But the restriction must stem from the provisions of the law imposing the tax which could be said to have a direct and immediate effect of restricting the free flow of "trade, commerce and intercourse".

It is not all taxes that have this effect. Freedom under Article 301 is, by all reckoning, a great freedom, one of the utmost significance to economic unity of the nation. Underlying the need for and the recognition of the freedom. of inter-State trade, con1merce and intercourse, one is tempted to refer to the lofty sentime. nts of Justice Cardozo in Baldwin v. GAF Inc. , I1934I US 511 that "it was framed upon the theory that peoples of several States must sink or swim together and that in the long run the prosperity and salvation are in union and not in division" and that "the ultimate principle is that one State· in dealing with another may not place itself In position of economic isolation". But in the present case it has not been pointed out how a tax on "luxuries" enjoyed by a person in a hotel is either discriminatory or has the direct and immediate effect of impeding the freedom of inter- EXPRESS HOTELS v. STATE OF GUJARAT [VENKATACHALIAH, J. ] 917 + course. In Granna/l v.

Marrickville Margarine Pty. Ltd. , [1955] 93 CLR 55 a New South Wales statute which prohibited the manufacture of margarine without a licence which, if granted, would contain a condition limiting the quantity to be manufactured was assailed on the ground of its violation of sec. 92 of the Australian Constitution. Repelling the challenge, it was held: "It is of course obvious that without goods there can be no inter-State or any other trade in goods. In that sense manufacture or production within, or importation. into, the Commonwealth is an essential preliminary condition to trade and commerce between the States in merchandise. But that does not make manufacture production or importalion trade and commerce among the States. It is no reason for extending the. freedom which s. 92 confers upon trade and commerce among the State, to something which precedes it and is outside the freedom conferred. " We find no substance in contention (g). 13.

In the result, for the foregoing reasons, the writ petitions and the appeals are dismissed. But, in the circumstances, there will be no order as to costs. P. S. S. Appeals dismissed. . E