Judgment

VENKATACHALIAH, J. (for C.J.I.and Sabyasachi Mukharji, S. Natarajan and himself):- In these writ petitions under Article 32 of the Constitution of India, petitioners who are engaged in, or associated with, the Hotel Industry in India challenge the constitutional validity of the Expenditure Tax Act, 1987 (Central Act 35 of 1987). The Act envisages a tax at 10 per cent ad valorem on chargeable expenditure incurred in the class of Hotels wherein "room-charges" for any unit of residential accommodation are Rupees Four Hundred per day per individual. The chargeable-expenditure as defined in Section 5 of the Act include expenditure incurred in or payments made in such class of hotels in connection with the provision of any accommodation, residential or otherwise, food or drink whether at or outside the hotel; or for any accommodation in such hotel on hire or lease; or any other services envisaged in that Section. However, any expenditure incurred in or paid for in "foreign exchange" or by persons who enjoy certain diplomatic privileges and immunities are exempt.

The challenge to the vires of the Act is on grounds of lack of legislative competence and of violation of the rights under Arts. 14 and 19(1)(g). Union of India seeks to sustain the legislative competence to enact the impugned law under Article 248 read with Entry 97 of List I of the Seventh Schedule.

2. Writ Petition No. 1395 of 1987 is quite comprehensive as to the array of parties and may generally be regarded as representative of the contentions urged in support of the challenge. The first petitioner therein is "The Federation of Hotel & Restaurant Association of India" - which is said to be a representative body of over 1,000 member petitioners in India. Petitioners 2 to 5 are said to be the Regional Associations of the Federation and Petitioners 6 and 7 are two Hotel companies which own several hotels in India. Petitioners 8 and 9 are Indian citizens who are the directors and shareholders of petitioners 6 and 7 respectively. Petitioner 10, is a practising chartered-accountant who claims to use the services in the several Hotels in India owned by the members of the Federation. The array of petitioners is quite comprehensive so as to include all interests affected so as to satisfy the requisite standing to sue from all points of view.

3. The Expenditure Tax Bill No. 90 of 1987, preceding the impugned Act was introduced in the Union Legislature on 21-8-1987. It became an Act on 14-9-1987. It extends to the whole of India except the State of Jammu and Kashmir. The requisite notification under Section 1(3) of the Act was issued on 14-10-1987 appointing 1-11-1987 as the date on which the Act shall come into force.

The Expenditure Tax Bill No. 90 of 1987 states the following as its objects and reasons:

"The Bill seeks to impose a tax on expenditure incurred in hotels where the room charges for any Unit of residential accommodation are four hundred rupees or more per day per individual. This tax will be levied at the rate of ten per cent of the expenditure incurred in connection with provision of any accommodation, food, drinks, and certain other categories of services. This tax will not apply to expenditure incurred in foreign exchange or in the case of person enjoying diplomatic privileges."

(Emphasis supplied)

4. A brief survey of the provisions of the Act is perhaps necessary to apprehend and assess the grounds of challenge in their true perspective. Section 4 is the charging section which says:

"Subject to the provisions of this Act, there shall be charged on and from the commencement of this Act, a tax at the rate of ten per cent of the chargeable expenditure."

The expression chargeable-expenditure is defined in clauses (a), (b), (c) and (d) of Section 5, which reads:

For the purposes of this Act, chargeable expenditure means any expenditure incurred, in, or payments made to, a hotel ot which this Act applies, in connection with the provisions of,-

(a) any accommodation, re