R.M.S. Khandeparkar, J.
1. All the above three writ petitions give rise to common questions of law and, therefore, they are being disposed of by this common judgment.
2. The points for determination which arise in these petitions are as under:-
(1) Whether the insertion of Clause 29A in Article 366 of the Constitution of India automatically confers power on the State Government to collect tax on supply or sale of food stuff without taking consequential steps for necessary amendments in the local Sales Tax Act for that purpose.
(2) Whether the provisions in the local Sales Tax Act as they existed at the relevant time, i.e., prior to Goa Sales Tax (Amendment) Act, 1989, authorised the State Government to levy and collect sales tax on supply or service of food stuff?
(3) Whether the provisions contained in Entry No. 45 in the Second Schedule read with Entry No. 39 in the First Schedule of the said Act as sought to be interpreted by the Assessing Authorities results in the classification of the dealers based on the volume of their turnover and, that such classification in violative of Article 14 of the Constitution of India? and
(4) To what extent the exemption under Entry No. 45 in the Second Schedule of the Goa Sales Tax Act is available in view of Entry No. 39 in the First Schedule of the said Act.
3. The Writ Petition No. 380/88 relates to Order dated 1st June, 1987 passed by the first respondent and upheld by the second respondent by his Order dated 18th December, 1987 in respect of the turnover of sale of cooked food and non-alcoholic drinks made by the petitioner at his bar and restaurant by name 'CLANDALE' amounting to Rs. 3,86,467.74 for the assessment year 1985-86 being assessed at the rate of 12 paise in a rupee for a total sales tax amounting to Rs. 46,376.12. It is stated by the petitioner that out of the said dues, the petitioner had already paid advance of Rs. 22,387.90.
4. The Writ Petition No. 383/88 relates to the Orders dated 20th January, 1988 and 12th July, 1988 passed by the first respondent in respect of the turnover of the sale of cooked food and non-alcoholic drinks, made by the petitioner at his 'Peacock Bar and Restaurant' at Tourist Hotel, Margao for the periods from 1st April, 1985 to 21st November, 1985 and 22nd November, 1985 to 31st March 1986 respectively. Accordingly, the Sales Tax Officer made assessment and held that the sale of cooked food and non-alcoholic drinks of the petitioner for the period from 1st April, 1985 to 21st November, 1985 to be of Rs. 4,66,930.00 and assessed the sales tax payable on the said sale at the rate of 12 paise per rupee, amounting to total of Rs. 55,311.00. On the sale of other items, the petitioner was assessed at Rs. 360/- and further penalty of Rs. 5,000.00 in terms of Section 17(5) of the said Act was levied and the petitioner was directed to pay a total sum of Rs, 60,671.00. Again by Order dated 12th July, 1988, the Sales Tax Officer made assessment and held that the sale of the said products for the period from 22nd November, 1985 to 21st March 198610 be Rs. 2,80,131.02 and assessed the sales tax at Rs. 33,616.00 and further levied a penalty of Rs. 10,000.00 for non-filing of the returns and nonpayment of tax under Section 17(4) of the said Act.
5. The Writ Petition No. 83/92 relates to the Order of the Sales Tax Officer for the period from 1st April, 1986 to 31st March, 1987 in respect of the same Bar and Restaurant, holding that the total taxable turnover for the said period was Rs. 7,44,561.30 and demanded the Sales Tax of total amount of Rs. 89,287.00 and further imposed penalty of Rs. 15,000.00 under Section 17(4) and thereby demanded total sum of Rs. 1,04,287.35.
6. Before considering the arguments on merits, it is appropriate to deal with the preliminary objection sought to be raised by Shri Bharne, the Additional Government Advocate, on the ground that the Writ Petition Nos. 383/88 and 380/88 do not contain pleadings relating to any challenge to the power of the respondents to levy and collect the sales tax during the relevant period as well as any provision in the Sales Tax Act and Rules made thereunder being violative of Article 14 of the Constitution of India and, therefore, the arguments advanced in that respect should not be considered while disposing of the said Writ Petitions. There is no doubt that there is always presumption of constitutional validity of a statutory provision and if any party assails the validity of any provision on the ground that it is violative of Article 14 of the Constitution, it is for that party to make the necessary averments and adduce material to show discrimination and violation of Article 14. This principle of law is well established and certainly the decision of the Apex Court in the matter of Anant Mills Co. Ltd. v. The Aryoday Spg. & Wvg. Mills Co. Ltd. : [1975]3SCR220 reiterates the said principle. Moreover, the said two Writ Petitions are being disposed of alongwith another Writ Petition No. 83/92 and the same is filed by the petitioner in Writ Petition No. 383/88 and in relation to the same premises. Besides, the decision on the point of law in Writ Petition No. 83/92 will also be binding upon the parties in the two other Writ Petitions. Therefore, we find no substance in the grievance of Shri Bharne that the respondents will be taken by surprise if the said point is allowed to be agitated in the said two Writ Petitions since, admittedly, the said point has already been raised in Writ Petition No. 83/92 and the respondents are fully aware of the same. The preliminary objection sought to be raised by the advocate for the respondents is, therefore, rejected.
7. Coming to the merits of the case, we find that the 'power to levy sales tax was conferred on the Legislature of the State by the Constitution of India by Entry 54 of List II of the Seventh Schedule to the Constitution of India which, as originally enacted, read thus;-
54. Taxes on the sale or purchase of goods other than newspapers.
Subsequent to the judgment in Bengal Immunity Co. Ltd. v. State of Bihar and Ors. : [1955]2SCR603 and on the recommendations of the Taxation Enquiry Commission as regards the amendment of the constitutional provisions relating to sales tax, the Parliament passed the Constitution (Sixth Amendment) Act, 1955. By the said amendment, Entry 92A was added in the List I of the Seventh Schedule to the Constitution. The said Entry reads as under:-
92 A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.
Simultaneously in the List II, existing Entry 54 was substituted by the following Entry:-
54. Taxes on the sale or purchase of goods other than newspaper, subject to the provisions of Entry 92A of List I.
8. Thereafter controversies arose before the various High Courts regarding the liability to pay the sales tax on different kinds of transactions on various grounds and as a result of decisions of the various High Courts, certain kinds of transactions were held to be 'not sales' and, therefore, not liable to payment of sales tax.
9. In Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi : [1979]1SCR557 the Hon'ble Supreme Court held that there was no sale when food or drink was supplied to the guest residing in a hotel and the supply of material was essentially in the nature of service provided to the guests and could not be identified as a transaction of sale. The Hon'ble Supreme Court declined to accept the argument that the revenue was entitled to split up the transaction into two parts, one of service and the other of sale of food stuffs and, accordingly, held that the proprietor of a restaurant who provided many services in addition to the supply of food was not liable to pay sales tax on the value of goods supplied by him.
10. The various problems which arose on account of various above mentioned and similar other decisions in the matter of sales tax were referred to the Law Commission of India and after considering its recommendations in 61st Report, Parliament passed the Constitution (Forty-Sixth Amendment) Act 1982, hereinafter called as '46th Amendment Act' thereby amending the Constitution in several respects in order to bring many of the transactions within the scope of the power of the States to levy sales tax.
11. The Section 4 of the said 46th Amendment Act inserted a new clause being Clause 29A in Article 366 of the Constitution of India. The relevant entry in the new Clause 29A reads as under:-
(29A) 'tax on the sale or purchase of goods' includes-
(a) ...
(b) ...
(c) ...
(d) ...
(e) ...
(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be sale of those goods by the person making the transfer, delivery or supply and purchase of those goods by the person to whom such transfer, delivery or supply is made.
12. The relevant provisions comprised in Section 6 of the 46th Amendment Act reads as under-
6. Validation and exemption.- (1) For the purposes of every provision of the Constitution in which the expression 'tax on the sale or purchase of goods' occurs, and for the purposes of any law passed or made, or purporting to have been passed or made, before the commencement of this Act, in pursuance of any such provision,-
(a) the said expression shall be deemed to include, and shall be deemed always to have included, a tax (hereinafter in this section referred to as the aforesaid tax) on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) for cash, deferred payment or other valuable consideration; and
(b) every transaction by way of supply of the nature referred to in Clause (a) made before such commencement shall be deemed to be, and shall be deemed always to have been, a transaction by way of sale, with respect to which the person making such supply is the seller and the person to whom such supply is made, is the purchaser,
and notwithstanding any judgment, decree or order of any Court, tribunal or authority, no law which was passed or made before such commencement and which imposed or authorised the imposition of, or purported to impose or authorise the imposition of, the aforesaid tax shall be deemed to be invalid or ever to have been invalid on the ground merely that the Legislature or other authority passing or making such law did not have competence to pass or make such law, and accordingly:-
(i) all the aforesaid taxes levied or collected or purporting to have been levied or collected under any such law before the commencement of this Act shall be deemed always to have been validly levied or collected in accordance with law;
(ii) no suit or other proceeding shall be maintained or continued in any court or before any tribunal or authority for the refund of, and no enforcement shall be made by any court, tribunal or authority of any decree or order directing the refund of any such aforesaid tax which has been collected;
(iii) recoveries shall be made in accordance with the provisions of such law of all amounts which would have been collected thereunder as such aforesaid tax if this section has been in force at all material times.
13. Shri S.S. Usgaonkar, the learned advocate appearing for the petitioners in Writ Petition Nos. 383/88 and 83/92, while drawing our attention to the 46th Amendment Act and to the Goa Sales Tax (Amendment) Act 1989, hereinafter called 'Local Amendment' Act submitted that the 46th Amendment Act does not by itself levy sales tax for the respondents and it is incumbent upon the respondents to bring about the necessary amendments to the Goa, Daman and Diu Sales Tax Act, 1964 hereinafter called as 'the Local Sales Tax Act' in order to enable them to levy and collect sales tax on the cooked food and non-alcoholic drinks in the territory of Goa. According to Shri Usgaonkar the 46th Amendment Act is in the declaratory nature enabling the States to amend their State Sales Tax Acts to enable them to levy and collect the sales tax on supply and service of food stuffs; however, the 46th Amendment Act by itself does not validate such levy and collection of sales tax by the States on such items, it does not validate recovery of sales tax on food stuffs made subsequent to the 46lh Amendment Act in the absence of necessary corresponding amendments in the State Sales Tax Acts. Countering these arguments, Shri H.R. Bharne, learned Additional Government Advocate, while taking us through the definitions of various terms as contained in the Local Sales Tax Act as it existed prior to Local Amendment Act and referring to the 46th Amendment Act, submitted that by the said 46th Amendment Act Entry 29A was added to Article 366 after Clause 29 therein and the said Entry included the tax on supply by way of or as part of any service or in any other mariner of whatsoever of the goods being food or any other article for human consumption or any drink, where such supply or service is for cash or for deferred payment or for any valuable consideration, to be a tax on sale or purchase of goods and, therefore, such inclusion automatically amounts to inclusion of the said term in the Local Sales Tax Act also. He tried to bring home his point by referring to Section 6 of the 46th Amendment Act. According to Shri Bharne, the 46th Amendment Act has itself expanded the definition of the term 'sale' under Section 2(k) of the Local Sales Tax Act, and, therefore, even without Local Amendment Act, the respondents were fully empowered to levy and collect the tax on cooked food and non-alcoholic drinks. According to the learned Additional Government Advocate, Section 6 of the said 46th Amendment Act clearly validates such action on the part of the State Government.
14. Advocate S.S. Usgaonkar for the petitioner further submitted that the levy of sales tax for the relevant period by the respondents was itself without jurisdiction and authority and, therefore, assessment made and demand of sales tax for the relevant period is illegal and unwarranted. According to Shri Usgaonkar, the definition of the term 'sale' contained in Section 2(k) of the Local Sales Tax Act prior to Local Amendment Act did not include any supply or service of food or drink and, therefore, prior to the Local Amendment Act, it was not open to the respondents 1 and 2 to collect sales tax on supply or service of food and drinks in a hotel or restaurant in view of various decisions of the Supreme Court. Shri Usgaonkar submitted that as there was no breach of any provisions of the law by the petitioner, imposition of penalty was absolutely illegal, arbitrary and unjustified. He further submitted that the respondents having not carried out any amendment to the Local Sales Tax Act till the year 1989, they were not entitled to demand any sales tax for the relevant period, that is prior to 1989 on cooked food. Undoubtedly, the relevant period is from 1st April, 1985 till 31st March, 1987. Countering this argument, Shri H.R. Bharne, the learned Additional Government Advocate, submitted that the provision contained even prior to Local Amendment Act in the Local Sales Tax Act did permit the respondents to levy and collect Sales Tax on the said items. He further submitted that such levy has been further validated by Section 6 of the 46th Amendment Act. Referring to Entries 39 and 45 in the First and Second Schedule respectively of the Local Sales Tax Act, Shri Bharne submitted that the provision contained therein amply makes it clear that it already contained the provisions empowering the State Government to levy Sales Tax on the said items.
15. Indeed the effect of 46th Amendment Act upon the State Sales Tax Acts has been subject matter of dispute before various High Courts. The Madras High Court in the matter of Shree Annapoorna and Anr. v. The State of Tamil Nadu and Anr. 1986 (63) S.T.C. 18 : (1986) 99 LW 414 : (1984) 18 STC 116 held that the latter part of Clause (1) of Section 6 of 46th Amendment Act validated the law which was passed or made before the commencement of 46th Amendment Act which imposes or authorises the imposition or purported to impose or authorise the imposition of tax on food and drinks supplied in hotels or restaurants and that if the law thus made, though would have been ultra vires on the ground of want of legislative competence, the defect or want of competence was removed by the validation provisions in the said Section. It further held that if the law which was in force at the relevant date did not expressly impose or authorise the imposition of a tax on the supply of food and drinks in hotels or restaurants, the 46th Amendment Act did not amend that law including in it a tax on the sale of food and drinks in a hotel or restaurant and that the amendment only expanded the legislative entry and conferred legislative competence in respect of a matter which the State Legislature was found lacking. The Madras High Court relied upon the Statement of Objects and Reasons appended to the 46th Amendment Bill, 1981 in support of its conclusions. The High Court of Rajasthan in the matter of Rambagh Hotels Pvt. Ltd. v. Commercial Taxes Officers Circle 'B', Jaipur 1990 (78) S.T.C. 35 : (1991) 36 STC 99 after considering number of decisions on the point observed that mere insertion of Clause 29A in Article 366 of the Constitution of India and Section 6 of 46th Amendment Act does not amend the definition of 'sale' as given in various State Sales Tax Acts and it was necessary that there must be an amendment of the definition 'sale'. Likewise the High Court of Punjab and Haryana in the matter of Thomson Press (India) Ltd. and Anr. v. State of Haryana and Anr. 1996 (100) STC 417 held the Clause 29A which was added in Article 366 by the 46th Amendment Act only embodies an enabling provision. The High Court of Andhra Pradesh in the matter of State Bank of India and Ors. v. State of Andhra Pradesh 1988 (70) S.T.C. 215: (1988) AP STJ 184 : (1988) 27 STC 122 also held that the insertion of Clause 29A in Article 366 of the Constitution of India did not automatically confer power on the Stale Government to levy tax and consequential steps have to be taken for effecting necessary amendments to the Sales Tax Acts at the State level. Similar is the decision of the same High Court in the matter of Hotel Dwaraka, Hyderabad v. The Union of India and Ors. 1985 (58) STC 241. Though we have not been enlightened by the learned advocates for the parties of any direct decision of the Apex Court on the subject in relation to sale of food stuffs and drinks, the parties have relied on the decision of the Apex Court in the matter of Builders Association of India and Ors. v. Union of India and Ors. : [1989]2SCR320 wherein their Lordships while considering the matter relating to controversy regard the liability of contractors, who had undertaken to carry out the works contract, to pay sales tax in relation to the work undertaken to be carried out pursuant to the works contract, after taking into consideration the history of the relevant constitutional and statutory provisions and judicial decisions having bearing on the matter in issue, held that the 46th Amendment Act validated laws levying tax and also collection by way of tax under such laws subject to conditions mentioned therein. It also observed that the object of the 46th Amendment Act is to convert what is not a sale into a sale. The Apex Court therein held that the 46th Amendment Act does no more than making it possible for the States to levy sales tax on the price of goods and materials used in works contract as if there was a sale of such goods and materials. In other words, the 46th Amendment Act makes it possible for the States to levy sales tax on the supply or service of goods being food or any other article for human consumption or any drink either for cash or deferred payment or other valuable consideration. It, however, does not ipso facto authorise the State Government to collect the tax on such supply or service of food stuffs and drinks and for that purpose consequential steps are required to be taken for necessary amendment to the State Sales Tax Act at the State level unless the law in force at the relevant date already provided for imposition of such tax on supply of food and drink and which, but for the 46th Amendment Act, would have been bad law on account of want of competence of the State Legislative to enact such law. On a plain reading of the provisions contained in Entry 29A and other constitutional provisions relating to the competence of State Legislative to levy sales tax, we do not find any justification to take a view different from one taken by various other Courts in that regard. We have, therefore, no hesitation in holding that the insertion of Clause 29A in Article 366 of the Constitution of India does not automatically confer power on the State Government to collect tax on supply or sale of food stuffs without taking consequential steps for necessary amendments in the State Sales Tax Acts for that purpose.
16. The question that arises is that whether Local Sales Tax Act already provided for levy and collection of sales tax on supply and service of food stuffs and non-alcoholic drinks in hotels and restaurants in Goa prior to Local Amendment Act. What then if the Local Sales Tax Act already provided for levy and collection of sales tax on food stuff even prior to coming into force of 46th Amendment Act Would it be enforceable, as a result of the 46th Amendment Act. In other words is it saved by 46th Amendment Act.?
17. To consider the rival contentions of the counsels on this point it will be necessary to take note of the provisions contained in Section 6 of the 46th Amendment Act. In fact Section 6(1)(a) of the 46th Amendment Act provides that the term 'tax on sale or purchase of goods' includes supply of food and drinks. Section 6(1)(b) provides that any levy and collection of sales tax on supply of food and drinks done prior to the commencement of 46th Amendment Act is valid and lawful. Section 6(1) further provides that no provision in the Sales Tax regarding levy of sales tax on the supply of food and drinks made prior to commencement of 46th Amendment Act would be deemed to be invalid. Section 6(1)(i) provides that all taxes levied and collected by virtue of such provisions in State Sales Tax Acts shall be deemed to be valid. Section 6(1)(ii) provides that recoveries shall be made in accordance with the provisions of such laws of all amounts which would have been collected thereunder as such tax as if this Section had been in force at all material times. These provisions contained in Section 6 amply clarify that the law which was made by the State Legislature prior to the commencement of 46th Amendment Act imposing or authorising the imposition or purported to impose or authorise imposition of tax on food and drinks supplied in the hotel or restaurant though would have been ultra vires on the ground of lack of legislative competence, the same would stand validated by virtue of the provisions contained in Section 6 of the 46th Amendment Act. Moreover if the law which was in force on the relevant date did not provide imposition of tax merely by 46th Amendment Act itself would not authorise the State Government to collect sales tax on food and drinks in hotels and restaurants.
18. As already observed above the constitutional amendment conferred legislative competence to the State Legislature in certain matters which was found absent by the Supreme Court. The net result is that the State Legislatures are authorised to make law imposing such levy of sales tax on certain items. Hence for future levy, making or amending laws were necessary because Section 6 of the 46th Amendment Act only intended to validate past levies and collection, if any. Such Amendment, however, in the State laws was not necessary in cases where the State laws already permitted such levy. Being so, it is necessary to have a close examination of the scheme of the Local Sales Tax Act to find out whether such provision already existed in the said Act during the relevant period or not.
19. Section 2(k) of Local Sales Tax Act defines the term 'sale' and Section 2(d) defines the term 'goods'. Section 4 provides that every dealer whose gross turnover during the year immediately preceding the commencement of the Act exceeded the taxable quantum shall be liable to pay tax under the Act on all sales effected after the date so notified. Section 7 provides that the tax payable by a dealer under the Act shall be levied on the taxable turnover at the various rates as specified in different Schedules appended to the Act. Section 10 provides that no tax shall be payable under the Act on the sale of goods specified in the Second Schedule, subject to the conditions and exceptions, if any, set out therein with liberty to the Government to add, omit from or otherwise amend the entries in the Second Schedule. If one reads Section 7 with the Schedules appended to the Act, it is apparent that the goods specified in the First, Third, Fourth and Fifth Schedules are subjected to different rates of tax whereas in respect of any other goods a specific rate of tax is provided under Section 7(1)(c). The First Schedule deals with various goods including cooked food and non-alcoholic drinks under Item No. 39 which reads as under:-
Cooked food and non-alcoholic drinks served for consumption at or outside any eating house, restaurant, hotel, refreshment room or boarding establishment which is not a shop or establishment conducted primarily for sale of sweetmeats, confectionery, cakes, biscuits or pastries, where the total turnover of sales exceeds rupees five lakhs in a year.
What is revealed from reading of the above item is that the provisions for levy of sales tax on cooked food and non-alcoholic drinks served in hotels and restaurants already existed in the Local Sales Tax Act at the relevant time, that is, even prior to the 46th Amendment Act. Hence we hold that the Local Sales Tax Act as it existed prior to the Local Amendment Act did authorise the Government to levy tax on the service of foods stuffs and drinks and these provisions are fully saved by 46th Amendment Act. The submission of Shri Usgaonkar that the term 'sale' did not include service of food stuffs and drinks in restaurant and, therefore, the State could not have levied or collected sales tax on such items during the relevant period is to be rejected.
20. In fact similar question arose before the Division Bench at Nagpur of this Court in the matter of Yogi Restaurant v. Commissioner of Sates Tax 1991 (83) S.T.C. 122. That was on reference under 61 of the Bombay Sales Tax Act, 1959 made by the Sales Tax Tribunal at the instance of the assessee to answer the question as to whether in the facts and circumstances of that case the Tribunal was correct in holding that the assessee was liable to pay tax in respect of the amount recovered by it from the customers for serving food to the customers in the restaurant. In the said case the assessee had a restaurant by name and style Yogi Restaurant at Nagpur where food stuffs and drinks were served. For a period from April 1971 to March 1972, the assessee was assessed for the turnover of sales on those articles. One of the contentions raised by the assessee was that it was charging a minimum floor charge of Rs. 10/- per person for cabaret show in the night time and these charges should be treated an entertainment charges and should be deducted from the total turnover. On consideration of various aspects the said deduction was not allowed and the tax assessed was Rs. 5,353.53. The assessee preferred an appeal before the Assistant Commissioner of Sales Tax without any success. It also preferred a second appeal before the Sales Tax Tribunal and that too was without success. The assessee applied for reference on the basis of Northern India Caterers (India) (supra). This Court after taking into consideration the Judgment of the Supreme Court in the matter of Northern India Caterers (India) (supra), State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. : [1959]1SCR379 and State of Himachal Pradesh v. Associated Hotels of India Ltd : [1972]2SCR937 held that Section 6 of the 46th Amendment Act is a provision relating to validation and exemption and gives retrospective effect to the constitutional amendment and thus one of the plain objects of the constitutional amendment was to remove retrospectively the existing defect of want of legislative competence on the part of the State Legislature to levy sales tax on supply of food stuffs, etc., in the hotel, restaurant, etc., and to validate such taxes and so also the recoveries of tax made thereunder. This Court after considering provisions contained in Bombay Sales Tax Act, 1959 and the Schedules appended thereto containing the list of goods and the rates at which sales tax is to be imposed, held that the concept of levy of sales tax on cooked food and drinks served at the restaurants already existed in the Bombay Sales Tax Act, 1959 at the material time and before 2nd February, 1983 when the 46th Amendment Act was made. Further reliance was placed on the judgment of the Andhra Pradesh High Court in the matter of Amba Bhavani v. Government of Andhra Pradesh 1986 (63) S.T.C. 40 : (1986) 17 STL 136. In other words this Court in the matter of Yogi Restaurant held that the 46th Amendment Act enlarged the scope of entry 54 of List II of the Seventh Schedule to the Constitution and conferred legislative competence to the State Legislature which was found absent by the Supreme Court and the State Legislatures were authorised to make law imposing such levy and collection of tax. Hence for future levies, the making or amending of law was necessary because 46th Amendment Act was intended to validate the past levies and collection, if any. Such amendment in the State law was however not necessary where the State law already permitted such levy. This Court in the matter of Yogi Restaurant held that a close examination of the scheme of the Bombay Sales Tax Act reveals that such provision existed in the Act since its inception. Similarly close examination of the Local Sales Tax Act clearly reveals that such provision did exist therein during the relevant period, that is, from 1st April, 1985 till 31st March, 1987, that is, prior to Local Amendment Act.
21. This brings us to the next limb of argument of the petitioners regarding violation of Article 14 as of result of interpretation given to the Entry No. 39 in First Schedule and Entry No. 45 in Second Schedule by the respondents and further regarding the scope of these entries. In that respect, Shri Usgaonkar submitted that in any case there cannot be levy of tax on the turnover of sale of cooked food and non-alcoholic drinks upto Rs. 5 lakhs. While elaborating this submission Shri Usgaonkar drew our attention to Section 7, which defines the term 'taxable turnover'. Section 10, which deals with tax free goods, Section 16, which provides for ban on collecting tax in absence of proper authority, Section 30, which provides for penalty in case of unauthorised collection of tax, Rule 23 of the Rules made under the Local Sales Tax Act, which prohibits collection of tax without authority, and submitted that harmonious reading of Entry Nos. 39 and 45 in the First and Second Schedules respectively, leads to the sole conclusion that the turnover of the said items upto the limit of Rs. 5 lakhs is completely exempted under any circumstances. According to Shri Usgaonkar, Section 7(1) of the said Act provides that the tax payable by the dealer is leviable on the taxable turnover. Further Section 7(3) defined the expression 'taxable turnover'. Therefore, according to him, the turnover of Rs. 5 lakhs in respect of cooked food and non-alcoholic drinks could not form part of taxable turnover and is not liable to be subjected to tax. He further submitted that a combined reading of Entry No. 39 in the First Schedule and Entry No. 45 in the Second Schedule of the said Act, shows that the sale of cooked food and non-alcoholic drinks upto Rs. 5 lakhs in a year are exempted from the levy of sales tax.
22. Shri J. Dias, learned Senior Advocate appearing for the petitioner in Writ Petition No. 380/88, while drawing our attention to Section 10(1) of the said Act and Entry No. 39 in the First Schedule and Entry No. 45 in the Second Schedule of the said Act, submitted that the phrase 'turnover of sales' used expressly in Entry No. 45 according to grammar and syntex 'can' and 'must' apply only to 'cooked food and non-alcoholic drinks' and that attaching any other meaning in the absence of express word or words, would not only amount to violence to the provisions, but would be absolutely arbitrary reading of the said provision. He submitted that Entry No. 45 in the Second Schedule clearly exempts turnover of cooked food and nonalcoholic drinks upto the limit of Rs. 5 lakhs from the levy of sales tax. According to Shri Dias, the interpretation given to the said phrase by the respondents is wholly arbitrary. According to him, the classification sought to be made by the respondents is not based on intelligible differentia and on the contrary, the differentia does not have rational nexus with the object sought to be achieved. Such a classification results in inequality and may permit unjust gain by one dealer over others and may cause unjust loss to another as it may not be possible for a dealer to know before hand as to how much would be the total turnover of total sale in a given annual year. Entry No. 39 in the First Schedule, according to Shri Dias, can only mean that the sales tax on cooked food and non-alcoholic drinks will have to be paid when such sale exceeds the exemption given under Entry No. 45 of the Second Schedule. Logical inference to be drawn from this, according to Shri Dias, is that the turnover upto five lakhs is fully exempted from sales tax under any circumstances. Any other interpretation would lead to absurdity and injustice to the dealers. Being so, the orders passed by the respondents are contrary to the provisions of law. Shri Dias sought to rely upon the judgment of this High Court in the matter of Commissioner of Sales Tax v. Punjab National Hotel,. 1985 (58) S.T.C 68.
23. Being so, according to the petitioners the view taken by the respondents is unreasonable and contrary to the law. As per the said Entry 45, liability to pay tax on cooked food and non-alcoholic drinks would arise only when the turnover of sale would exceed Rs. 5 lakhs in a year. In other words, a dealer becomes liable to pay tax and is entitled to collect tax from the customers where the total turnover of sale exceeds Rs. 5 lakhs in a year. A dealer cannot anticipate that his total turnover of sale will exceed Rs. 5 lakhs in a year to start collecting tax on total turnover including Rs. 5 lakhs at the commencement of the year. Even assuming that his turnover is likely to exceed Rs 5 lakhs, he cannot collect tax from the customers before he is liable to pay the sales-tax and in view of the provisions of Section 16 of the said Act, in such situations it will amount to violation of the said provisions of law and such a collection would be unauthorised collection of tax. That imposition of sales tax depending upon the turnover of sales results in classification of the dealers based on the volume of the turnover of sale and this is in clear violation of Article 14 of the Constitution as dissimilar attitude is meted out to the persons similarly situated.
24. Countering these arguments, Shri H.R. Bharne, learned Additional Government Advocate submitted that increase in tax in proportion to the increase in turnover is always permissible and provisions in that respect do not violate Article 14 of the Constitution of India in any way. Capacity of dealer, depending upon the turnover of the sale, cannot be irrelevant factor for deciding the tax liability. Placing reliance on the decision of the Apex Court in the matter of K.M. Mohamed Abdul Khader Firm v. The State of Tamil Nadu and Ors., 1985 (58) S.T.C. 12. Shri Bharne submitted that the Legislature in its wisdom can make the burden of tax heavier on the dealer in proportion to the increase in the turnover.
25. Shri Bharne further submitted that the Entry 45 in the Second Schedule clearly specifies that 'the turnover of sale' of cooked food and non-alcoholic drinks is exempted from the levy of sales tax provided it 'does not exceed' Rs. 5 lakhs in a year. Similarly Entry No. 39 provides that sales tax will be leviable on total turnover of sale of cooked food and non-alcoholic drinks, when the same 'exceeds' Rs. 5 lakhs in a year. A harmonious reading of these two Entries, according to the Additional Government Advocate would be that the turnover of the sale of the cooked food on non-alcoholic drinks, when it does not exceed Rs. 5 lakhs in a year, is exempted from levy of sales tax. However when it exceeds the said limit, the total turnover of sales of the said entries becomes liable for payment of sales tax. He drew our attention to the different terminology, used in two items while referring to the turnover of sales. In the case of Item No. 45, it speaks about the 'turnover of sale' of the cooked food and non-alcoholic drinks, within a limit of Rs. 5 lakhs, whereas Item No. 39 refers to 'total turnover of sale' of such items, when it exceeds the limit of Rs. 5 lakhs. Difference in terminology in two items, according to Shri Bharne, gives us clear idea about the intention of the Legislature to the effect that the cooked food and non-alcoholic drinks is exempted from payment of sales tax upto certain limit of quantum of turnover, that is, when the turnover of the same does not exceed Rs. 5 lakhs. Such items are subject to the payment of sales tax, when their turnover exceeds. Rs. 5 lakhs and not only that, the levy of sales tax would be on the total turnover of such items.
26. In order to appreciate the rival contentions in respect of this point it would be worthwhile to consider the law laid down by the Apex Court. The Apex Court in the matter of S. Kodar v. State of Kerala, 1974 (34) S.T.C. 136 held that a classification depending upon the quantum of the turnover for the purpose of exemption from tax has been upheld in several decided case and by parity of reasoning, it can be said that a legislative classification making the burden of the tax heavier in proportion to the increase in turnover would be reasonable. The basis is that just as in taxes upon income or upon transfers on death, so also in imposts upon business, the little man, by reason of inferior capacity to pay, should bear a lighter load of taxes, relatively as well as absolutely, than is borne by the big one. The flat rate is thought to be less efficient than the graded one as an instrument of social justice. The large dealer occupies a position of economic superiority by reason of his greater volume of business. And to make his tax heavier, both absolutely and relatively, is not arbitrary discrimination, but an attempt to proportion the payment to the capacity to pay and thus to arrive in the end at more genuine equality. The capacity of a dealer in particular circumstances to pay tax is not irrelevant factor in fixing the rate of tax.
27. Similar is the decision of the Apex Court in relation to additional sales tax in the matter of K.M. Mohamed Abdul Khader Firm (supra) wherein the Apex Court observed that the Additional Tax is an enhancement in the rate of the sales tax when the turnover of a dealer exceeds Rs. 10 lakhs a year and it is a tax on the aggregate of the sales effected by the dealer during the year. The legal incidence of a tax on sale of goods falls squarely on the dealer. It may be that he can add the tax to the price of the goods sold and thus pass it on to the purchaser. But it is not necessary that the dealer should be able to pass on the incidence of the tax on sale to the purchaser in order that it might be a tax on sales of goods. It is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the Legislature to impose a tax on sales conditional on its making a provision for sellers to collect the tax from purchasers.
28. The decision in the matter of Commissioner of Sales Tax v. Punjab National Hotel (supra) relied upon by Advocate Dias has no application to the case in hand. The said decision was given in the peculiar facts and circumstances of that case. Besides this Court was dealing with the interpretation of the expression 'turnover of sales' as appearing in entry of Notification regarding the exemption granted from payment of tax on certain items in the specified circumstances. Being so, the said decision is clearly distinguishable and cannot be applied to the facts of the present case.
29. If we peruse the Entry No. 39 in the First Schedule alongwith Entry No. 45 in the Second Schedule, it is apparent that in terms of said Entry No. 39 cooked food and non-alcoholic drinks are subjected to levy of tax when the turnover exceeds Rs. 5 lakhs in a year whereas the exemption under said Item No. 45 is restricted to the turnover not exceeding Rs. 5 lakhs a year. The harmonious reading of both the entries clearly shows that the moment turnover of sales exceeds Rs. 5 lakhs in a year goods like cooked food and non-alcoholic drinks cannot avoid the liability of tax under the Local Sales Tax Act as specified under Entry No. 39 in the First Schedule. Considering the scheme of the Local Sales Tax Act, it is apparent that the collection of sales tax from the buyer is a matter of choice and there is no compulsion on the seller that they should recover the sales tax on the goods sold by them to the consumers. Sellers are not prohibited from selling the goods without recovering the sales tax from the buyers. In fact, if he does so, he is not penalised under the Local Sales Tax Act. However, if he recovers the sales tax without being liable to pay the same to the Government then certainly he invites penal action against him. If the seller does not insist on such payment and if the buyer does not pay the same, he would not violate any of the provisions of the Local Sales Tax Act. So also the dealers are not paid any remuneration or reward for collecting any sales tax. Considering these factors the Apex Court has already held that it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the purchaser. Considering this aspect of the case, we do not find any substance in the argument advanced by the petitioners in relation to the points for consideration enlisted underNos. 3 and 4 hereinabove. In fact reading of the two entries in the said two Schedules in the manner the petitioners desire us to read them would defeat the very purpose of the Entries in the said Schedules. The argument that the interpretation sought to be given by the Assessing Authority would result in varying the rate of tax depending upon the volume of the turnover of the sales by the dealers and would violate the provisions contained in Article 14 is devoid of substance. The Apex Court has also held that the increase in gross sales carries with it an increase in opportunity for higher profit. It is held by the Apex Court in the matter of K.M. Mohamed Abdul Khader Firm (supra) the object of the tax is not only to raise revenue but also to regulate the economic life of the society and viewed from that angle we do not find any substance in the arguments advanced by the petitioners in relation to the points for consideration enlisted under Nos. 3 and 4 hereinabove. We are fortified in our view by the various decisions of the Apex Court in the matter of J.K. Jute Mills Co. v. Slate of Uttar Pradesh : [1962]2SCR1 and Tata Iron Steel Co. Ltd. v. The State of Bihar : [1958]1SCR1355 as well as in Konduri Buchimjalingam v. State of Hyderabad : AIR1958SC756 . We have, therefore, no hesitation in holding that the provisions contained in Entry No. 45 in the Second Schedule read with Entry No. 39 in the First Schedule of the Act though result in classification of the dealers based on volume of their turnover, the same does not in any manner violate the provisions of Article 14 of the Constitution of India, and that the harmonious reading of both the Entries clearly shows that moment the turnover of the sales of the dealers exceeds Rs. 5 lakhs in a year, the entire turnover of the goods like cooked food and non-alcoholic drinks would be subjected to the levy and recovery of sales tax thereon.
30. We, therefore, hold that the insertion of clause 29 A in Article 366 of the Constitution of India does not automatically confer power on the State Government to collect the tax on supply and sale of food stuffs and non-alcoholic drinks in the hotels and restaurants without taking consequential steps for necessary amendments in the Statute dealing with Sales tax in the States for that purpose. The provisions in Local Sales Tax Act as they existed at the relevant time, that is, prior to Sales Tax (Amendment) Act, 1989 did authorise the State Government to levy and collect sales tax on supply and sale of food stuffs and non-alcoholic drinks in the territory comprised of Goa, Daman and Diu. The provisions contained in Entry No. 45 in the Second Schedule read with Entry No. 39 in the First Schedule of the Local Sales Tax Act did result in classification of dealers based on volume of turnover. However, the said classification does not in any manner violate the provisions in Article 14 of the Constitution of India. The harmonious reading of Entry No. 45 in the Second Schedule and the Entry No. 39 in the First Schedule of the Local Sales Tax Act discloses that the entire turnover of the goods like cooked food and non-alcoholic drinks are liable to be subjected to levy of sales tax moment the turnover of such goods exceed Rs. 5 lakhs in a year. We, therefore, do not find any infirmity in the impugned orders and there is no justification for interference therein. We also do not find the penalty imposed to be unjustified or uncalled for in the facts and circumstances of each of the cases. All the three petitions are, therefore, liable to be dismissed and they are hereby accordingly dismissed. Rule is discharged. There shall be no order as to costs.