B.P. Jeevan Reddy, J.
1. The A.P. General Sales Tax (Amendment) Act (19 of 1986) introduced a new entry, 129-A, in the First Schedule to the Act. The First Schedule specifies the goods under various entries in respect of which single point tax is leviable under section 5(2)(a). Entry 129-A reads as follows :
------------------------------------------------------------------------Sl. No. Description of goods Point of levy Rate of tax------------------------------------------------------------------------'129-A Articles of processed food At the point 6 paise inother than those specifically of first sale the rupee.'mentioned elsewhere) prepared in the State.wholly or mainly from flour ofgram, cereals, pulses or oilseeds.------------------------------------------------------------------------
This entry was introduced with effect from 1st June, 1986, the date on which it was introduced into the schedule by a notification issued by the State Government in exercise of its power under section 40 of the Act. The petitioners are challenging the constitutional validity of the said entry on the ground that it is violative of article 14, and also on the ground that it constitutes an unreasonable restriction on their fundamental right to carry on their occupation, trade, or business.
2. Since the facts and contentions in all the writ petitions are identical, it would be sufficient if we refer to the facts in W.P. No. 18586 of 1987. This writ petition is filed by 'the Rajahmundry Sweetmeat Shops Association', an association of all the sweetmeat shop holders of Rajahmundry Town, and also by an individual sweetmeat shop owner who is figuring as the 2nd petitioner. The 1st petitioner is said to have been registered under the Societies Registration Act. The members of the 1st petitioner-association are said to be petty businessmen who sell their items in small sheds or shops. Their turnover is less than Rs. 2 lakhs in a year. Prior to the introduction of entry 129-A the petitioners were governed by section 5(1) of the Act, and since their annual turnover is less than Rs. 2 lakhs, no sales tax was payable by them. But, with the introduction of the said entry the petitioners came to be governed by sub-section (2) of section 5, and they have become liable to pay sales tax on their total turnover at the rate of 6 paise in a rupee, notwithstanding the fact that their annual turnover is less than Rs. 2 lakhs. It is in this manner that the petitioners are affected by, and are therefore assailing the validity of entry 129-A. Their main attack is based upon article 14 of the Constitution, and it runs thus :
3. The articles of food which are sold by the petitioners in their shops/stalls are also sold by hotels, restaurants, and eating houses; in their case, however, section 5-C (which was introduced by Amendment Act 18 of 1985 and the proviso whereof was introduced by Amendment Act 19 of 1986) exempts them from payment of sales tax unless their annual turn-over exceeds Rs. 2 lakhs. In other words, hoteliers and restaurant-owners need not pay tax in respect of articles of food (mentioned in entry 129-A) sold by them unless their total annual turnover exceeds Rs. 2 lakhs, whereas in the case of the petitioners, all their sales are subject to payment of sales tax even though their annual turnover is less than Rs. 2 lakhs. This is a clear case of discrimination between similarly situated persons, and is violative of the equal protection clause enshrined in article 14 of the Constitution.
4. Section 5(1) of the Act says that every dealer (other than a casual dealer and an agent of a non-resident dealer) whose total turnover for a year is not less than Rs. 2 lakhs, shall pay a tax for each year at the rate of 5 paise on every rupee on his turnover. Clause (a) of sub-section (2), however, says that notwithstanding anything in sub-section (1), tax shall be levied in the case of the goods mentioned in the First Schedule at the rate, and at the point of sale specified therein, on the total turnover of sales every year, relating to such goods, irrespective of the quantum of the turnover. Before the introduction of entry 129-A, the petitioners say, they were governed by sub-section (1) of section 5, and since their annual turnover does not exceed Rs. 2 lakhs, the sales effected by them were not exigible to tax; but, by virtue of the introduction of the said entry, they have come to be governed by clause (a) of sub-section (2) and have been deprived of the said benefit, namely, exemption.
5. Section 5-C reads as follows :
'5-C. Tax in respect of supply of articles of food or drink in restaurants or catering houses or hotels. - Every dealer running any restaurant or eating house or hotel (by whatever name called), who supplies, 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, shall on the total amount charged by the said dealer for such supply, pay a tax at the rate of five paise on every rupee on the aggregate of such amount realised or realisable by him during the year. (Provided that no such tax shall be levied if the total turnover of the dealer including such aggregate during the year is less than Rs. 2,00,000.)'
6. According to this section, a dealer running a restaurant or eating house, or a hotel, who supplies food or other articles for human consumption 'by way of or as part of any service or in any other manner whatsoever' is liable to pay tax at the rate of 5 paise on every rupee on the total turnover relating to such goods. The proviso, however, exempts those dealers whose annual turnover is less than Rs. 2 lakhs. This is precisely the grievance of the petitioners. They say, a hotelier or a restaurant-owner (dealer) who sells the very same articles of food as sold by them is exempt from tax altogether if his annual turnover is less than Rs. 2 lakhs, and even where his annual turnover exceeds Rs. 2 lakhs, the rate of tax is 5 paise in a rupee, whereas the petitioners, who too sell the very same articles of food, are liable to pay tax at the rate of 6 paise in a rupee irrespective of their turnover. This, according to them, is a double discrimination and therefore, they say, entry 129-A should be struck down as it meets out a hostile discrimination to the petitioners.
7. Whenever a provision of a taxing statute is challenged on the ground of discrimination, it is well to remember the oft-repeated admonition of the Supreme Court that in the matter of taxation the court must allow a larger play to legislative discretion in the matter of classification, subject, of course, to adherence to the fundamental principles of the doctrine of equality. In V. Venugopala Ravi Varma Rajah v. Union of India : [1969]74ITR49(SC) this is what the Supreme Court said :
'Equal protection clause of the Constitution does not enjoin equal protection of the laws as abstract propositions. Laws being the expression of legislative will intended to solve specific problems or to achieve definite objectives by specific remedies, absolute equality or uniformity of treatment is impossible of achievement. Again tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements. The courts accordingly admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification. The power to classify may be exercised so as to adjust the system of taxation in all proper and reasonable ways; the legislature may select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the legislature does so reasonably. Protection of the equality clause does not predicate a mathematically precise or logically complete or symmetrical classification : it is not a condition of the guarantee of equal protection that all transactions, properties, objects or persons of the same genus must be affected by it or none at all. If the classification is rational, the legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject different classes of property to tax in different ways and adopt different modes of assessment. A taxing statute may contravene article 14 of the Constitution if it seeks to impose on the same class of property, persons, transactions or occupations similarly situate, incidence of taxation, which leads to obvious inequality. A taxing statute is not, therefore, exposed to attack on the ground of discrimination merely because different rates of taxation are prescribed for different categories of persons, transactions, occupations or objects ......'
8. It is unnecessary to multiply the authorities on this score.
9. Keeping the above principles in mind, let us examine the complaint of the petitioners. The first question is whether the petitioners and the dealers running restaurants, eating houses, or hotels are similarly situated. The only answer can be, they are not. The petitioners are in the nature of shop-keepers selling their goods without any element of service. What distinguishes them from restaurants, eating houses and hotels is the service element in the latter category. Indeed section 5-C emphasizes this element. It speaks of a dealer running a restaurant, eating house, or a hotel, supplying by way of, or as part of any service any food or other articles for human consumption. Moreover, hotels, restaurants and eating houses supply many other articles of food than those falling under entry 129-A. Entry 129-A, it must be remembered, is confined to those articles of processed foods which are prepared wholly or mainly from flour of gram, cereals, pulses, or oil seeds. Indeed, prior to the Forty-sixth Amendment, hotels, restaurants, and eating houses were held not liable to sales tax on the ground that the supplies made by them do not constitute 'sales', whereas in the case of the petitioners there was never any doubt that they are mainly engaged in selling the food articles prepared by them. They were enjoying an exemption only where their annual turnover was less than Rs. 2 lakhs. If it exceeded the said figure, they were undoubtedly liable to pay sales tax under section 5(1) as 'general goods'. It is thus clear the the first premise of the petitioners that they and the dealers running hotels, restaurants and eating houses are similarly situated, is unsustainable and unacceptable.
10. It is then argued that to pass the test of article 14 it is not enough to show that the statute in question satisfies the test of reasonable classification; it must also satisfy the other test, viz., that the said classification has a nexus to the object of the statute. It is in this connection that we must remember we are dealing with a taxing statute. The idea is to tax the sale of goods and raise revenue. The object is to raise revenue by taxing the sales, and in such a context situations may arise where there is a seeming differential treatment. In a taxing statute it is not permissible, as stated by the Supreme Court, to apply the principle too rigorously.
11. It is then argued by Mr. Ratnakar that the laudable object underlying section 5-C, i.e., to exempt the small dealers running hotels/eating houses/restaurants, whose annual turnover does not exceed Rs. 2 lakhs, should also have been applied in the case of small dealers like the petitioners. May be, the legislature could have done that; but, it is not permissible for the court, in the name of article 14, to direct the legislature to make such a provision. For that matter, every article mentioned in any of the entries in the First Schedule, attracts tax at the prescribed rate, notwithstanding the fact that the total turnover of the dealer does not exceed Rs. 2 lakhs. The petitioners are not the only persons in that situation. Just because dealers running hotels, etc., are given a certain benefit by section 5-C, it is not possible for this court to direct the extension of the said benefit to all other dealers selling goods mentioned in any of the entries in the First Schedule.
12. Mr. Ratnakar then contended that the benefit of section 5-C is available to a dealer running a restaurant, eating house, or a hotel not only if he supplies the food and other articles for human consumption 'by way of or as part of any service', but also where he supplies the same 'in any other manner whatsoever'. Counsel says that where a dealer running a restaurant sells the eatables prepared by him without rendering any service, even then he would be entitled to the benefit of section 5-C, because of the words 'in any other manner whatsoever' occurring in section 5-C. We do not think that the learned counsel is right in his submission. Section 5-C is confined only to dealers 'running any restaurant or eating house or hotel (by whatever name called)'. Secondly, it uses the expression 'supplies', and not 'sells'. Thirdly, it contemplates food or other articles for human consumption, or any drink being supplied (i) by way of service, or (ii) as part of any service, or (iii) in any other manner of service whatsoever. It is not permissible to read the words 'in any other manner whatsoever' independent of the context and say that even pure sales by such dealers would amount to 'supplies' within the meaning of section 5-C. They do not. The main and essential element distinguishing a dealer running a restaurant, eating house, or hotel, from the petitioners is the element of service rendered by him. Indeed, where the service element is lacking, it would be a sale attracting the sales tax, and not 'supplies' within the meaning of section 5-C. This was so held by the Supreme Court in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi : [1980]2SCR650 . It was held that where food is supplied in an eating house or restaurant, and it is established upon the facts that the substance of the transaction, evidenced by its dominant object, is a sale of food, and rendering of service is merely incidental, the transaction would undoubtedly to exigible to sales tax. To the same effect is the judgment of a Bench of this Court in Durga Bhavan v. Deputy Commercial Tax Officer [1981] 47 STC 104. It would, therefore, be impermissible to read the words 'in any other manner whatsoever' occurring in section 5-C shorn of their context, and in a manner not involving the element of service. Having regard to the context and the setting, the said words must be understood and read as 'in any other manner of service whatsoever'.
13. It is relevant to note that the words 'supplies 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' occurring in section 5-C are mere repetition of sub-clause (f) in clause (29-A) in article 366 of the Constitution. Clause (29-A) was introduced by the Forty-sixth Amendment to the Constitution. The clause defines 'tax on the sale or purchase of goods' as including, inter alia, '(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'. Even such supply or service was treated as 'sale' by the said clause. It must also be remembered that the said clause was introduced by the Forty-sixth Amendment in view of the judgment of the Supreme Court in Northern Indian Caterers (India) Ltd. : [1980]2SCR650 , where it was held that service of a meal or other food, whether in a hotel or a restaurant, does not constitute a sale of food for the purpose of levy of sales tax, but must be regarded as the rendering of a service in the satisfaction of a human need or ministering to the bodily want of human beings. Having regard to the said context and legislative history, the service element cannot be ignored or excluded from section 5-C. It is evident that where it is found that there is no service element, it would be a clear case of 'sale', not falling within the purview of section 5-C.
14. So far as the other ground of attack based on article 19(1)(g) of the Constitution is concerned, the only submission of the learned counsel is that the newly imposed burden of sales tax is likely to cause grave prejudice and uncalled for paper work and complications to the petitioners. It is not possible to accede to this submission either. Sales tax is an indirect tax; it is supposed to be, and is normally passed on to the consumer. Collection of sales tax and making it over to the State cannot be treated as a prejudice, or uncalled for complication. It is an incident of business carried on by every dealer in the State. It serves the State interest of raising revenue. Moreover, the petitioners are not the only dealers so affected. Every dealer dealing in any of the goods mentioned in the First Schedule has to undertake the said responsibility, whether his turnover is less than Rs. 2 lakhs, or more than Rs. 2 lakhs. In the circumstances, this contention also is rejected.
15. The writ petitions, accordingly, fail and are dismissed. There shall be no order as to costs. Advocate's fee Rs. 150 in each.
16. Learned counsel for the petitioners makes an oral request for leave to appeal to the Supreme Court under article 133 of the Constitution. We do not however think that this case involves a substantial question of law of general importance which in our opinion needs to be considered by the Supreme Court. The oral request is accordingly rejected.
17. Writ petitions dismissed.