judgement:
ivil Appeal No. 1259 of 1990.
From the Judgment and Order dated 6.10.1989 of the Andhra Pradesh Administrative Tribunal in R.P. No. 2403 of 1987.
Dr. L.M. Singhvi and Y.P.Rao for the Appellants.
P.P. Rao, K. Madhava Reddy, Ms. Rani Chhabra, T.V.S.N. Chari and B. Rajeshwar Rao for the Respondents.
The Judgment of the Court was delivered by K. RAMASWAMY, J.
1.
Special leave granted.
This appeal under Article 136 is against the order dated October 6, 1989 made in R.P. No. 2403 of 1987.
The facts are as under: 2.
The respondents Nos. 4 & 5, B. Kumara Swamy and G. Amarender, in this appeal filed R.P. No. 1615 of 1984 before the Andhra Pradesh Administrative Tribunal, Hyderabad, contending for promotion from Senior Assistant to Assistant Commercial Taxes Officer, zonal seniority of Warangal local area comprising of Warangal, Khammam, Karimnagar and Adila bad is the criteria.
The Adilabad division consisting of Adilabad and Karimnagar Districts of the Commercial Taxes Division cannot be treated to be a zone and the divisional seniority prepared by the department is bad in law.
It was held by the Tribunal by order dated February 18, 1986, that the zonal seniority is the criteria.
Though, for the admin istrative convenience a division consisting of the revenue districts of Adilabad and Karimnagar may be treated as one division and Warangal and Khammam as Warangal division may be carved out, for the purpose of promotion zonal seniority has to be maintained.
Accordingly, the Tribunal allowed the Representation Petition.
The Government of Andhra Pradesh in exercising its power under cl.
(5) of article 371 D annulled that order which had given rise to filing of W.P. No. 998 of 1986 in this Court under article 32 of the Constitution.
This Court declared cl.
(5) of article 371 D of the Constitution as ultra vires violating the basic structure.
The State Govern ment filed S.L.P. No. 8868 of 1987 against order in R.P. No. 1615 of 1984 which was dismissed by this Court on December 7, 1987.
Subsequently, the petitioners impleading the 566 respondents Nos. 4 and 5 and the 6th respondent, G. Satya Rao, filed R.P. No. 2403 of 1987, which was dismissed by the Tribunal.
The appellants filed Civil Appeal No. 3203 of 1989 which was allowed by this Court and remitted to the Tribunal and directed, "to examine the legal effect of the Government order in G.O.Ms.
No. 1648 dated November 20, 1982 after again hearing the parties.
" Thereafter, the Tribunal after considering the effects of the G.O. held that in the im pugned order that G.O.Ms.
No. 1648 was issued under Para 5(2)(c) of the Andhra Pradesh Public Employment (Organisa tion of Local Cadres and Regulation of Direct Recruitment) Order 1975 for that "the 'order ' no allotment of cadre in terms of para 4 of the order was issued.
The G.O.Ms.
No. 1648 and G.O.Ms.
No. 1900 do not mention the constitution of new local cadre for Adilabad Division and no order was issued constituting a separate cadre in terms of 'the or der '.
Accordingly, it reiterated the original order dated April 29, 1988.
The Constitution (Thirtysecond Amendment) Act, 1973 through section 3 thereof brought into the Constitution article 371 D with effect from July 1, 1974.
This is a special provision in respect of the State of Andhra Pradesh empower ing the President, having regard to the requirements of the State as a whole for equitable opportunities and facilities for the people belonging to different parts of the State, in the matter of public employment and in the matter of educa tion, and different provisions may be made for various parts of the State to make an order, in particular (a) require the State Government to organise any class or classes of posts in a civil service of, or any class or classes of civil posts under, the State into different local cadres for different parts of the State and allot in accord ance with such principles and procedure as may be specified in the order the persons holding such posts to the local cadres so organised; (b) specify any part or parts of the State which shall be regarded as the local area (i) for direct recruitment to posts in any local cadre (whether organised in pursuance of an order under this article or constituted otherwise) under the State Government . . (Other clauses are not relevant for the purpose of this case, Hence omitted.) 567 4.
In exercise of the power under cl.
(1) & cl.
(2) of article 371 D the President issued 'the order ' in G.S.R. No. 524 E dated October 18, 1975 which was notified through G.O.Ms.
No. 674 dated October 20, 1975.
Para 2(1)(c) inter pretation clause defines 'local area ' in relation to local cadre thus: " 'local area ', in relation to any local cadre, means the local area specified in paragraph 6 for direct recruitment to posts in such local cadre, and includes, in respect of posts belonging to the category of Civil Assistant Surgeons, the local area specified in sub paragraph (5) of paragraph 8 of this Order.
" Para 2(1)(e) defines 'local cadre ': " 'local cadre ' means any local cadre of posts under the State Government organised in pursuance of paragraph 3, or constituted otherwise, for any part of the State.
" Para 2(1)(m) defines 'zone ': " 'zone ' means a zone specified in the Second Schedule com prising the territories mentioned therein.
" Para 3(1) provides organisation of local cadres: "The State Government shall, within a period of twelve months from the commencement of this Order, organise classes of posts in the civil services of, and classes of civil posts under, the State into different local cadres for different parts of the State to the extent, and in the manner, hereinafter provided.
" The proviso thereto was added and was published through G.O.Ms.
No. 34G.A.(SPF.
A.) Deptt.
dated January 24, 1981, which reads thus: "Provided that, notwithstanding the expiration of the said period, the President may by order, require the State Gov ernment, whenever he considers it expedient so to do, to organise any classes of posts in the civil services of, and classes of civil posts under, the State into different local cadres for different parts of the State.
" (emphasis supplied) 568 Sub paragraph (2) provides that the posts belonging to the category of lower division clerk, (now redesignated as Junior Assistant), and to each of the other categories equivalent to, or lower than that of a lower division clerk, in each department in each district shall be organised into a separate cadre.
Sub paragraph (3) provides the posts belonging to each non gazetted category, other than those referred to in sub paragraph (2), in each zone shall be organised into a separate cadre.
Sub paragraph (4) provides, the post belonging to each specified gazetted category in each department in each zone shall be organised into a separate cadre.
Paragraph 3(5) with a non obstanti clause provides that: "Notwithstanding anything contained in sub paragraphs (3) and (4), the State Government may where it considers it expedient so to do and with the approval of the Central Government organise the posts belonging to any of the cate gories referred to therein, in any department, or any estab lishment thereof, in two or more contiguous zones into a single cadre.
" Sub paragraph (6) is not material.
Hence omitted.
Sub paragraph (7) provides: "In organising a separate cadre in respect of any category of posts in any department for any part of the State, noth ing in this Order shall be deemed to prevent the State Government from organising or continuing more than one cadre in respect of such category in such department for such part of the State." Paragraph 3(8) is also not necessary.
Hence omitted.
(emphas is supplied) Paragraph 4 provides mode of allotment of persons, holding posts required to be organised into local cadres in accordance with the principles and procedure laid down therein, the details of which are not material.
Hence omit ted.
Paragraph 5 declares that: "(1) Each part of the State, for which a local cadre has been organised, in respect of any category of posts, shall be 569 a separate unit for purposes of recruitment, appointment, discharge, seniority, promotion and transfer, and such other matters as may be specified by the State Government, in respect of that category of posts." (Other sub paragraphs relate to transfer of persons and are not relevant for the purpose of this case.
Hence omitted.).
Paragraph 6 deals with local areas: (1) Each district shall be regarded as a local area (i) for direct recruitment to posts in any local cadre under the State Government comprising all or any of the posts in any department in that district belonging to the category of a lower division clerk or to any other category equivalent to or lower than that of a lower division clerk (Junior Assistant): (ii) for direct recruitment to posts in any local authority within that district, carrying a scale of pay, the minimum of which does not exceed the minimum of the scale of pay of a lower division clerk or a fixed pay not exceeding that amount.
(2) Each zone shall be regarded as a local area the details of which are not material.
Hence omitted.
(emphasis supplied) In the Table 'Local area and the ratio ' in the Schedule, the State of Andhra Pradesh was divided into seven zones and zone V consists of the revenue districts of Adilabad, Karim nagar, Warangal and Khammam.
Instructions have been issued for implementation of the order through G.O.Ms.
No. 728 dated November 1, 1975, in organising the local cadres.
Para 3 thereof postulates, after quoting paragraph 3(1) of the order referred to hereinbefore, thus: "A local cadre is a cadre comprising the posts belonging to a category in a Department and located within a specified part of the State.
The concept of the local cadre is thus related to the concept of the unit of appointment under the service rules; the part of the State for which a local cadre is organised in respect of any category will serve as a unit of appointment etc., for that category.
The scheme of organ isation of local cadres under,the Presidential Order applies generally to all non gazetted categories, other than those 570 specifically exempted under Government of India Notification G.S.R. No. 529, (E), dated 18th October, 1975 issued under paragraph 3(8) of the Order, as also to the specified gazet ted categories, i.e., the gazetted categories listed in the Third Schedule to the Order and those that may be notified in pursuance of paragraph 2(i)(j) of the Order by the Cen tral Government.
Instruction 4(a) says that the lower division clerks or equivalent categories or lower than that were designated as a District Cadre.
Posts belonging to other non gazetted categories were designated as zonal cadre and specified gazetted cadres were also designated as zonal cadres.
In struction7 provides thus: "More than one Local Cadre permissible within Local Area It should be borne in mind that where the State Government is required to organise a local cadre for any part of the State, there is no objection to organising or continuing more than one local cadre for such part of the State (vide paragraph 3(7) of the order).
There is, therefore, no objec tion to having more than one cadre in Revenue District in respect of a post belonging to the category of Lower Divi sion Clerk (Junior Assistant) or below or to having more than one cadre in a zone in respect of a higher category." (emphasis supplied) Instruction 9(e) provides re adjustment of territorial jurisdiction, thus: "In several departments, the unit of appointment in respect of non gazetted categories is linked to the territorial jurisdiction of an authority or officer subordinate to the Head of Department.
For instance, the unit of appointment of Upper Division Clerks (Senior Assistants) in the Commercial Taxes Department is the division in charge of Dy.
Commis sioner.
In the case of such departments if it becomes neces sary to alter the units of appointment in order to bring them into conformity with the Presidential Order, a corre sponding adjustment in the territorial jurisdiction of the departmental authority may also become necessary and will have to be made . " 571 6.
Thus, it is seen that pursuant to the power given under cls.
(1) & (2) of article 371 D the President had issued the order organising local cadres and zone V consists of Adilabad, Warangal, Karimnagar and Khammam revenue dis tricts.
It is the local area for the local cadres.
The post of the Junior Assistant is the district cadre post and the post of Senior Assistant and Assistant Commercial Taxes Officers, etc.
are the zonal posts.
The State Government is empowered under the Presidential Order to organise the local cadres within a period of twelve months from October 20, 1975.
In pursuance thereof the State Government in Commer cial Taxes Department issued order G.O.Ms.
No. 581 dated May 24, 1976 organising zones for the purpose of Commercial Taxes Department, namely, Visakhapatnam, Kakinada, Krishna, Guntur, Triputhi, Karnool, Warangal, Hyderabad 1 and Hydera bad II.
Warangal zone consists of revenue districts of Adilabad, Karimnagar, Warangal and .Khammam.
Thus, the Warangal zone of Commercial Taxes Department for the purpose of recruitment, seniority, promotion, transfer, etc.
of local cadres is co terminus with the zone V of the Presiden tial Order.
The Junior Assistant in each revenue district in Warangal zone is a separate district post, .but for the purpose of promotion to the post of Senior Assistants and Assistant Commercial Taxes Officers, which are zonal posts common seniority of the Junior Assistants, Senior Assistants working in all the four revenue districts shall have to be maintained and promotions made in accordance with Ministeri al Service Rules or the Commercial Taxes Subordinate Service Rules issued under proviso to article 309 of the Constitution as the case may be.
It would be subject to rule of reserva tion for local candidates as adumbrated in para 8 of the Order and the general rule of reservation made in Rule 22 in Andhra Pradesh State and Subrodinate Service Rules.
It would appear from the record that the Government intended to reorganise, for the purpose of efficient admin istration of the Commercial Taxes Department and create separate divisions within the zones and issued through G.O.Ms.
No. 1900 dated December 22, 1981 carving out Adila bad and Karimnagar as Adilabad division and Warangal and Khammam as Warangal division with the administrative control of the concerned Dy.
Commissioner of Commercial Taxes at Adilabad and Warangal.
As a follow up action options have been called for from the employees and they have been allot ted in G.O.Ms.
No. 1648 dated November 22, 1982 to the respective divisions.
It is not disputed that the allotment and transfer were not made in terms of Para 4 of the Order.
As stated earlier this action had given rise to the above Representation Petitions and the orders passed by the Tribu nal and the results ensued thereunder.
572 8.
Dr. L.M. Singhvi, the learned Senior Counsel for the appellants, contends that paragraph 3(7) of the Order empow ers the State Government to create a zone within the Waran gal zone for the purpose of recruitment, seniority and promotion.
The State Government has inherent power in that regard.
There is no express prohibition in that regard in the order.
The phrase 'or constituted otherwise ' engrafted in the definition of local cadre in paragraph 2(e) read with paragraph 3(7) gives ample power to the State Government to organise any local cadre within the zone for the Commercial Taxes Department.
The action thus, taken by the State Gov ernment is clearly within its power.
The contra finding recorded by the Tribunal is illegal.
He placed strong reli ance on a decision of a single member Tribunal made in R.P. No. 101 of 1982 and batch dated April 1, 1982.
He further contended that in maintaining harmony in Centre State rela tionship, the State Government shall continue to have its inherent power to organise its local cadre to meet the exigencies of its administrative needs.
The prior approval or concurrence of the Central Government is redundant.
We find no force in these contentions.
It is already seen that in exercise of the power under paragraph 3(1) of the Order the State Government shall, within a period of twelve months from the date of the commencement of the Order, organise class or classes of posts in the civil services of, and class or classes of civil posts, under the State into dif ferent local cadres for different parts of the State in the manner therein provided.
It is already seen that through G.O.Ms.
No. 581, the State Government in fact had organised the Commercial Taxes Departments by constituting different local cadres and Warangal zone comprised of the four revenue districts, namely, Adilabad, Karimnagar, Khammam and Waran gal was declared as local area for local cadres of the Department.
Having done so, the question emerged whether the State Government has further power to reorganise the local cadre within the zone.
In our considered view, we have no hesitation to hold that once the State Government has orga nised the class or classes of posts in the civil services of and class or classes of civil posts, under the State as local cadres, it ceases to have any power to bifurcate or reorganise a zone within a zone, cadre or cadres therein.
In exercise of the power under proviso to paragraph 3(1), it is for the President notwithstanding the expiry of the period of twelve months prescribed in sub paragraph (1) of para graph 3, by an order require the State Government whenever he considers it expedient so to do to have the power under paragraph 3(1) exercised.
Thereby, it is clear that the State Government shall have to place necessary material before the President; the President shall consider that it is expedient to organise any class or classes of 573 posts in the civil services of and class or classes of civil posts, under the State into a further local cadre within the local cadre in the zone already prescribed and to pass an order in that regard requiring the State Government to so organise it.
It is made clear that for the purpose of effi cient administration or convenience, the State Government may create division/divisions within the local area or local cadre.
But for the purpose of recruitment, seniority, promo tion, discharge, etc.
the local cadre once organised under para 3(1) shall be final and continue to be operative until action is taken under proviso to subparagraph (1) of para graph 3 of the Order.
When we enquired the learned counsel for the State, Shri Madhava Reddy candidly conceded that no order of the President, as provided under the proviso, was made.
Therefore, the action taken by the State Government in issuing G.O.Ms.
No. 1648 dated November 20, 1982 is clearly illegal and invalid contravening the proviso to sub para graph (1) of paragraph 3, undoubtedly it contravened para 4 of the Order.
It is seen that the order was made pursuant to the power given to the President under article 371 D, which is a special provision made under the Constitution (Thirty second Amendment) Act, 1973 peculiar to the State of Andhra Pradesh due to historical background.
Therefore, the State Govern ment have no inherent power in creating a zone or organising local cadre within the zones except in accordance with the provisions made in the Andhra Pradesh Public Employment (Organisation of Local Cadres and Regulation for Direct Recruitment) Order.
It is true that the clause 'or consti tuted otherwise ' defined in paragraph 2(e) is of wide im port, but is only relatable to the power given by the Presi dent to the State Government to organise local cadre.
Para graph 3(1) is the source of that power, but the exercise thereof is hedged with a limitation of twelve months from the date of the commencement of the Order.
Therefore, the power to organise class or classes of posts of civil serv ices of, and class or classes of civil posts, under the State into different local cadres should be exercised by the State Government in accordance with para 3(1) before the expiry of the twelve months from October 20, 1975.
If the .exercise of the power is not circumscribed within limitation, certainly under General Clauses Act the power could be exercised from time to time in organising local cadres to meet the administrative exigencies.
The prescrip tion of limitation is a fetter put on the exercise of power by the State Government.
Obviously, realising this reality and the need to organise local cadres, subsequent thereto the amendment was made and was published in G.O.Ms.
No. 34 G.A. dated January 24, 1981 introducing proviso to Paragraph 3(1).
Thereunder, notwithstanding the expiry of the said period, the President alone has been given power 574 to organise local cadres in respect of class or classes of posts in civil services of and class or classes of civil posts, under the State.
That too subject to the conditions precedent laid therein.
Thus, it is the President and the President alone has been given power under proviso by an order to require the State Government to organise the local cadres in relation to any class or classes of posts in the civil services of and class or classes of civil posts under the State into different local cadres.
It could be consid ered in yet another perspective.
Para 2(e) indicates that President himself may create a local cadre instead of re quiring the State Government to organise local cadre.
For instance, Para 3(6) empowered the President to create local cadre for the city of Hyderabad.
Similarly, under proviso to para 3(1) the President may require the State Government to create a local cadre within a zone.
So the phrase 'or con stituted otherwise ' cannot be understood dehorse the scheme of the Presidential order.
No doubt in common parlence, the word 'otherwise ' is of 'wide ' amplitude.
This Court in Kochuni vs States of Madras & Kerala, ; , Subba Rao, J., as he then was, speaking per majority in paragraph 50 while construing the word 'otherwise ' held that it must be confined to things analogous to right or contract such as lost grant, immemorial user etc.
The Word 'other wise ' in the context only means whatever may be the origin of the receipt of maintenance.
The ratio thereunder cannot be extended in the contextual circumstances obtainable on the facts in this case.
Similarly, in Lilavati Bai vs The State of Bombay, ; at 735, Sinha J., as he then was, speaking for the Constitution Bench interpreting Expla nation (a) to section 6 of Bombay Land Requisition Act, 1948, as amended in 1950 and repelling the application of ejusdem generis doctrine laid the law thus: "The legislature has been cautious and thorough going enough to bar all avenues of escape by using the words 'or other wise '.
These words are not words of limitation but of exten sion so as to cover all possible ways in which a vacancy may occur.
Generally speaking a tenancy is terminated by acts of parties or by operation of law or by eviction by the land lord or by assignment or transfer of the tenant 's interest.
But the legislature, when it used the words 'or otherwise ', apparently intended to cover other cases which may not come within the meaning of the preceding clauses, for example a case where the tenant 's occupation has ceased as a result of trespass by a third party.
The legislature, in our opinion, intended to cover all possible cases of vacancy occurring due, to any reasons whatsoever.
" 575 Thus, contextual interpretation to the word 'or otherwise ' was given by this Court.
Therefore, the phrase 'constituted otherwise ' is to be understood in that context and purpose which article 371 D and the Presidential Order seek to achieve.
If the interpretation given by the appellants is given acceptance it amounts to giving blanket power to the State Government to create local cadres at its will tending to defeat the object of article 37 I D and the Presidential Order.
Accordingly, we have no hesitation to reject the interpreta tion of wider connotation.
The ratio in these decisions does not render any assistance to the appellants.
Similarly, the power given to the State Government in subparagraph (7) of paragraph 3 of the Order is only to organise a separate cadre in respect of any category of posts in any department when more than one cadre in respect of such category exists in each department; so that State Government may organise one cadre when more than one cadre in respect of different categories of posts exist in a zone under para 3(1) of the Order.
It is clear when we see the language in para 3(7) which says that: "nothing in this order shall be deemed to prevent the State from organising".
Take for instance while creating local cadre co terminus with the administrative control of the Dy.
Commissioner, Commercial Taxes, local cadre for Senior Assistants may be created.
It is also made manifest by Instruction No. 7 and 9(e) of the instructions contained in G.O.Ms.
No. 728 G.A.D. dated November 1, 1975.
But, as stated earlier, it is only for the purpose of administrative convenience, not for the purpose of recruitment, seniority or promotion etc., as the case may be.
Thus, we have no hesitation to hold that the creation of a division and maintaining separate seniority of Junior Assistants and Senior Assistants for Adilabad and Warangal Divisions are illegal, contrary to order issued in G.O.Ms.
No. 581 and the Andhra Pradesh Employment (Organisa tion of Local Cadre and Regulation of Direct Recruitment) Order, 1975.
The single member of the Tribunal in R.P. No. 101/82 dated April 1, 1982 did not consider the effect of the order in proper perspective and is illegal.
Accordingly, the impugned order of the Administra tive Tribunal is not vitiated by any manifest error of law warranting interference.
The appeal is accordingly dismissed, but without costs.
P.S. S Appeal dismissed.

summary/full:
Article 371 D brought into the Constitution by Thirty second Amendment Act, 1973, with effect from July 1, 1974 empowered the President in respect of the State of Andhra Pradesh by an Order (1) to require the State Government to organise any class or classes of posts in a civil service of, or any class or classes of civil posts under, the State into different local cadres for different parts of the State and allot the persons holding such posts to the local cadres, and (2) to specify any part or parts of the State which shall be regarded as the local area for direct re cruitment to posts in any local cadre.
In exercise of the power so conferred the President issued the Andhra Pradesh Public Employment (Organisation of Local Cadres and Regulation of Direct Recruitment) Order, 1975 on October 18, 1975.
Para 3(1) of the Order empowered the State Government to organise the local cadre within a period of twelve months.
The term 'local cadre ' was defined in para 2(1)(e) to mean any local cadre of posts under the State Government organised in pursuance of para 3, or con stituted otherwise, for any part of the State.
The proviso added to para 3(1) subsequently and published through G.O. Ms. No. 34 dated January 24, 1981, empowered the President, notwithstanding the expiration of the period of twelve months, to require the State Government, whenever he consid ered it expedient so to do, to organise local cadres for different parts of the State.
Para 3(7) permitted the State Government to organise or to continue more than one cadre in respect of any category of posts in any department for any part of the State.
Para 4 provided mode of allotment of employees to local cadres.
Para 562 5(1) declared that each part of the State for which a local cadre has been organised, in respect of any category of posts, shall be a separate unit for purposes of recruitment, appointment, discharge, seniority, promotion and transfer.
In the table in the schedule thereto the State was divided into seven zones and zone V consisted of the revenue dis tricts of Adilabad, Karimnagar, Warangal and Khammam.
In structions were issued for implementation of the Presiden tial Order through G.O.Ms.
No. 728 dated November 1, 1975 in organising the local cadres.
In pursuance of para 3(1) of the Order the State Govern ment in Commercial Taxes Department issued order G.O.Ms.
No. 581 dated May 24, 1976 organising zones and the Warangal Zone consisted of revenue districts of Adilabad, Karimnagar, Warangal and Khammam, which was co terminus with zone V of the Presidential Order.
The Junior Assistant in each revenue district in Warangal zone was a separate district post, but for the purpose of promotion to the post of Senior Assist ants and Assistant Commercial Taxes Officers, which were zonal posts, common seniority of the Junior Assistants and Senior Assistants working in all the four revenue districts was being maintained and promotion made in accordance with the rules.
Subsequently, however, the State Government created separate divisions within the zones in the Commercial Taxes Department through G.O.Ms.
No. 1900 dated December 22, 1981 carving out Adilabad and Karimnagar as Adilabad Division and Warangal and Khammam as Warangal Division.
Options were called for and the employees allotted in G.O.Ms.
No. 1648 dated November 22, 1982 to the respective divisions.
Agrieved by the said order respondent Nos. 4 and 5 filed a petition before the State Administrative Tribunal contend ing that for promotion from Senior Assistant to Assistant Commercial Taxes Officer zonal seniority of Warangal local area comprising of Warangal, Khammam, Karimnagar and Adila bad was the criteria, that the Adilabad division consisting of Adilabad and Karimnagar districts of Commercial Taxes Department could not be treated to be a zone, and that the divisional seniority prepared by the department was bad in law.
The Tribunal held that the zonal seniority was the criteria for purposes of promotion, and allowed the peti tion.
The State Government in exercise of its power under cl.
(5) of article 371 D annulled that order.
Thereupon, respondent Nos. 4 and 5 filed a writ petition under article 32 of the Constitution wherein this Court 563 declared cl.
(5) of article 371 D as ultra vires.
Left with no alternative the State filed special leave petition against the original order of the Tribunal, which was dismissed.
Subsequently, the appellants beneficiaries of G.O.Ms. No. 1648 of 1982, filed representative petition before the Tribunal, which was dismissed.
In the appeal by special leave it was contended for them that the State Government continues to have its inherent power to organise local cadres to meet the exigencies of administrative needs, as there was no prohibition in that regard in the Order, and that the phrase 'or constituted otherwise ' engrafted in the definition of 'local cadre ' in para 2(1)(e) read with para 3(7) gave ample power to the State Government to create a zone within the Warangal zone for the purpose of recruitment, seniority and promotion in the Commercial Taxes Department.
Dismissing the appeal, the Court, HELD: 1.
The action taken by the State Government in issuing G.O.Ms.
No. 1648 dated November 20, 1982 was illegal and invalid contravening the proviso to para 3(1) and para 4 of the Presidential Order.
[573C] 2.1 Once the State Government had organised the Commer cial Taxes Department by constituting different local cadres and Warangal zone comprising of the four revenue districts, namely, Adilabad, Karimnagar, Khammam and Warangal was declared as local area for local cadres of the Department through G.O.Ms.
No. 581 dated May 24, 1976 in exercise of the powers under para 3(1), it ceased to have any power to bifurcate or reorganise a zone within a zone, cadre or cadres therein.
[572E G] 2.2 In exercise of the power under the proviso to para 3(1), it is for the President and President alone notwith standing the expiry of the period of twelve months pre scribed in para 3(1), by an order require the State Govern ment whenever he considers it expedient so to do to have the power under para 3(1) exercised.
Therefore, the State Gov ernment shall have to place necessary material before the President; the President shall consider that it is expedient to organise any class or classes of posts in the civil services of and class or classes of civil posts under, the State into a further local cadre within the local cadre in the zone already prescribed and to pass an order in that regard requiring the State Government to so organise it.
[572G; 573A] 564 2.3 However, for the purpose of efficient administration or convenience, the State Government may create division/divisions within the local area or local cadre.
But for the purpose of recruitment, seniority, promotion, dis charge, etc.
the local cadre once organised under para 3(1) shall be final and continue to be operative until action is taken under the proviso to para 3(1) of the Order.
In the instant case, no order of the President, as provided under the proviso, was made.
[573A B] 3.
The Presidential Order was made pursuant to the power given under article 371 D, which is a special provision made under the Constitution (Thirtysecond Amendment) Act, 1973 peculiar to the State of Andhra Pradesh.
Therefore, the State Government had no inherent power in creating a zone or organising local cadres within the zones except in accord ance with the provisions of the said Order.
[573D] 4.
The phrase 'or constituted otherwise ' defined in para 2(1)(e) is only related to the power given by the President to the State Government to organise local cadre.
Para 3(1) is the source of that power.
The said phrase is, therefore, to be understood in the context and purpose which article 371 D and the President Order seek to achieve.
The State Govern ment cannot create local cadres at its will.
[573E; 575A] Kochuni vs States of Madras & Kerala, ; and Lilavati Bai vs The State of Bombay, ; at 735, distinguished.
The power given to the State Government in para 3(7) of the Order is only to organise a separate cadre in respect of any category of posts in any department when more than one cadre in respect of such category exists in each depart ment.
So, the State Government may organise one cadre when more than one cadre in respect of different categories of posts exist in a zone under para 3(1) of the Order.
For instance, while creating local cadre co terminus with the administrative control of the Dy.
Commissioner, Commercial Taxes, local cadre for Senior Assistants may be created.
It is also made manifest in Instruction No. 7 and 9(e) of the instructions contained in G.O.Ms.
No. 728 dated November 1, 1975.
But it is only for the purpose of administrative convenience, not for the purpose of recruitment, seniority or promotion etc., as the case may be.
[575C E] Thus, the creation of a division and maintaining sepa rate seniority of Junior Assistants and Senior Assistants in the Commercial Taxes Department for adilabad and Warangal Divisions were illegal, contrary 565 to order issued in G.O.Ms.
No. 581 and the Presidential Order.
[575F]


judgement:
ivil Appeal Nos.
912 to 20 of 1988 Etc.
From the Judgment and Order dated 23.10.
1987 of the Kerala High Court in O.P. Nos.
7976, 8543, 8385, 7712, 7761, 8058, 7461, 7709 & 7460/87.
WITH Civil Appeal Nos. 4460 to 4480 of 1985.
(From the Judgment and Order of the Madras High Court dated 31.1.
1985 in W.P. Nos. 7, 1586, 1591, 1636, 2079, 2702, 5510, 5718, 5782, 5834, 6035, 6036, 6384, 6497, 7038, 7067, 7079/1981 and 6479/82, 2348/83, 8196/83 and 256 1985.) AND Writ Petition No. 281 of 1988.
(Under Article 32 of the Constitution of India).
T.S. Krishnamurthy lyer, P.S. Poti, A.S. Nambiar, C.N. Sree Kumar, Rajendra Chowdhry, V. Krishna Murthy, section Thana Jayan, K.R. Nambiar, R.F. Nariman, K.J. John and Thomas Joseph for the appearing parties.
The Judgment of the Court was delivered by VERMA, J.
These civil appeals and the connected writ petition involve decision of the substantially common ques tion arising out of the conflicting decisions of the High Courts of Kerala and Madras regarding constitutional validi ty of similar provisions in the States of Kerala and Tamil Nadu which result in imposition of sales tax in the two States on cooked food sold to the affluent in the luxury hotels while exempting the same from sales tax in the modest eating houses patronised by the lesser mortals.
In both these States the eligibility to sales tax of cooked food sold only in luxury hotels was challenged on 519 the ground that it amounted to hostile discrimination.
The Kerala High Court rejected the challenge while the Madras High Court has upheld it.
This has led to filing of Civil Appeal Nos.
912 20 of 1988 against the Kerala High Court 's decision and Writ Petition (Civil) No. 281 of 1988 under Article 32 of the Constitution by the unsuccessful hoteliers of Kerala while Civil Appeal Nos. 4460 80 of 1985 are by the State of Tamil Nadu against the Madras High Court 's deci sion.
These conflicting decisions of the two High Courts giving rise to these matters are: Sangu Chakra Hotels Pvt.
Ltd. vs State of Tamil Nadu, [1985] 60 STC 125 (Madras) and Hotel Elite vs State of Kerala, [1988] 69 STC 119 (Kerala).
Shorn of rhetoric and bereft of the legal embroidery which invariably constitute bulk of the armoury of constitu tional attack on such a statutory provision and removing the gloss of hypertechnicality from the arguments, the real question is: Whether imposition of sales tax on the sale of cooked food in the more costly eating places alone violates the guarantee of equality enshrined in the Constitution of our 'Socialist ' Republic in view of the fact that cooked food sold in the modest eating places catering to the need of the common man is not similarly taxed? The challenge is that this can be done only by taxing them equally but not otherwise.
In other words, the contention is that this tax burden which is ultimately borne by the consumers of cooked food must be shared equally by all consumers and it cannot be placed only on the more affluent in the society who obviously are the ones frequenting the costlier eating houses, sale of cooked food wherein is taxed, the tax not being on the income or status of the consumer but on the sale of food for consumption.
In substance the question is: Is this the kind of equality envisaged and guaranteed in our Constitution? It is well settled that in order to tax some thing it is not necessary to tax everything.
So long as those within the tax net can be legitimately classified together indicating an intelligible differentia vis a vis those left out and the classification so made bears a rational nexus with the object sought to be achieved, the classification is clearly permissible and it does not violate Article 14 of the Con stitution.
There being obviously no controversy with this settled principle, the contention of Shri T.S. Krishnamurthy Iyer who led the attack to this imposition supported by other learned counsel appearing in these matters is, that the cooked food sold in all eating houses, be it the luxury hotels catering to the affluent or the wayside dhabas fre quented by the commoner, has the common characteristic of appeasing the hunger of the consumer, the requirement of the affluent as well as the commoner to appease the hunger being common.
On this basis, the main theme of 520 the argument was that the common purpose of sale of cooked food in all eating houses being to appease the hunger of the consumer, there can be no reasonable basis for its classifi cation with reference to the eating house in which it was sold to the customers and, therefore, for exigibility to sales tax the cooked food could not be classified with reference to the place of its sale.
Is this the correct approach to examine the reasonableness and validity of the classification made in the present case? In case such an argument is valid, it logically follows that in order to tax sale of cooked food the States must levy the sales tax on cooked food sold in all eating places whether it be a luxury hotel or a roadside dhaba; or not tax it at all, if it wishes to relieve the common man who is in eternal pursuit of adequate means of sustenance, of this additional burden.
We must frankly admit that unless it be the clear mandate of the Constitution we would not hesitate to reject this argument which, if accepted, may lead to the disastrous consequence of equating for taxation the haves with the have nots even in the matter of sustenance of the latter.
Moreover, such a view may even tempt the legislature to tax all cooked food sold anywhere and we certainly do not wish to make any contribution to a move in that direction.
Fortunately, as we read the constitutional provisions and the mandate of equality enshrined therein, such a view is not envisaged and the indication indeed is to the contrary.
The preamble to the Constitution contains the solemn resolve to secure to all its citizens, inter alia, economic and social justice along with equality of status and oppor tunity.
The expression 'socialist ' was intentionally intro duced in the preamble by the Constitution (FortySecond Amendment) Act, 1976 with the principal aim of eliminating inequality in income and status and standards of life.
The emphasis on economic equality in our socialist welfare society has to pervade all interpretations made in the context of any challenge based on hostile discrimination.
It is on the altar of this vibrant concept in our dynamic Constitution that the attack based on hostile discrimination in the present case must be tested when the legislature intended to rest content with placing the tax burden only on the haves excluding the havenots from the tax net for satis fying the tax need from this source.
The reasonableness of classification must be examined on this basis when the object of the taxing provision is not to tax sale of all cooked food and thereby tax everyone but to be satisfied with the revenue raised by taxing only the sale of costlier food consumed by those who can bear the tax burden.
521 The extent to which the revenue is required from a particular source is a matter of fiscal policy and if the legislature chooses to be satisfied with the raising of that amount alone which can be recovered from the affluent, it cannot be faulted for not dragging the impecunious also in the tax net.
Even otherwise the play at the joints permitted to the legislature for making classification in a taxing provision is greater and unless the classification made cannot satisfy the test of reasonableness in the context of economic equality envisaged in our society, a legislative enactment which undoubtedly benefits the common man cannot be held discriminatory or arbitrary.
The Directive Princi ples of State Policy also enjoin the State to temper the legislation towards securing a social order conducive to the promotion of social and economic equality, eliminating as far as may be the existing inequalities between different strata in the society.
This too is a pointer in the same direction.
We are here concerned with the constitutional validity of a legislative provision which has the effect of making the cooked food sold in the posh eating houses alone exigi ble to sales tax while exempting from that levy the cooked food sold in the moderate eating houses.
Reasonableness to the classification has to be decided with reference to the realities of life and not in the abstract.
A discernible dissimilarity between those grouped together and those excluded is a pragmatic test, if there be a rational nexus of such classification with the object to be achieved.
in the abstract all cooked food may be the same since its efficacy is to appease the hunger of the consumer.
But when the object is to raise only limited revenue by taxing only some category of cooked food sold in eating houses and not all cooked food sold anywhere, it is undoubtedly reasonable to tax only the more costly cooked food.
The taxed cooked food being the more costly variety constitutes a distinct class with a discernible difference from the remaining tax free cooked food.
A blinkered perception of stark reality alone can equate caviar served with champagne in a luxury hotel with the gruel and buttermilk in a village hamlet on the unrealistic abstract hypothesis that both the meals have the equal efficacy to appease the hunger and quench the thirst of the consumer.
Validity of a classification under our Constitution does not require such a blurred perception.
The cost of meal in these two distinct classes of eating houses varies considerably, the cost in a modest eating house quite often being a mere pittance of that in a posh eating house.
Not only that, the incidence of sales tax on the cost of food served in a posh eating house 522 quite often would not even be noticed by the customer and it may even exceed the total cost of the meal served in a modest eating house.
How can the two meals be then equated and classified together by application of the unreal test that the efficacy of both meals is to appease the consumers ' hunger? It is the substance and not form alone which must be seen.
The difference in the cooked food classified differ ently, taxed and tax free, is as intelligible and real as the two types of customers to whom they are served at these different eating houses.
This difference must also be avail able to support the difference in the incidence of the impugned sales tax.
This classification does bear a rational nexus with the object sought to be achieved.
The object clearly is to raise the needed revenue from this source, determined by the fiscal policy, which can be achieved by taxing sale of costly food alone and thereby placing the burden only on the affluent in the society.
The classifica tion is made by grouping together only those places where costly food is sold leaving out the comparatively modest ones.
The classification is, therefore, rounded on intelli gible differentia and has a rational nexus with the object to be achieved.
Having mentioned this broad feature of the case, we now advert to the specific provisions challenged and the various facets of the attack to their constitutional validity.
The provisions of the Kerala Act may first be stated.
The Kerala General Sales Tax Act, 1963 has been amended from time to time both by the Kerala General Sales Tax (Amend ment) Acts and also by the Kerala Finance Acts.
Section 5 of the Kerala General Sales Tax Act is the charging section and the first Schedule specifies goods subject to single point tax thereunder.
Section 9 of the Act provides for exemption from tax and the goods so exempted are specified in the third schedule to the Act.
Item 12 in the third schedule as it stood prior to 1.4.1976, read: "Item 12 Cooked food including coffee, tea and like arti cles served in a hotel, restaurant or any other place by a dealer whose total turnover in respect of such food is less than thirty five thousand rupees in a year.
" The above provision was amended by Act 45 of 1976 from 1.4.1976.
After the said amendment, the provision read: "Cooked food including coffee, tea and like articles served in a hotel, restaurant or any other place." 523 As a result of the above amendment, cooked food speci fied in Item 12 mentioned above was exempt from sales tax by virtue of Section 9 of the Act.
This was the position until 1987 when the Kerala Finance Act, 1987 was passed, which was brought into force retro spectively with effect from 1.7.1987.
However, we are not concerned with its retrospective operation since an under taking was given in the High Court on behalf of the State Government that retrospective effect would not be given to this provision.
Item 57 in the First Schedule reads: "57.
Cooked food including beverages At the point of not falling in any entry in the first sale in the fifth schedule in bar attached State by a dealer hotels of restaurants and/or who is liable to hotels above the grade of two tax under section stars.
" Item 12 in the Third Schedule was amended by the above Finance Act to read as follows: "12.
Cooked food including coffee, tea and like articles served in a hotel or a restaurant or any other place not falling under Entry 57 of the First Schedule.
" In the Fifth Schedule dealing with goods in respect of which tax is leviable on two points under sub section (1) or sub section (2) of Section 5 is included foreign liquor as Item 2.
As a result of the Kerala Finance Act, 1987, Writ Peti tions were filed in the Kerala High Court challenging the constitutional validity of the sales tax levied on the cooked food included under Item 57 of the First Schedule of the Act on the ground of discrimination because of Item 12 in the Third Schedule of the Act whereby cooked food includ ing coffee, tea and the like articles served in a hotel, a restaurant or any other place not falling under Item 57 of the First Schedule was exempted.
The Kerala High Court dismissed the writ petitions.
That decision reported in Hotel Elite & Ors.
vs State of Kerala & Ors.
, [1988] 69 STC 119 is challenged in one batch of Civil Appeals before us.
524 During the pendency of these civil appeals, Kerala Finance Act,1988 was passed amending Entry 57 of the Kerala General Sales Tax Act, 1963, as under: "For the entry in column (2) against Serial No. 57, the following entry shall be substituted, namely, "Cooked Food" including beverages not falling under entry 76A of this Schedule sold or served in, (i) hotels and/or restaurants, the turnover in respect of which is twenty lakhs rupees and above; and (ii) bar attached hotels and/or restaurants." As a result of the above amendment, the category of star hotels has been removed and in its place hotels or restau rants with turnover of rupees twenty lakhs and above and bar attached hotels, etc. are substituted.
The validity of the above provision was challenged by filing an application for amendment in this Court to incor porate additional grounds mentioned in Civil Miscellaneous Petition Nos.
7569 77 of 1988 in Civil Appeal Nos 912 20 of 1988.
The application for amendment was allowed by this Court and it is, therefore, necessary to also consider the validity of the said amendment introduced by Act 17 of 1988.
In addition, Civil Writ Petition No. 281 of 1988 has been filed directly in this Court under Article 32 of the Consti tution, challenging the constitutional validity of these amendments in the Kerala Act.
The relevant provisions of the Tamil Nadu Act may also be noticed.
It is the constitutional validity of Item 150 in the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 which is challenged.
By an amendment with effect from 4.10.
1980 Item 150 reads as under: "Articles of food and drinks sold to customers in three star, four star and five star hotels, as recognised by Tourism Department, Government of India whether such arti cles are meant to be consumed in the premises or outside.
" The effect thereof was to tax sales of food and drinks covered by the above item while exempting those outside the item.
Thereafter Item 525 150 was substituted with effect from 12.6.1981 as under: "Articles of food and drinks other than those specified elsewhere in this schedule, sold to customers in hotels classified or approved by the Government of India, Depart ment of Tourism.
" The challenge to levy of sales tax on the sales covered by these items is substantially on the same grounds as in the Kerala case.
We shall now mention the arguments advanced by learned counsel challenging this imposition in the two States.
The power of the State Legislature to levy sales tax by virtue of Entry 54 in list II of the 7th Schedule to the Constitution and the availability of that power in the present case to impose sales tax on food and drinks by virtue of Clause (29A) inserted in Article 366 of the Con stitution by the Constitution (Forty sixth Amendment) Act, 1982, is rightly not disputed.
However, it is contended that the classification made of the food and drinks taxed and those exempted is discriminatory and arbitrary.
It was urged that the classification is not based on the goods taxed but on the status of the consumers which is not permissible.
It was urged that the commodity taxed being the same as that exempted, the difference being only in the place of their sale, differentiation for taxation on the basis of place of sale is impermissible.
It was argued that Article 366(29A) permits imposition of tax on sale of food and drinks in any form but it does not permit.a differentiation with reference only to the place of sale.
It was also urged that the clas sification in such cases based only on turnover may be permissible for administrative and some other reasons but not on the place of sale, the status ' of the customer or difference in the impact of such tax on the customer.
It was also contended that the classification made with reference to the status of hotel has no nexus with the object of imposition of sales tax because the approval for the star status is for a different purpose relating to tourism and the other amenities provided in the hotel.
An attempt was also made to contend that the quality of food need not necessarily be superior in a hotel of higher star status as compared to an ordinary eating house and the charges for food served in the luxury hotels also include the service charges and not merely the cost of food.
Similarly, it was urged that a distinction made on the basis of a bar being attached to this hotel has no relevance or justification for the classification made in this context.
In reply, it was contended by Shri P.S. Poti and Shri K. Rajendra Choudhary on behalf of the two State Governments that such classifica tion being permissible the mode to be 526 adopted is the legislature 's choice which has chosen a pragmatic mode based on an existing classification instead of undertaking the exercise of a new classification to identify the two categories of eating houses, the sales wherein should be taxed or exempted.
It was urged that unless the classification so made is found to be arbitrary, there is no ground to reject the same and substitute it with another method simply because another method may be more desirable.
It was also contended that the object being to raise only limited revenue from this source, it was decided to tax only the sale of costlier food and thereby confine the burden only to fewer people on whom the burden would be light with the added advantage of greater administrative convenience.
A catena of decisions was cited at the bar on the point relating to valid classification and the test to be applied when hostile discrimination is alleged.
It is not necessary to refer to all those decisions which state the settled principles not in dispute even before us.
The difficulty really is in the application of settled principles to the facts of each case.
It is settled that classification round ed on intelligible differentia is permitted provided the classification made has a rational nexus with the object sought to be achieved.
In other words, those grouped togeth er must possess a common characteristic justifying their inclusion in the group, but distinguishing them from those excluded; and performance of this exercise must bear a rational nexus with the reason for the exercise.
The scope for classification permitted in taxation is greater and unless the classification made can be termed to be palpably arbitrary, it must be left to the legislative wisdom to choose the yardstick for classification, in the background of the fiscal policy of the State to promote economic equality as well.
It cannot be doubted that if the classification is made with the object of taxing only the economically stronger while leaving out the economically weaker sections of society, that would be a good reason to uphold the classification if it does not otherwise offend any of the accepted norms of valid classification under the equality clause.
Broadly stated the points involved in the constitutional attack to the validity of this classification are, in sub stance, only two: (1) Is the classification of sales of cooked food made with reference to the eating houses wherein the sales are made, rounded on an intelligible differentia? and 527 (2) If so, does the classification have a rational nexus with the object sought to be achieved? It would be useful at this stage to refer to some decisions of this Court indicating the settled principles for determining validity of classification in a taxing statute.
In Ganga Sugar Corporation Limited vs State of Uttar Pradesh and Ors., ; , Krishna lyer, J. speaking for the Constitution Bench held that a classifica tion based, inter alia, on "profits of business and ability to pay tax" is constitutionally valid.
Classification per missible in a taxing statute of dealers on the basis of different turnovers for levying varying rates of sales tax was considered by the Constitution Bench in M/s section Kodar vs State of Kerala; , , and Mathew, J. therein indicated the true perspective as under: "As we said, a large dealer occupies a posi tion of economic superiority by reason of his volume of business and to make the tax heavier on him both absolutely and relatively is not arbitrary discrimination but an at tempt to proportion the payment to capacity to pay and thus arrive in the end at more genuine equality.
The capacity of a dealer, in particular circumstances, to pay tax is not an irrelevant factor in fixing the rate of tax and one index of capacity is the quantum of turnover.
The argument that while a dealer beyond certain limit is obliged to pay higher tax, when others bear a less tax, and it is consequently discrim inatory really misses the point namely that the former kind of dealers are in a position of economic superiority by reason of their volume of business and form a class by themselves.
They cannot be treated as on a part with compar atively small dealers.
An attempt to proportion the payment to capacity to pay and thus bring about a real and factual equality cannot be ruled out as irrelevant in levy of tax on the sale or purchase of goods.
The object of a tax is not only to raise revenue but also to regulate the economic life of the society." (emphasis supplied) A recent decision of this Court in P.H. Ashwathana rayana Setty and Ors.
vs State of Karnataka and Ors.
, [1989] Supp. 1 SCC 696 gives a fresh look to the extent of classi fication held valid in a taxing statute; and the scope of judicial review permitted while considering its validity on the ground of equality under Article 14.
The true position has been 528 succinctly summarised by Venkatachaliah, J. speaking for the Court, as under: "The problem is, indeed, a complex one not free from its own peculiar difficulties.
Though other legislative measures dealing with economic regulation are not outside Article 14, it is well recognised that the State enjoys the widest latitude where measures of economic regulation are con cerned.
These measures for fiscal and economic regulation involve an evaluation of diverse and quite often conflicting economic criteria and adjustment and balancing of various conflicting social and economic values and interests.
It is for the State to decide what economic and social policy it should pursue and what discriminations advance those social and economic policies.
In view of the inherent complexity of these fiscal adjustments, courts give a larger discretion to the legislature in the matter of its preferences of economic and social policies and effectuate the chosen system in all possible and reasonable ways.
If two or more methods of adjustments of an economic measure are available, the legis lative preference in favour of one of them cannot be ques tioned on the ground of lack of legislative wisdom or that the method adopted is not the best or that there were better ways of adjusting the competing interests and claims.
The legislature possesses the greatest freedom in such areas . . " "The legislature has to reckon with practical difficulties of adjustments of conflicting interests.
It has to bring to bear a pragmatic approach to the resolution of these con flicts and evolve a fiscal policy it thinks is best suited to the felt needs.
The complexity of economic matters and the pragmatic solutions to be found for them defy and go beyond conceptual mental models.
Social and economic prob lems of a policy do not accord with preconceived stereotypes so as to be amenable to predetermined solutions . . " The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality.
It is rightly said that no economic measure has yet been devised which is free from all discriminatory impact and that in such a complex arena in which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of criti 529 cism, under the equal protection clause, reviewing fiscal services.
In G.K. Krishnan vs State of Tamil Nadu this Court referred to, with approval, the majority view in San Antonio Independent School District vs Rodriguez speaking through Justice Stewart: 'No Scheme of taxation, whether the tax is imposed on property, income or purchases of goods and services, has yet been devised which is free of all discriminatory impact.
In such a complex arena in which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the Equal Protection clause ' and also to the dissent of Marshall, J. who summed up his conclusion that: 'In summary, it seems to me inescapably clear that this Court has consistently adjusted the care with which it will review State discrimination in light of the constitutional significance of the interests affected and the invidiousness of the particular classification.
In the context of economic interests, we find that discriminatory State action is almost always sustained, for such interests are generally far removed from constitutional guarantees.
Moreover, "(t)he extremes to which the court has gone in dreaming up rational basis for State regulation in that area may in many in stances be ascribed to a healthy revulsion from the court 's earlier excesses in using the Constitution to protect inter ests that have more than enough power to protect themselves in the legislative halls." "The observations of this Court in ITO vs K.N. Takim Roy Rymbai made in the context of taxation laws are worth re calling.
(T)he mere fact that a tax falls more heavily on some in the same category, is not by itself a ground to render the law invalid.
It is only when within the range of its selection.
the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of Article 14." (emphasis supplied) 530 In Federation of Hotel and Restaurant Association of India and others vs Union of India and others, Venkatachaliah, J., delivering the majority opinion of the Constitution Bench while dealing with a similar objection to classification in a taxing statute, held as under: "The State, in the exercise of its Governmental power, has, of necessity, to make laws operating differently in relation to different groups or class of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things.
It is also recognised that no precise or set formula or doctrinaire tests or precise scientific principles of exclusion or inclusion are to be applied.
The test could only be one of palpable arbitrari ness applied in the context of the felt needs 10 the times and societal exigencies informed by experience.
Classifications based on differences in the value of articles or the economic superiority of the persons of incidence are well recognised.
A reasonable classification is one which includes all who are similarly situated and none who are not.
In order 10 ascertain whether persons are similarly placed, one must look beyond the classification and to the purposes of the law." (emphasis supplied) Thus, it is clear that the test applicable for striking down a taxing provision on this ground is one of 'palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience '; and the courts should not interfere with the legislative wisdom of making the classification unless the classifica tion is found to be invalid by this test.
In the present case, to assail the constitutional valid ity of the impugned provisions reliance is placed on a decision of the Madras High Court in A.R. Krishna lyer and Ors.
vs State of Madras, [1956] 7 STC 346.
However, contrary view was taken by the A.P. High Court of the same provision in the Madras General Sales Tax Act, 1939 in Kadiyala Chan drayya vs The State of Andhra Pradesh, [1957] 8 STC 33.
Subba Rao, C J, as his lordship then was, upheld the classi fication in the Andhra decision on the ground that it was made as a genuine attempt to adjust the, burden with a fair and reasonable degree of equality and to harmonise the doctrine of equality with differences 531 inherent in the categories of persons assessed.
After refer ring to the principle of classification authoritatively restated by this Court in Budban Chowdhary vs State of Bihar, ; and quoting the of quoted passage from Willis on Constitutional Law on this point, Subba Rao, CJ., as his Lordship then was, proceeded to hold as under: "The object of the Act, as set out in the preamble.
is to provide for the levy of a general tax on the sale of goods in the State of Andhra.
But every taxing legislation makes a genuine attempt to adjust the burden with a fair and reason able degree of equality.
It also aims to apportion the burden equitably on different categories of properties or persons with distinct economic characteristics.
It is impos sible in the nature of things to aim at absolute equality in the matter of taxation.
The State resorts to the principle of classification in an attempt to harmonise the doctrine of equality with differences inherent in the categories of properties or persons assessed.
In the present case, the object to provide for the levy of a general tax and to apportion the burden equitably between different categories of persons has a reasonable nexus with the classification adopted by the legislature.
The question can be considered from the stand point of the citizen as well as from the stand point of the State.
From the stand point of the State, the classification can be justified on the ground of equita ble apportionment of the burden and easy realisation of the tax.
Articles of food and drink are more in demand than other articles.
Even in the case of the former, there will be a larger demand in restaurants, boarding houses and hotels than in other places like way side shops.
There may be small or big dealers even in such commodities, who run hotels or keep boarding houses.
The State also can reasona bly recover taxes at higher rates from prosperous dealers than from impecunious ones.
From the stand point of the dealer also, there is justification for the varied rates.
The articles sold, the place where the business is carried on and the expectation of large profits are the characteris tics of dealers who are distinct from dealers not covered by the proviso.
Learned counsel relied upon the decision of the Madras High Court in Krishna lyer vs The State of Madras, wherein the learned Judges took a different view from what we have taken.
After pointing out that three lines of clas 532 sification run through the impugned provision, the learned judges considered only the second classification, namely, the distinction between dealers in articles of food and drinks sold in hotels, boarding houses and restaurants and other dealers in such articles and held that it was suffi cient to deny the validity of the impugned provision.
With great respect we cannot agree.
In our view, the characteris tics of the dealer covered by the proviso should be cumula tively considered and, if so looked at, the said character istics will afford a reasonable basis of classification which has a rational nexus with the object sought to be achieved.
We, therefore, hold that the classification is rounded on intelligible differentia distinguishing dealers like the assessee and that it has a rational relation to the object sought to be achieved." (emphasis supplied) The vision of Subba Rao, C J, as his Lordship then was, portrayed in the Andhra decision more than three decades earlier, a forerunner in the field, is fully realised being consistent with the picture emerging from the decisions of this Court already noticed and promotes the principle of economic equality governing formulation of the country 's fiscal policy.
With great respect, we fully concur with the above view taken by Subba Rao, C J, as his Lordship then was, even prior to introduction of the word 'socialist ' in the Preamble of the Constitution, which further reinforces its correctness.
The obvious reason for making the classification in the present case is to group together those eating houses alone wherein costlier cooked food is sold for the purpose of imposition of sales tax to raise the needed revenue from this source.
The object apparently is to raise the needed revenue from this source by taxing the sale of cooked food only to the extent necessary and, therefore, tO confine the levy only to the costlier food.
The predominant object is to tax sale of cooked food to the minimum extent possible, since it is a vital need for sustenance.
Those who can afford the costlier cooked food, being more affluent, would find the burden lighter.
This object cannot be faulted on principle and is, indeed, laudable.
In addition, the course adopted has the result of taxing fewer people who are more affluent in the society for raising the needed revenue with the added advantage of greater administrative convenience since it involves dealing with fewer eating houses which are easier to locate.
This accords with the principle of promot ing economic equality in the society which must, undoubted ly, govern formulation of the fiscal policy of the State.
533 The trend of the up to date decisions of this Court, already noticed does indicate that a classification made whereby the tax net covers only the sale of costlier cooked food in the posh eating houses while exempting the cooked food sold in the modest eating houses at lesser prices, thereby confining the burden to the more affluent in the society, satisfies the requirements of a valid classifica tion.
Moreover, the classification so made cannot be termed as arbitrary, being within the limits upto which the legis lature is given a free hand for making classification in a taxing statute.
It has not been shown that any eating house similar to those grouped together for purpose of taxation has been excluded from the group.
The classification made is to group together all eating houses wherein costlier cooked food is sold.
It has not been shown that the tariff of cooked food sold in any of the exempted eating houses is the same or higher than that of those taxed.
The tax is applied equally to all those within the tax net.
It was urged that eating houses serving cooked food of the same quality but not recognised with the higher star status to bring it within the tax net enjoyed an undue advantage not available to those within the tax net.
It was also urged that recognition of a hotel for conferment of the star status was made for a different purpose, namely, promo tion of tourism and the other facilities available therein which have no relevance to the quality of food served there in.
Admittedly, such recognition entails several benefits and seeking recognition depends on volition.
In our opinion, such an enquiry is unwarranted for the purpose of classification in the present context.
It is well known that the tariff in hotels depends on its star status, it being higher for the higher star hotels.
The object being to tax cooked food sold at a higher tariff, the status of the hotel where it is sold is certainly relevant.
The classification is made in the present case to bring within the tax net hotels or eating houses of the higher status excluding therefrom the more modest ones.
A rational nexus exists of this classification with the object for which it is made and the classification is rounded on intelligible differentia.
This being a relevant basis of classification related to the avowed object, the legislature having chosen an existing classification instead of resorting to a fresh method of classification, it cannot be a ground of invalidity even assuming there are other better modes of permissible classification.
That is clearly within the domain of legislative wisdom intrusion into which of judicial review is unwarranted.
There is no material placed before us to indicate that with reference to the purpose for which the classification has ' been made in 534 the present case, there is a grouping together of dissimilar eating houses or that similar eating houses have been ex cluded from the class subject to the tax burden.
This discussion clearly shows that the attack to the constitutional validity of the impugned provisions in both States has no merit since the classification made is neither discriminatory nor arbitrary.
We have no hesitation in rejecting the challenge on the aforesaid grounds on the material produced.
The writ petitions filed in both High Courts as also in this Court challenging the levy in the States of Kerala and Tamil Nadu must fail.
Consequently, Civil Appeal Nos 912 20 of 1988 against the judgment of the Kerala High Court as well as the con nected Civil Writ Petition No. 281 of 1988 challenging the validity of the impugned provisions in the Kerala Act are dismissed while Civil Appeal Nos.
4460 80 of 1985 against the Madras High Court decision are allowed resulting in dismissal of those writ petitions also.
In the circumstances of the case, the parties shall bear their own costs.

dataset_name: IN-Abs

summary/full:
The Constitutional validity of similar provisions in the States of Kerala and Tamil Nadu which result in imposition of Sales Tax on cooked food sold only in luxury hotels while exempting the same from sales tax in modest eating houses was challenged by some hoteliers in both States on the ground that this amounted to hostile discrimination and therefore violative of Article 14 of the Constitution.
While the Kerala High Court rejected the challenge, the High Court of Madras upheld it.
Consequently one set of appeals and a Writ Petition under Article 32 of the Constitution have been preferred by the unsuccessful hoteliers of Kerala and the other set of appeals by the State of Tamil Nadu against the decision of the Madras High Court allowing the Writ Peti tions filed before it by the hoteliers.
Upholding the constitutional validity of the impugned provisions in both States, while dismissing the appeals and Writ Petition filed by the hoteliers and allowing the ap peals by the State of Tamil Nadu, this Court, HELD: It is the substance and not form alone which must be seen.
The difference in the cooked food classified dif ferently, taxed and taxfree, is as intelligible and real as the two types of customers to whom they are served at these different eating houses.
This difference must also be avail able to support the difference in the incidence of the impugned sales tax.
This classification does bear rational nexus with the 517 object sought to be achieved.
The object clearly is to raise the needed revenue from this source, determined by the fiscal policy, which can be achieved by taxing sale of costly food on the affluent alone in the society.
The clas sification is made by grouping together only those places where costly food is sold leaving out the comparatively modest ones.
The classification is, therefore, rounded on intelligible differentia and has a rational nexus with the object sought to be achieved.
In other words, those grouped together possess a common characteristic justifying their inclusion in the group, but distinguishing them from those excluded; and performance of this exercise bears a rational nexus with the reason for the exercise.
[526B D] The scope for classification permitted in taxation is greater and unless the classification made can be termed to be palpably arbitrary, it must be left to the legislative wisdom to choose the yardstick for classification, in the background of the fiscal policy of the State to promote economic equality as well.
It cannot be doubted that if the classification is made with the object of taxing only the economically stronger while leaving out the economically weaker sections of society, that would be a good reason to uphold the classification if it does not otherwise offend any of the accepted norms of valid classification under the equality clause.
[526F G] The predominant object is to tax sale of cooked food to the minimum extent possible, since it is a vital need for sustenance.
Those who can afford the costlier cooked food, being more affluent, would find the burden lighter.
This object cannot be faulted on principle and is, indeed, laud able.
In addition, the course adopted has the result of taxing fewer people who are more affluent in the society for raising the needed revenue with the added advantage of greater administrative convenience since it involves dealing with fewer eating houses which are easier to locate.
This accords with the principle of promoting economic equality in the society which must, undoubtedly, govern formulation of the fiscal policy of the State.
[532G H] The classification is made in the present case to bring within the tax next hotels or eating houses of the higher status excluding therefrom the more modest ones.
A rational nexus exists of this classification with the object for which it is made ,and the classification is rounded on intelligible differentia.
This being a relevant basis of classification related to the avowed object, the legislature having chosen an existing classification instead of resort ing to a fresh method of classification, it cannot be a ground of invalidity even assuming there are other better 518 modes of permissible classification.
The classification made under the impugned provisions is neither discriminatory nor arbitrary.
[533F G; 534B] Ganga Sugar Corporation Limited vs State of Uttar Pra desh & Ors.
; , ; M/s section Kodar vs State of Kerala, ; ; P.H. Ashwathanarayana Setty & Ors.
vs State of Karnataka & Ors.
, [1989] Suppl.
1 SCC 696; ITO vs K.N. Takim Roy Rymbai; Federation of Hotel and Res taurant Association of India & Ors.
vs Union of India & Ors.
, ; A.R. Krishna lyer & Ors.
vs State of Madras, [1956] 7 STC 346; Kadiyala Chandrayya vs The State of Andhra, [1957] 8 STC 33 and Budhan Chowdhary vs State of Bihar; , , referred to.