Declining to quash a government decision levying 14.5 per cent value added tax on liquor served in hotels and bars, the Madras High Court today made it clear that bars and hotels cannot be equated with The Tamil Nadu State Marketing Corporation outlets.
Dismissing a batch of petitions, the First Bench, comprising Chief Justice Sanjay Kishan Kaul and Justice M.M. Sundresh, in its order, said bars and hotels cannot be equated with TASMAC outlets where no such tax was applicable. The fact that bars and hotels selling liquor at extra cost could not be denied, it said.
The petitions were filed by the members of Hotel and Bar Association of Tamil Nadu having 'FL3' licenses and individual entities.
The bench said "it was also introduced to get over the anomaly existed hitherto by which bars/hotels were given benefits though they were selling liquor at higher price by making considerable value additions. When the object is to augment more revenue as well as to regulate the economic life of the society, it cannot be termed as arbitrary."
The state government started levying the tax to set right an anomaly- until now bars and hotels were paying tax on the sale of liquor of foreign origin, but they had no tax on sale of liquor manufactured outside as well as within Tamil Nadu.
The petitioner-bar owners assailed the levy on the ground that TASMAC bars were not subjected to such additional tax burden and argued that it was a case of discrimination.
Refuting the charges, TASMAC said TASMAC customers and bar visitors were totally different, and TASMAC was neither a club nor a hotel having FL license. The levy was introduced to augment more revenue to carry out welfare measures.
Accepting the submissions, the bench said TASMAC's authority to deal with liquor within Tamil Nadu was not in dispute. "Therefore, having purchased liquor from TASMAC, the petitioners cannot seek parity (in taxation). When they are selling liquor at a higher price than TASMAC, they cannot seek parity. Admittedly, TASMAC is an instrumentality of the state. The profit earned by TASMAC goes to coffers of the state meant to be used for welfare measures."
The judges said "the power of judicial review over a policy decision in the field of revenue is quite settled, and added, "such a decision is not required to be tested by a court of law with suspicious and microscopic eye. The parameters for decision are good faith and intention.
