ISSUE:
Whether the Hotel Expenditure Act, 1987, fall within the legislative competence of the Union Parliament?
Whether the classification of the hotels under the Act based on room charges arbitrary and violative of Article 14?
Whether imposing restrictions by the Act on hotel businesses onerous and without reasonable justification?
RULE:
The Court considered whether the restrictions imposed by the legislation were reasonable under Article 19(6) of the Constitution, allowing the state to impose reasonable restrictions on trade or business for public health, morality, and welfare.
Union parliament has the legislative competence to enact the Expenditure Act, 1987 under Article 248 read with Entry 97 of List I of the Seventh Schedule.
The Court noted that while the legislative powers between the Union and the States may overlap, this overlap must be viewed in law and distinguished based on the aspect theory. The same transaction can give rise to different taxable events from legislative perspective.
Expenditure tax is not specifically mentioned in either List I or List II of the Constitution, the Court recognized it as a sui generis tax, justifying its imposition through the exercise of residuary powers under List I.