1983 (8) TMI 305 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the withdrawal of tax exemption for tourist vehicles by Karnataka.
2. Alleged misuse of All India Tourist Permits.
3. Impact on freedom of trade, commerce, and intercourse under Article 301 of the Constitution.
4. Claims of violation of Article 14 of the Constitution.
5. Applicability of promissory estoppel against the State Government.

Summary:

1. Validity of the withdrawal of tax exemption for tourist vehicles by Karnataka:
The Supreme Court examined the withdrawal of tax exemption by Karnataka for tourist vehicles holding permits u/s 63(7) of the Motor Vehicles Act, 1939. The court acknowledged the State Legislature's power to levy taxes on vehicles suitable for use on roads and to grant or withdraw exemptions. The court held that the State's action did not violate any constitutional provisions.

2. Alleged misuse of All India Tourist Permits:
The judgment detailed the misuse of All India Tourist Permits by transport operators who registered vehicles in smaller states to avoid taxes and then operated these vehicles as stage carriages in states like Karnataka, contrary to the intended purpose of promoting inter-state tourism. The court found substantial evidence supporting these allegations of misuse.

3. Impact on freedom of trade, commerce, and intercourse under Article 301 of the Constitution:
The court addressed the argument that the withdrawal of tax exemption impaired the freedom of trade, commerce, and intercourse guaranteed by Article 301. It concluded that taxes of a compensatory and regulatory character are outside the scope of Article 301. The court held that the Karnataka Motor Vehicles Taxation Act and similar acts in other states were regulatory and compensatory, thus not violating Article 301.

4. Claims of violation of Article 14 of the Constitution:
The petitioners argued that treating all-India tourist vehicles the same as state contract carriages violated Article 14 (right to equality). The court rejected this argument, stating that the state's taxation policy did not result in unequal treatment, as the tax burden was uniformly applied.

5. Applicability of promissory estoppel against the State Government:
The petitioners contended that the principle of promissory estoppel prevented Karnataka from withdrawing the tax exemption. The court dismissed this argument, emphasizing that policy decisions, including tax exemptions, are within the legislative and executive domain and can be altered as deemed necessary.

Conclusion:
The Supreme Court dismissed all writ petitions, upheld the withdrawal of tax exemption by Karnataka, and vacated the interim orders. The court found no constitutional violations in the state's actions and emphasized the need for regulatory measures to address the misuse of All India Tourist Permits.