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TMI Blog2001 (12) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... s canvassed before the High Court and reiterated in this Court is essentially as follows: Vehicles of the appellants are covered by the tourist vehicles permits issued by the State Transport Authority, Karnataka under Rule 64(1) of the Karnataka Motor Vehicles Rules and the authorization certificates issued by the same authority under the Motor Vehicles (All India Permit for Tourist and Transport Operators) Rules, 1993 (in short 'permit rules) and also the recognition certificates issued by the Director of Tourism, Bangalore under the said Rules. By virtue of these permits and certificates, tourist vehicles of the appellants are authorized to ply in certain contiguous States including the State of Andhra Pradesh. Central Government after discussions with the State Governments and with their consent formulated policies in the matter of concessions to be extended to tourist vehicles. A Notification dated 1.7.1995 was issued pursuant to a directive of the Central Government and its withdrawal is clearly unconstitutional. Rule 1(4) of the Permit Rules makes it clear that the conditions prescribed in Rules 82 to 85A of the Central Motor Vehicles Rules, 1989 (in short 'the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .A. Jayaram and Ors. Vs. Union of India and Ors. (1984 (1) SCC 168) is inappropriate as factual and legal background involved are different. In any event, some of the observations made in the said case need re-consideration in view of what has been stated by a 7-Judge Bench in The Automobile Transport (Rajasthan) Ltd. Vs. The State of Rajasthan and Ors. (1963 (1) SCR 491). Learned Solicitor General appearing for the Union of India stated that the letter dated 30th August, 1993 issued by the Joint Secretary to the Government of India to which reference was made in the Notification dated 1.7.1995 cannot be construed to be a directive by the Central Government to the States. Apparently, Articles 73, 256 and 257 deal with different situations in which directives can be issued. But the present case is one to which none of these Articles apply. He, however, submitted that there are certain observations in Jayaram's case (supra) which are prima facie at variance with the views expressed by the larger Bench in the Automobile Transport's case (supra). Learned counsel appearing for the State of Andhra Pradesh submitted that there was no challenge before the High Court on the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vehicles Taxation Rules and also issue necessary instructions/guidelines to the State Transport Authorities for grant of permits. It may also be clarified that the composite fee is in lieu of all taxes. Yours faithfully, (C.S.Khairwal) Joint Secretary to the Govt. of India This is not a case where the theory of occupied field can be made applicable. The Taxation Act essentially deals with fares charged from passengers and freight collected from them. On the contrary, the Act deals with levy on vehicles. They are conceptually different. Whatever has been stated above in the background of Article 73 is equally applicable to Articles 256 and 257 of the Constitution. Article 256 provides that the executive power of every State shall be so exercised as to ensure compliance with the laws made by Parliament and any existing laws which apply in that State and the executive power of the Union shall extend to the giving of such directions to a State as may appear to the Government of India to be necessary for that purpose. This Article has application only when any law has been made by Parliament and the executive power of the State is made subservient to it by requiring it to ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples on which the taxes may be levied on mechanically propelled vehicles in the background of Entry 35 of List III. To put it differently, Parliament may lay down the guidelines for the levy of taxes on such vehicles, but the right to levy such taxes vests solely in the State Legislature. No principles admittedly have been formulated by the Parliament. In that sense, the Government of India's communication dated 30th August, 1993 does not in any sense violate the power of the State Legislature or its delegatee to levy or exempt taxes from time to time. It is the stand of the appellants that what is ruled out by application of Rule 1(4) of the Permit Rules has been indirectly brought into force. Reference has been made to Rule 84 of the Central Rules to submit that the levy which is permitted in terms of that rule is clearly excluded of its application. This plea is equally without any substance as Rule 84 states that the liability to pay taxes under the law does not cease merely on account of obtaining a tourist permit. Said rule is not a substantive charging provision as far as levy is concerned. The power to levy tax, to reduce or exempt the tax and to withdraw conces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established one in the field of administrative law. The foundation for the claim based on the principle of promissory estoppel in public law was laid by Lord Denning in 1948 in Robertson Vs. Minister of Pensions (1949 (1) K.B. 227). Prof. De Smith in his Judicial Review of Administrative Action (4th Edition at page 103) observed that the citizen is entitled to rely on their having the authority that they have asserted . Doctrine of 'Promissory Estoppel' has been evolved by the courts, on the principles of equity, to avoid injustice. 'Estoppel' in Black's Law Dictionary, is indicated to mean that a party is prevented by his own acts from claiming a right to the detriment of other party who was entitled to rely on such conduct and has acted accordingly. Section 115 of the Indian Evidence Act is also, more or less, couched in a language which conveys the same expression. 'Promissory Estoppel' is defined as in Black's Law Dictionary as 'an estoppel which arises when there is a promise which promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of promise, and which does induc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, lie in the necessity of showing 'detriment'. Where one party deliberately promises to waive, modify or discharge his strict legal rights, intending the other party to act on the faith of promise, and the other party actually does act on it, then it is contrary, not only to equity but also to good faith, to allow the promisor to go back on his promise. It should not be necessary for the other party to show that he acted to his detriment in reliance on the promise. It should be sufficient that he acted on it. This principle has been evolved by equity to avoid injustice. It is neither in the realm of contract nor in the realm of estoppel. Its object is to interpose equity shorn of its form to mitigate the rigour of strict law. In Union of India Ors. Vs. M/s Anglo Afgan Agencies etc. (AIR 1968 SC 718), it was inter alia observed as follows: We are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set up no person may be deprived of his authority of law, if a member of the Executive seeks to deprive a citizen of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te individual so far as the obligation of the law is concerned. The former is equally bound as the latter. Therefore, the Government cannot claim any immunity from the doctrine of promissory estoppel and it cannot say that it is under no obligation to act in a manner, i.e., fair and just or that it is not bound by the considerations of honesty and good faith. In fact, the Government should be held a high standard of rectangular rectitude while dealing with citizens. Since the doctrine of promissory estoppel is an equitable doctrine, it must yield where the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the promise and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government should be held bound by the promise made by it. But the Govt. must be able to show that in view of the fact as have been transpired, public interest would not be pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those registered in other states. Therefore, there cannot be any question of irrationality. The tests of arbitrary action applicable to executive action do not necessarily apply to delegated legislation. In order to strike down a delegated legislation as arbitrary it has to be established that there is manifest arbitrariness. In order to be described as arbitrary, it must be shown that it was not reasonable and manifestly arbitrary. The expression arbitrarily means: in an unreasonable manner, as fixed or done capriciously or at pleasure, without adequate determining principle, not founded in the nature of things, non-rational, not done or acting according to reason or judgment, depending on the will alone. In the present cases all persons who are similarly situated are similarly affected by the change. That being so, there is no question of any discrimination. That plea also fails. What remains now to be considered is plea in the background of Article 301 of the Constitution. The said Article talks of freedom of trade, commerce and intercourse. Imposition of a tax does not in every case tantamount to infringement of Article 301. One has to determine whether the impugned provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Legislature also legislating by virtue of any entry relating to trade and commerce in lists II and III of the Seventh Schedule. Article 303(2) again carves out an exception to the restriction placed by Article 303(1) on the powers of Parliament, by providing that nothing in Article 303(1) shall prevent Parliament from making any law giving preference to one State over another or discriminating between one State and another, if it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India. This exception applies only to Parliament and not to the State Legislatures. Article 304 comprises two clauses and each clause operates as a proviso to Articles 301 and 303. Clause (a) of that article provides that the Legislature of a State may impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced. This clause, therefore, permits the levy on goods imported from sister States any tax which similar goods manufactured or produced in that State are subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impose restrictions under Article 302 upon freedom of commerce in the public interest is not subject to the requirement of reasonableness, the power of the States to impose restrictions on the freedom of commerce in the public interest under Article 304 is subject to the condition that they are reasonable . Freedom granted by Article 301 is of the widest amplitude and is subject to only such restrictions as are contained in the succeeding Articles in Part XIII of the Constitution. The following observations in Automobile's case are relevant: Even in the matter of textual construction there are difficulties. One of the difficulties which was adverted to during the Constituent Assembly debates related to the somewhat indiscriminate or inappropriate use of the expressions 'subject to' and 'notwithstanding' in the articles in question. Article 302, as we have seen, makes a relaxation in favour of Parliament. Article 303 again imposes a restriction on that relaxation 'notwithstanding anything in Article 302 but Article 303 relates both to Parliament and the State Legislature, though Article 302 makes no relaxation in favour of the State Legislature. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from creating some indirect or inconsequential impediment which may fairly be regarded as remote. Lord Porter admitted that in the application of these general propositions, in determining whether an enactment is regulatory or something more or, whether a restriction is direct or only remote or incidental, there cannot fail to be difference of opinion. It seems clear, however, that since the conception of freedom of trade, commerce and intercourse in a community regulated by law presupposes some degree of restriction upon the individual , that freedom must necessarily be delimited by considerations of social orderliness. In one of the earlier Australian decisions (Duncan v. The State of Queensland) (1916 (22) CLR 556), Griffith, C.J. said: But the word free does not mean extra legem, any more than freedom means anarchy. We boast of being an absolutely free people, but that does not mean that we are not subject to law . (p.573) As the language employed in Article 301 runs unqualified the Court, bearing in mind the fact that provision has to be applied in the working of an orderly society, has necessarily to add certain qualifications subject to which alone that freedom m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convenient or more expensive route. Such compensatory taxes are no hindrance to anybody's freedom so long as they remain reasonable; but they could of course be converted into a hindrance to the freedom of trade. If the authorities concerned really wanted to hamper anybody's trade, they could easily raise the amount of tax or toll to an amount which would be prohibitive or deterrent or create other impediments which instead of facilitating trade and commerce would hamper them. It is here that the contrast, between 'freedom' (Article 301) and 'restrictions' (Articles 302 and 304) clearly appears: that which in reality facilitates trade and commerce is not a restriction, and that which in reality hampers or burdens trade and commerce is a restriction. It is the reality or substance of the matter that has to be determined. It is not possible a priori to draw a dividing line between that which would really be a charge for a facility provided and that which would really be a deterrent to a trade; but the distinction: if it has to be drawn, is real and clear. For the tax to become a prohibited tax it has to be a direct tax the effect of which is to hinder the mov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... measures and compensatory taxes far from impeding the free flow of trade and commerce, often promote such free flow of trade and commerce by creating agreeable conditions and providing appropriate services. All that is necessary to uphold a tax which purports to be or is claimed to be a compensatory tax is, the existence of a specific, identifiable object behind the levy and a nexus between the subject and the object of the levy . (underlined for emphasis) A mere claim that tax is compensatory would not suffice. To that extent the observations in Jayaram's case (supra) do not reflect the correct position in law. Whether a tax is compensatory or not cannot be made to depend on the preamble of the statute imposing it. A tax cannot also be said not to be compensatory because the precise or specific amount collected is not actually used to providing any facilities. We may note here that though arguments were advanced in the background of Article 301 of the Constitution, as has been rightly submitted by the learned counsel for the State of Andhra Pradesh, there were no pleadings in this regard in the writ petitions, excepting some general statements about violation of Articl ..... 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