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P. Venkatarama Reddi, J
1. The petitioners who are operators of
tourist buses originating from Karnataka State which is their ‘home-State’ and plying in adjacent States including the State of Andhra Pradcsh, have filed writ petitions assailing the legality and Constitutional validity of Notification issued by the State Government in G.O. Ms. No.83 (Transport-II) Dept, dated 5-2-2000. By the said notification issued under clause (b) of Section 9(1) of A.P. Motor Vehicles Taxation Act (hereinafter referred to as the Taxation Act), the earlier order issued providing for concessional rales of tax was cancelled.
2. The vehicles of the petitioners are covered by the Tourist vehicle Permits issued by the State Transport Authority, Karnataka under Rule 64(1) of KMV Rules and the authorisation certificates issued by same authority under the Motor Vehicles (All India Permit for Tourist and Transport Operators) Rules, 1993 and also the recognition certificate issued by the Director of Tourism, Bangalore under the 1993 Rules. By virtue of these permits and certificates, the tourist vehicles of the petilioners originating from Karnataka State are authorised to ply in certain contiguous States including the State of Andhra Pradesh.
3. Section 88(9) empowers the State Transport Authority, “subject to any Rules that may be made by the Central Government under sub-section (14) to grant permits in respect of tourist vehicles valid for the whole of India or in such contiguous States not less than three in number including the State in which the permit is issued for the purpose of promoting tourism”. Certain provisions in Chapter V in relation to general permits apply mutatis mutandis to such tourist permits. In exercise of powers conferred by sub-section (14) read with sub-section (9) of Section 88 of Motor Vehicles Act, 1988, the Central Government framed the Rules entitled “All India Permits for Tourist and Transport Operators Rules, 1993 (hereinafter referred to as the TTO Rules). Clause (b) of
Rule 2 defines ‘authorisation certificate’ as the follows:
“Authorisation Certificate means a certificate issued by an appropriate authority to a recognised Tourist Transport Operator authorising him to operate through out the territory of India or in such contiguous State, not being less than three in number including the State in which the permit is issued, on recognised tourist circuits, as are specified in the All India Permit for a tourist vehicle granted to him.”
‘Tourist Transport Operator is defined as a company or an individual engaged in the business of promotion of tourism by providing tourist transport vehicles on tourist circuits”. It also includes a travel agency or a recognised tourist operator possessing his own vehicle or a vehicle taken on lease atleast for one year.
‘Tourist Circuit’ is defined as follows :
“Tourist Circuit” means all places of tourist interest situated in a State for which package tours are prepared and sold by the recognised tourist transport operator.
Explanation :–For the purpose of removal of doubts, it is clarified that the permit covering such tourist circuits shall be valid throughout the State”.
4. It may be noted that in the TTO Rules, the authorisation certificate is treated as synonymous with permit and it is apparent from Rules 6 and 13 that the authorisation certificate and permit are used as interchangeable expressions. The tourist vehicle other than a motor cab having an All India Permit under the said Rules shall carry a list of tourist passengers in respect of each trip and the list shall be produced on demand by the authorised Officer (vide Rule 13). The form of authorisation certificate is set out in the second schedule.
The authority empowered to grant the certificate is the State Transport Authority concerned. The fee for issuing the certificate of authorisation is Rs.500/- per annum. Rule 3 says that the authorisation certificate shall be issued only to the tourist transport operators recognised by Department of Tourism of the Central Government. The application for issuance of certificate of recognition shall be submitted in the prescribed form to the Director-General of Tourism, Government of India. The eligibility conditions for certificate of recognition are set out in the fourth schedule. The conditions set out in the fourth schedule together with the proforma of application make it clear that they are meant to ensure induction of experienced operators for handling the tourist traffic. The tour operator who is granted recognition shall be entitled to such incentives and concessions as may be granted by the State Government from time to lime and shall abide by the terms and conditions of recognition.
5. Sub-rule (4) of Rule 1 enjoins that the conditions prescribed in Rules 82 to 85-A of the Central Motor Vehicles Rules, shall not apply to the permits granted under the Scheme governed by TTO Rules. At this juncture, we may notice what those rules are : Rule 82 provides for the grant of a permit in respect of a tourist vehicle by the State Transport Authority. Rule 83 prescribes that the authorisation fee shall be Rs.500/- per annum and the period of validity of authorisation shall not exceed one year at a time. Rule 84 which has been prominently referred to by the learned Counsel for the petitioners in juxta position to Rule 1(4) of TTO Rules reads as follows:
“No tourist permit shall be deemed to confer the right of operation in any State not included in the authorisation referred to in Rule 83 nor shall it exempt the owner of the vehicle from the
payment of tax or fee if any leviable in any State.”
6. Rule 85 specifies the additional conditions to be attached to the permit granted to the tourist vehicle other than motor cab.
7. These are the Rules governing the tourist vehicle permits envisaged by Section 88(9).
8. A few days after the TTO Rules were framed by the Central Government with a view to promote tourism, it appears that a letter emanated from the Joint Secretary to Government of India addressed to the Transport Secretaries of the State Governments and the Union Territories. By this letter, the Government of India drew the attention of the State Governments to the broad agreement reached at the meeting of the Transport Development Council held in January, 1992 wherein it was agreed to frame an appropriate scheme for operation of tourist cabs/coaches on the basis of All India Permits and the framing of TTO Rules on 10-8-1993. Paras2 and 3 of the said letter are relevant for our purpose.
“2. It may be mentioned that the State Governments had agreed that apart from the Home State Tax, the composite fee be charged from the permit holders according to the following rates :
a. For motor cabs upto 6 seats – Rs.300/-per quarter per State (other than Home State.
b. For Max cabs of 7-13 seats- Rs.3,000/-per quarter per State (other than Home State)
c. For omni buses of 14-35 seats -Rs. 12,000/- per quarter per State (other than Home State).
3. I am writing to request you to take necessary action to incorporate these
provisions relating to composite fee in the State Motor 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.”
9. In the opening para of the G.O., reference is made to TTO Rules framed by the Central Government. Obviously, it is this letter that evoked the State Government’s response in issuing G.O. Ms. No.106, dated 1-7-1995 notifying the identical rates of tax as were spelt out in that letter. By the notification which was issued in exercise of powers under sub section (1) of Section 9 of A.P. Motor Vehicles Taxation Act, the Government directed that “composite fee (tax) payable in respect of vehicles which are registered and normally kept in other States including the Union territories and are covered by permits issued under the TTO Rules and authorised to ply in Andhra Pradesh” shall be at the rates specified below:
“c) For omni buses 14 to 35 seats-Rs.12,000/- per quarter in other than the Home State”
10. The mode of payment, period of demand of the composite tax, the consequence of non payment of such tax, are set out in the notification. One of the conditions prescribed is that the Home State tax should have been paid by the tourist transport operator.
11. But for this notification, a tourist vehicle operator would have been liable to pay the tax under the Entry 4(vi)(a) of G.O. Ms. No.75, (Transport). Accordingly, the tourist transport operator would have been called upon the pay the tax at the rate of
Rs.2,500/- per seat per quarter which would work out to Rs.87,500/- per quarter maximum. Thus, the overall difference would be about Rs.75,000/- per quarter.
12. The background in which a similar notification reducing the rate of tax on the tourist vehicles having all India permits under Section 63(7) of the old Act was narrated by the Supreme Court in B.A. Jayaram v. Union of India, . We quote:
“Now there are twenty two States and nine Union Territories in India specified in the First Schedule to the Constitution. Each of the States has the right within its territory to levy a tax on motor vehicles. If a tourist vehicle holding an ‘All India permit’ under Section 63(7) of the Motor Vehicles Act chooses to visit half of dozen States in the course of a round trip from, say Delhi to Kanyakumari or Srinagar to Hyderabad, tax will ordinarily have to be paid in all the half a dozen or so States. The burden will surely be intolerable and the whole object of Section 63(7), namely promotion of all India or inter-State tourist traffic will be frustrated. The Central Government was alive to the problem and referred the matter to the Transport Development Council for its advice. The Transport Development Council is a non-statutory body constituted by the Central Government and consists of the representatives of the Government of all the States. The Transport Advisory Council advised the Central Government that there should be a single-State taxation on tourist vehicles holding permits under Section 63(7), that is, tax should be paid in the ‘Home State’ and the vehicle should be exempted from payment of tax in States other than the Home State. This could be done by the respective State Governments issuing notifications
under their taxation Legislation exempting tourist vehicles registered in other States from payment of tax, if tax has already been paid in the Home State. The Government of India accepted the suggestion and requested the State Governments and Union Administrations to issue necessary notifications.”
13. The benefit of concessional rate of tax accorded by G.O. 106 has been withdrawn by the impugned G.O. dated 5-6-2000 issued under clause (b) of subsection (1) of Section 9 of the Taxation Act. Whereas clause (a) of Section 9(1) provides for grant of exemption or to make a reduction in the rate of tax payable, clause (b) provides for cancellation or variation of such exemption, reduction or other modification.
14. The reasons for cancellation of G.O. Ms. No. 106 issued in the background of TTO Rules are discernible from the averments in the counter affidavit filed on behalf of the State Government. It is stated that the tourist transport operator has to operate the package tours on certain tourism circuits on the strength of the permits issued under Section 88(9). The deponent of the affidavit-Deputy Secretary to the Government then proceeds to state as follows:
“It is submitted that among southern States, Tamilnadu and Maharashtra have not extended this facility under Motor Vehicles (All India Tourist Transport Operator) Rules, 1993. Further, it is submitted that no Andhra Pradesh operator has obtained permits to ply in other States duly availing this concessional rate of tax and no valid permit is there as on date. The Transport Department after discussing at length in a recent meeting of Officers proposed for withdrawal of concession given in the rate of tax.”
15. Under these circumstances, it is averred that the Transport Department of the Government, after a thorough discussion decided to withdraw the concession and accordingly issued G.O. Ms. No.83 dated 5-6-2000. It is also clarified in Para 7 of the counter that G.O. Ms. No. 106, dated 1-7-1995 was promulgated at the request of the Central Government, but not because the Government of Andhra Pradesh was a party to the agreement. It is pleaded that the request made by the Central Government does not amount to formulation of principles of taxation by the Central Government. The power of the Government to withdraw a concession earlier extended is sought to be justified on the basis of Section 9(1)(b) and the need to control large scale avoidance of tax and misuse of the Scheme. Incidentally, it is also pointed out that the operators are misusing their vehicles as stage carriages and picking up the passengers who would otherwise travel by train or regular buses.
16. The impugned notification has
been attacked by the learned Counsel for the petitioners on the grounds of lack of legislative competence, infringement of TTO Rules, arbitrariness, discrimination and promissory estoppel.
17. The first and foremost contention of the learned senior Counsel Mr. Srinivasan which was reiterated by Mr. Noushad Ali is that the State Government or for that matter, the State Legislature has no competence to rescind or reverse the notification conferring the benefit of concessional rates of tax to All India Tourist Operators. It is contended that the State law cannot go counter to the Central law on the subject. According to the learned Counsel, the impugned notification is beyond the legislative power which the State derives under Entry 57 of List II of the VII Schedule to the Constitution by reason of the express language employed in
Entry 57 itself and also by virtue of the mandate contained in Article 254 of the Constitution.
18. The subject covered by Entry 57 of the State List in “taxes on vehicles”. It is however subject to the provisions of Entry 35 of List III. Entry 35 of the Concurrent List reads: “Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied”. It is the contention of the learned Counsel for the petitioners that the State Government issued earlier notification -G.O. Ms. No. 106, dated 1-7-1995 to comply with the TTO Rules framed by the Central Government read with the Central Government’s letter extracted supra. It is from these two sources, the petitioners’ Counsel wants to cull out the ‘principles of taxation’ within the meaning of Entry 35 of List III. The fallacy underlying this argument insofar as the status of the communication addressed by the Government of India is so obvious that it needs to be pointed out first. The Government of India’s letter cannot in any sense be regarded as a law laying down the principles of taxation on motor vehicles. It cannot even be viewed as a subordinate Legislation deriving its force from the MV Act or any other Union law. The letter is obviously in the nature of follow up action pursuant to certain deliberations that took place at the meeting of the Transport Development Council in which various States participated. It appears that in that meeting, a broad consensus had emerged that a composite fee or tax should be charged from the All India Tourist permit holders at certain rates. The Secretary to the Government of India wrote to the States to take necessary action in terms of the policy decision taken in the meeting. The Union Government itself realised that the decision cannot be put into effect ipso facto without proper amendments to the MV Taxation laws of the States. Hence, a request was made to the States as above and several
States including the State of Andhra Pradesh responded to the same by notifying the reduced rates of tax under G.O. Ms. No. 106, dated 1-7-1995. The Government of India’s letter cannot therefore, be deemed to be a law on the subject, nor does it place a fetter on the State Government’s or the Legislature’s power to restore the stauts quo ante on a reappraisal of the developments that have taken place in course of time. The mere fact that the Government of India’s suggestion has been accepted with the overall objective of giving certain incentives to the tourist operators does not mean that the State Government is for ever divested of the statutory power which it has under a competent Legislation dealing with the taxes on motor vehicles. The true position is as pointed out by the Supreme Court in Paragraph 10 in B.A. Jayaram’s case. It was observed:
“The Parliament white enacting Section 63(7) of the Motor Vehicles Act refrained from indicating any such principles either expressly or by necessary implication. The States’ power to tax and to exempt was left uninhibited”.
19. The argument of the learned
Counsel that the letter of the Government of India read with Rule 1(4) of TTO Rules has introduced a law which becomes an ‘occupied field’ as far as the taxation on tourist transport vehicles are concerned cannot therefore be countenanced. Construing the very same Entries in the context of a more or less same fact-situation, the ‘Supreme Court in B.A. Jayarams’s case observed thus:
“A coherent reading of Entry 57 of List II and Entry 35 of List III makes it abundantly clear that the power to levy taxes on vehicles suitable for use on roads vests solely in the State Legislature though it may be open to the Parliament to lay down the principles on which taxes may by levied on mechanically
propelled vehicles. In other words, the Parliament may lay down the guidelines for the levy of taxes on mechanically proposed vehicles but the right to levy such taxes vests solely in the State Legislature.”
20. In the instant case, no principles have been admittedly formulated by the Parliament. The Government of India’s communication does not in any sense override the power of the State Legislature or its delegate to levy or exempt taxes from time to time.
21. The learned senior Counsel Mr. Srinivasan then contended that the impugned G.O. though ostensibly falls within the sweep of the power confided to the State Government under Section 9(1)(b), in effect and in reality, the withdrawal of concessional tax ground earlier, is a subterfuge adopted by the State Government to circumvent the provisions of Central law, that is to say, Rule 1(4) of TTO Rules read with Rule 84 of Central Motor Vehicles Rules. What the State really wants to do is to impose tax on the All India Tourist vehicles which is prohibited by Rule 1(4). The step taken by the State Government to withdraw the notification is characterised as an instance of colourable exercise of power for the said reasons. The argument does not appeal to us. As already noticed, Rule 84 enjoins that the grant of a tourist permit shall not exempt the owner of the vehicle from payment of tax or fee leviable in any State. Rule 1(4) of TTO Rules ordains that the conditions prescribed in Rules 82 to 85-A shall not apply to the permits granted under the Scheme covered by the said Rules. What then is the effect of this exclusion clause as far as taxation is concerned? Be it noted that Rule 84 is not a substantive charging provision as far as tax is concerned. Rule 84 introduces a deeming provision by way of abundant caution to make explicit what is implicit. It only Eays that the liability to pay
the tax under the State law docs not cease merely on account of obtaining a tourist permit. Whatever taxes are due to be paid in the State in which the vehicle plies, are liable to be paid. The power to levy tax, to reduce or exempt the tax and to withdraw the concession granted arc traceable to the State taxation law. It is not as if the Sfate is enabled to levy or collect the taxes by virtue of Rule 84. To put it conversely, the State is not precluded from collecting the tax as per the relevant taxation law on the vehicles covered by tourist permits irrespective of Rule 84. When once the object and purport of Rule 84 is understood in its proper perspective, it becomes at once clear that Rule 1(4) of TTO Rules does not operate as an embargo against levy of tax on the AM India Tourist vehicles covered by the said Rules. It cannot be contended that unless and until a specific provision for taxation is introduced in the TTO Rules, no State law of taxation is attracted to such vehicles. Rule 1(4) cannot be so construed as to have a potential to grant immunity from taxation by its own force. The core of the matter is that the State Government thought it fit to extend a concessional rate of tax to the tourist transport vehicles pursuant to the suggestion made by the Central Government and later on rescinded the notification on further consideration. The State Government had undoubted compelence to do so. As observed by the Supreme Court in B.A. Jayaram’s case, “the State is obliged neither to grant an exemption nor to perpetuate the exemption once granted”. Rule 1(4), as already explained, does not have the effect of denuding the power of the State Government. There was no need for the State Government to adopt a device or subterfuge to get over Rule 1(4) of TTO Rules. There was no need to act in a covert or disguised fashion when a right route is open to the subordinate legislative body. In this context, the observations of Supreme Court in G.K. Krishnam v. State of Tamil Nadu, , a case
arising under Madras Motor Vehicles Taxation Act, are apt to be quoted :
“As the State Legislature was competent to pass the Act and as the Government is authorised under Section 4 to levy the tax, the question of the motive with which the tax was imposed is immaterial. To put it differently, there can be no plea of colourable exercise of power to tax if the Government had power to impose the tax and the fact that the imposition of the tax was for the purpose of eliminating competition would not detract from its validity. If an authority has power to impose a tax, the fact that it gave a wrong reason for exercising the power would not derogate from the validity of the tax”.
22. We have therefore no hesitation in rejecting the plea of colourable exercise of power.
23. The learned Counsel for the petitioners then advanced an argument on the basis of the plea of promissory estoppel. It is contended that there was no charm in obtaining all India tourist permits on onerous conditions, but for the tax concessions offered by the State Governments. There was an implied promise to maintain the concession so as to encourage tourism. We cannot lend our concurrence to this plea. First of all, there was no representation or assurance that the concessional tax of Rs. 12,000/- would be collected by the State for an indefinite point of time. The reduced tax was allowed to remain for nearly five years. Nothing prevented the State Government from withdrawing the same on a fresh appraisal of the relevant factors including the development that have taken place during the long interregnum of five years. Secondly, the principles of promissory estoppel is wholly out of place and cannot be applied to a situation where the State Government wants to exercise its undoubted statutory power. By granting exemption or
concession in exercise of statutory power, the State Government cannot bind itself for all time not to revoke or withdraw the same. Any such fetter placed on the State’s powers would offend the principle that there could be no estoppel against the statute. The case of Sales Tax Officer v. Shree Durga Oil Mills, 108 STC 274, is a direct answer to the arguments built up on the basis of promissory estoppel. The following observations are quite apposite:
“When the respondent set up its oil mill and was granted exemption from sales tax, it should have known that the notification granting exemption of tax under Section 6 could be withdrawn at any point of time. Therefore, the case of promissory estoppel is without any basis. There cannot be any estoppel against statute.”
24. After referring to Kasinka Trading Co. v. Union of India, , the Supreme Court observed:
“in the instant case, Section 6 of the Orissa Sales Tax Act, 1947 specifically lays down that the exemption notification issued under that Section can be withdrawn at any point of time.
Moreover withdrawal of notification was done in public interest. The Court will not interfere with any action taken by the Government in public interest. Public interest must override any consideration of private loss or gain.”
25. The Supreme Court then referred to the decision in Shrijee Sales Corporation v. Union of India, and approved the principle laid down therein that where there was supervening public interest, the Government would be allowed to change its stand and withdraw the exemption already granted. One such reason for” changing its policy decision could be
resource crunch and the loss of public revenue. The same situation obtains in the present case also.
26. After referring to the decision in Pine Chemicals Ltd. v. Assessing Officer, 85 STC 432, in which the Supreme Court took the view that the appellants who acted on the representation of the State and set up their Industries were entitled to the benefit of tax exemption for the entire period of five years as promised by the Government, their Lordships made the following observations:
“It will be seen that unlike Section 6 of the Orissa Sales Tax Act, 1947, it (Section 5 of J&K General Sales Tax Act considered in Pine Chemicals’s case is an exemption provision) does not specifically say that any exemption from tax could be granted by the Government by a notification and such exemption could be withdrawn at any point of time by the Government. Moreover, in that case, no argument was advanced nor was the Court called upon to consider the necessity of overriding public interest in situations like this. If the Government after granting tax exemption to various industries finds itself in a tremendous financial crunch and seeks to raise finance of doing away with the exemptions, it cannot be argued that because the Government had promissed to give tax exemption, which was revocable under the statute, the Government cannot resile from its stand however disastrous it may turn out to be for the State’s economy.”
27. On the facts also, the Supreme Court found that there were no sufficient details as to when the decision was taken to set up the industry and when various further steps were taken for setting up the industry, was not disclosed. The same is the position here. We do not have any particulars in the affidavits to highlight
that the petitioners purchased their vehicles and obtained All India Tourist permits prompted by the reduced rate of tax announced by the Slate Government. The detriment to the petitioners has not been established. This is yet another reason for negativing the plea of estoppel.
28. In this context, the observations of the Supreme Court in Kasinka Trading’s case (supra) are also very relevant. It was observed therein:
“There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel, clear, sound and positive foundation must be laid in the petition iiself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine.”
29. The decision of the Supreme Court in Kasinaka Trading’s case (supra) dispels any doubt as to the application of the principle of promissory estoppel in the fact-situation obtaining in the cases on hand. In that case, a notification was issued under the Customs Act exempting certain goods from basic import duty and specifying the date upto which it will remain in force. Even before the expiry of that date, another notification was issued withdrawing the exemption. The importers questioned the same on the ground that they had entered into agreements pursuant to the earlier notification and the breach of commitment on the part of Union of India resulted in great detriment. The Supreme Court repelled the contention holding that nothing prevented the Government from withdrawing the exemption which was earlier granted though the period had not expired. It was held that when the exemption was granted
under the statutory power, it was implicit that it can also be rescinded or modified in exercise of the same power. Dr. Anand, J. (as he then was) speaking for the Supreme Court put forth the legal position thus:
“It needs no emphasis that the power of exemption under Section 25(1) of the Act has been granted to the Government by the Legislature with a view to enabling it to regulate, control and promote the industries and industrial productions in the country. Where the Government on the basis of the material available before it, bona fide, is satisfied that the “public interest” would be served by either granting exemption or by withdrawing, modifying or rescinding an exemption already granted, it should be allowed a fee hand to do so. We are unable to agree with the learned Counsel for the appellants that Notification 66/79 could not be withdrawn before 31-3-1981. First, because the exemption notification having been issued under Section 25(1) of the Act, it was implicit in it that it could be rescinded or modified at any time if the public interest so demands and secondly it is not permissible to postpone the compulsions of “public interest” till after 31st March 1981 if the Government is satisfied as to the change in the circumstances before that date. Since, the Government in the instant case was satisfied that the very public interest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn, it was free act in the manner it did.”
30. This enunciation of law squarely applies to the cases under consideration.
31. A three Judge Bench decision of the Supreme Court in State of Rajasthan v. Mahaveer Oil Industries, 115 STC 29, reiterated the proposition laid down in
Kasinka Trading’s case (supra) and succinctly laid down the principle thus”
“Are the respondents justified in holding the State to the protnise made by it in the form of an incentive scheme which is made available for a specified period of time, when new industries are set up on the basis of that scheme relying on the promise of benefits held out by it? Public interest requires that the State be held bound by the promise held out by it in such a situation. But this does not preclude the State from withdrawing the benefit prospectively even during the period of the scheme, if public interest so requires. Even in a case where a party has acted on the promise, if there is any supervening public interest which requires that the benefit be withdrawn or the scheme be modified, that supervening public interest would prevail over any promissory estoppel.”
32. The two Judge Bench decision in Pournami Oil Mills v. State of Kerala, AIR 1987 SC 590, has been relied upon by the learned Counsel for petitioners. Apart from the fact that the ruling in Pournami Oil Mill’s case conflicts with the declaration of law in later decisions of the Supreme Court including the three Judge Bench decision in Mahaveer Oil Industries’s case which has approvingly cited the decision in Kasinka Trading’s case. The petitioners cannot derive any support from the decision in Pournami Oil Mill’s case for other reasons too. As already observed, no factual foundation has been laid in the present case for application of the principle of promissory estoppel. Secondly as in the case of Pournami Mill’s case, the G.O. of 1995 notifying the concessional rate of tax did not specify that it would hold good for specified duration.
33. We may also refer to a Division Bench decision of this Court in Roxy Roller Flour (P) Ltd. v. Govt. of AP., 94 STC
464. That was a case in which the State Government exempted by a G.O. dated 2-5-1991 wheat and wheat products from the payment of sales tax for a period of five years. Before the expiry of five years, the said GO was rescinded on 26-3-1993. The Division Bench held that the grant of exemption and the revocation thereof under the provisions of Statute is a legislative act and there can be no promissory estoppel against the legislative functions – a principles which was firmly recognised in M.P. Sugar Mills’s case, .
34. The next contention of the learned Counsel for the petitioners is that the withdrawal of concessional tax to the vehicles operating on All India Tourist permits (authorisation certificates) is an instance of arbitrary exercise of power, not backed up by rational and relevant considerations. It is therefore contended that the impugned notification falls foul of Article 14 of the Constitution.
35. Arbitrariness as a ground of attack of subordinate Legislation in a fiscal statute was considered by Supreme Court in the case of Khoday Distilleries Ltd v. State of Karnataka, . The Supreme Court clarified:
“The tests of arbitrary action which apply to executive actions do not necessarily apply to delegated Legislation. In order that delegated Legislation can be struck down, such Legislation must be manifestly arbitrary; a law which could not be reasonably expected to emanate from an authority delegated with the law-making power.”
36. After referring to Indian Express Newspapers Pvt. Ltd. v. Union of India, , it was observed:
“A piece of subordinate Legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a
competent Legislature. A subordinate Legislation may be questioned under Article 14 on the ground that it is unreasonable; “unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary”. Drawing a comparison between the law in England and in India, the Court further observed that in England the Judges would say “Parliament never intended the authority to make such Rules; they are unreasonable and ultra vires”. In India, arbitrariness is not a separate ground since it will come within the embargo of Article 14 of the Constitution. But subordinate Legislation must be so arbitrary that it would not be said to be in conformity with the statute or that it offends Article 14 of the Constitution.”
37. The Supreme Court then proceeded to consider whether there was any manifest arbitrariness in prescribing a distributor licence and compelling the appellants to sell their products to the distributor. The Supreme Court while adverting to the argument that a rebate in excise duty was given to liquor exported outside the country or the State, observed that no doubt it would cause some hardship to the appellants. At the same time, the learned Judges negatived the contention in the following words :
“The fact, however, remains that any concession which is granted by the State for export sales or inter-State sales is a matter of policy. Granting of such concession or absence of such concession cannot make the rule itself manifestly arbitrary or unreasonable. The absence of availability of such a concession, however, cannot make the Rules arbitrary or violative of Article 14. All manufacturers and suppliers within the State of Karnataka are governed by the same Rules and will, therefore, have to pay the same taxes. All persons who
are similarly situated are similarly affected by the amended Rules. There is, therefore, no discrimination under Article 14 in its traditional sense.”
38. The withdrawal of concession operating in favour of recognised tourist vehicles may no doubt create some hardship and may have a fallout on the tourism for the promotion of which the step was taken in the year 1995 to prescribe the ‘composite tax’. But, that is one aspect. The other aspects taken into consideration by the State Government after due deliberations cannot be brushed aside as irrelevant or extraneous to the overall purpose. The large scale exodus of tourist bus operators to Karnataka State where the home-State tax payable for contract carriage is much less than what it is in Andhra Pradesh and the consequential surrender of as many as 269 permits since the announcement of concessional tax by the State of A.P. in the year 1995, are the factors that have been and could be legitimately taken into account by the Government. That apart, it was noticed that certain neighbouring States, for example, Tamilnadu and Maharashtra did not fall in line with the suggestion of Government of India and they continued to charge the tax applicable under the normal provisions. Then, there are implications of revenue which cannot be eschewed from consideration in judging the validity of any move to withdraw or to revoke the concession or exemption. In this context, again we may usefully quote the observations of the Supreme Court in B.A. Jayaram’s case:
“This Scheme for the grant of ‘All India Permits’ designed as it was to promote all India and inter-State tourist traffic, soon fell into abuse at the hands of scheming transport operators. Within the scheme itself lay the seeds for abuse.
But the result was that transport operators from big and comparatively prosperous and advanced State, well versed in the intricacies of the transport business very soon flocked to small and comparatively poor and less advanced Stales like Manipur and Nagaland to apply for and obtain All India Permits from the State Transport Authorities of those States. It is conceded before us that a large number of persons holding all India permits from some of these small States do not belong to these States at all, but are transport operators coming from far off States.
States like Karnataka were swamped by tourist vehicles from alt over the country, registered in other States. These tourist vehicles practically ‘colonised’ Karnataka and like States and started operating more or less as stage carriages within the particular State, never and rarely if ever, moving out of the State. There was no thought or question of undertaking all India or inter State tours and out went the worthy object of Section 63(7).
The Government of Karnataka apparently the worst sufferer, reacted sharply. The concession given to the holders of all India permits by way of exempting the all India tourist vehicles, registered in other States, from payment of the Karnataka tax if tax had already been paid in the home State was withdrawn by a notification dated 31st March, 1981.”
39. It is only in rare cases, the plea of arbitrariness could be successfully projected in a case of withdrawal of concession or exemption under a taxing Statute. The situation obtaining in the present
case may not be of such alarming magnitude as was noted by the Supreme Court in Jayaram’s case (supra). But the situation is not very much different. It is only a difference in degree. It may be that the tourist transport operators resorted to the step of shifting their offices to Karnataka State to reap the benefits of lesser taxation prevailing there. Their motives need not be faulted. They may be dictated by considerations of business exigency. But the fact remains that recognised tourist vehicles did ‘flock’ into Karnataka State. This development is too glaring to be overlooked by the State. The State need not remain a silent spectator and afford to lose its revenue forever. Moreover, it shall not be forgotten that the impugned action was taken after a long passage of time and after reviewing the situation in the light of the experience and march of events. In this fact situation, we fail to see how the plea of arbitrariness falling within the sweep of equality clause could be sustained.
40. It is well settled that having regard to the complexities of fiscal laws, the legislative body has wider latitude and flexibility in the matter of levy of taxes and allied matters, (vide observations in Khandige Sham Bhat v. Agrl. IT Commissioner, AIR 1963 SC 591.
41. We cannot therefore uphold the plea of arbitrariness.
42. The decision of Punjab and Haryana High Court in Indo Canadian Transport Co. v. Union of India, has been strongly relied upon by the learned Counsel for the petitioners. It was held therein:
“In view of the above, we hold that the tourist operators constitute a separate and special class. Keeping in view the objective of promoting tourism, a conscious decision to levy a composite fee of Rs.12,000/- per quarter per State was taken. It was on the faith of this
decision that the tourist operators undertook the work of transporting tourists by spending substantial amounts of money on expensive vehicles, Once the petitioners have acted on the faith of the representation made to them, the respondents shall be estopped from levying anything beyond the composite fee as provided for in the letter dated August, 30, 1993. This position shall continue till the letter is withdrawn or a conscious decision is taken by each State regarding the levy of taxes.”
43. It was not a case in which the State Government in exercise of powers conferred under the Taxation Act notified the reduced tax (composite fee) on the All India Tourist Vehicles and thereafter withdrew the concession on reconsideration. The question whether the State Government was entitled to withdraw the concession once granted did not arise for consideration. In fact, the underlined sentence indicates that the learned Judges did not doubt the power of the State Government to take the decision on the question of continuance of the concessional rate of tax to the All India Tourist Vehicles. The stand taken in that case by the State of Haryana was that in addition to the composite tax of Rs. 12,000/-, the State was entitled to collect the normal tax due under the State law. That contention was rightly negatived at para 25. The ultimate conclusion in the said decision may be quite justified. However, there are certain observations which need to be explained. Firstly, in paragraph 21, the learned Judges expressed that Rule 1(4) of TTO Rules were intended to curtail the power of each State to levy the taxes in respect of All India Tourist vehicles- We have already discussed the ambit and effect of Rule 1(4). The said rule cannot be construed as a provision which on its own force has the effect of curtailing the State’s power to levy the taxes under relevant enactments.
Secondly, the dicta in paragraph 28 which we extracted above, seems to suggest that their Lordships of the Punjab and Haryana High Court invoked the principles of promissory estoppel. With great respect, we are unable to endorse the view taken by the learned Judges in this regard. The reasons why the principles of promissory estoppel cannot be applied, are set out in extenso while dealing with the same argument of the petitioner’s Counsel.
44. One more contention urged by Mr. Nonshad Ali is based on Article 256 of the Constitution which obligates the States to exercise its executive power to ensure compliance with the laws made by the Parliament. The same Article declares that the executive power of the Union shall extend to giving of such directions to States as it may appear to the Government of India to be necessary for the purpose of ensuring compliance with the Parliamentary laws. The argument that the withdrawal notification goes against the mandate of Article 256 proceeds on the premise that there is a law made by the Parliament. But as already discussed in detail, there is no such law specifying the principles of taxation. Neither Rule 1(4) of the TTO Rules nor the letter of the Secretary of the Government of India exhorting the States to prescribe a composite fee (tax) for the tourist vehicles, can be construed to be the law enacted by Parliament. Hence, we have no hesitation in rejecting the contention.
45. Lastly, the learned Counsel Mr. Sivaramakrishnaiah, appearing for some of the writ petitioners has contended that in any case, the withdrawal notification cannot come into effect till the expiry of the quarter ending on 30-6-2000. It is contended that the cancellation of the earlier notification fixing composite concessional tax has only prospective effect and the tax of Rs. 12,000/- in addition to the home
State tax having been already paid or fell due for payment, the cancellation can only take effect from the next quarter. We find force in this contention. According to Section 4 of the Taxation Act, the tax under the Act shall be paid in advance and in the manner specified in Section 11 either quarterly, half yearly or annually at the choice of the registered owner. Section 11 prescribes the manner of payment of tax. The notification issued under G.O. Ms. No. 106 dated 1-7-1995, as already been noticed, prescribes quarterly tax of Rs. 12,000/- for omni buses answering the description in the notification. We are of the view that the impugned notification cancelling the earlier notification is obviously and indisputably prospective in nature. It does not affect the rights already accrued or liabilities already incurred in the matter of payment of tax. The right and liability to pay the tax at the rate specified in G.O. No.106 became crystallised even at the beginning of the quarter i.e., 1-6-2000. The cancellation thereof during or after the commencement of the quarter does not have the effect of taking away the right or liability to pay the tax at the rate in force at the beginning of the quarter. We therefore direct that the impugned notification shall not be given effect till the expiry of the quarter ending on 30-6-2000. However, time for payment of differential tax for the next quarter is extended till the end of August, 2000. It the tax is paid before the end of August, 2000, no penalty shall be imposed.
46. In the result, the writ petitions arc dismissed subject to the above direction. No costs.