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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 ..... n Act') an earlier order dated 1.7.1995 issued by the Transport, Roads and Buildings (Tr. II) Department, was cancelled. The appellants who are operators of tourist buses originating from Karnataka State (their home State) and plying in adjacent States including the State of Andhra Pradesh filed the writ petitions assailing the legality and constitutional validity of the said Notification dated 5.6.2000. 2. Case of the appellants as canvassed before the High Court and reiterated in this Court is essentially as follows: 3. 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 disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification, taxes cannot be charged. Lastly, it was submitted that the action is clearly violative of guarantees and protections provided by Article 301 of the Constitution. It is to be noted that except the last stand indicated above, all other stands were examined by the High Court and negatived. 4. It was submitted by learned counsel appearing for the appellants that reliance placed by the High Court on the decision of this Court in B.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). 5. 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meeting of the Transport Development Council. The letter so far as relevant reads as follows: "No.RT-11053/1/92-MVL (Vol.II) 30th August, 1993 To: All the Transport Secretaries of The State Govts./Union Territory Administrations. Sub: Scheme for national permits for tourist coaches. Sir, 2. 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. Yours faithfully, (C.S. Khairwal) Joint Secretary to the Govt. of India" 9. 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 exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have the effect of curtailing power of States to levy taxes under relevant enactments. The said Rule reads as follows: "1(4): The conditions prescribed in Rules 82 to 85-A of the Central Motor Vehicles Rules, 1989 shall not apply to the permits granted under this scheme". 12. Power to levy taxes on vehicles, whether mechanically propelled or not vests solely on the State Legislature, though it may be open to the Parliament to lay down the principles 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. 13. 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 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have been taken place between the parties. The doctrine of promissory estoppel is now well 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". 15. Doctrine of 'Promissory Estoppel' has been evolved by the courts, on the principles of equity, to avoid injustice. 16. '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n "Recent Developments in the Doctrine of Consideration", Modern Law Review, Vol.15, in which he expressed as under : "A man should keep his word. All the more so when the promise is not a bare promise but is made with the intention that the other party should act upon it. Just a contract is different from tort and from estoppel, so also in the sphere now under discussion promises may give rise to a different equity from other conduct. The difference may, 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." 23. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y kind of legal relationship before the transaction from which the promissory estoppel takes its origin. The doctrine would apply even where there is no pre-existing legal relationship between the parties, but the promise is intended to create legal relations and effect a legal relationship which will arise in future. It was further held that it is indeed pride of constitutional democracy and rule of law that the Government stands on the same footing as a private 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es-tax Officer and another Vs. M/s Shree Durga Oil Mills and another (supra) and Dr. Ashok Kumar Maheshwari Vs. State of U.P. and another (1998 (2) SCC 502). Above being the position, the plea relating to promissory estoppel has no substance. 28. It has been pleaded as noted above that withdrawal is without any rational or relevant consideration. In this context, it has to be noted that the operators in the State of Andhra Pradesh are required to pay the same tax as 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 pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent shall not have the power to make any law giving any preference to any one State over another or discriminating between one State and another by virtue of any entry relating to trade and commerce in lists I and III of the Seventh Schedule. Article 303(1) which places a ban on Parliament against the giving of preferences to one State over another or of discriminating between one State and another, also provides that the same kind of ban should be placed upon the State 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 Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 is subject to the prohibition of preferences and discriminations decreed by Article 303(1) unless Parliament makes the declaration contained in Article 303(2), the State's power contained in Article 304(b) is made expressly free from the prohibition contained in Article 303(1), because the opening words of Article 304 contain a non-obstante clause both to Article 301and Article 303. The second difference springs from the fact that while Parliament's power to 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". 30. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no golden thread.' What is more important for our purpose is that he expressed the view that two general propositions stood out from the decisions: (i) that regulation of trade, commerce and intercourse among the States is compatible with its absolute freedom, and (ii) that Section 92 of the Australian Constitution is violated only when a legislative or executive act operates to restrict such trade, commerce and intercourse directly and immediately as distinct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother may wish to drive on the right of the road. If they come from opposite directions, there will be an inevitable clash. Another class of examples relates to making a charge for the use of trading facilities, such as, roads, bridges, aerodromes etc. The collection of a toll or a tax for the use of a road or for the use of a bridge or for the use of an aerodrome is no barrier or burden or deterrent to traders who, in their absence, may have to take a longer or less 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensatory it cannot operate as a hindrance. A Constitution Bench of this Court considered an identical question in M/s Sainik Motors, Jodhpur & Ors. Vs. State of Rajasthan (AIR 1961 SC 1480). 34. Observations in Jayaram's case (supra) to the following effect do not appear to have kept the said aspect in view when it was observed as follows: "Taxes of a compensatory and regulatory character are outside the expanse of Article 301 of the Constitution. Regulatory 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) 35. 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 im ..... 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