Withdrawal of motor vehicle tax exemption for tourist permits upheld as a valid regulatory levy, not a breach of free trade rights.

Withdrawal of the exemption from motor vehicles tax for all-India tourist permit vehicles was treated as consistent with the State's taxing power under Entry 57 of List II, because the levy was characterised as regulatory and compensatory, linked to the use of roads and the facilities provided. The scheme under Section 63(7) of the Motor Vehicles Act was intended to encourage inter-State tourist traffic, but it did not create any constitutional obligation for States to maintain tax exemptions or align their fiscal laws with the permit regime. The challenge under Article 301, Article 14, and promissory estoppel was rejected, with the revision of fiscal policy viewed as within the State's competence.

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Issues: Whether the withdrawal of exemption from motor vehicles tax for all-India tourist permit vehicles was unconstitutional as violating the freedom of trade, commerce and intercourse under Article 301 of the Constitution of India, or as offending Article 14 of the Constitution of India, or as being barred by promissory estoppel.

Analysis: The scheme for all-India tourist permits under Section 63(7) of the Motor Vehicles Act was intended to promote inter-State tourist traffic, but the State's power to levy tax on vehicles under Entry 57 of List II remained intact. The tax imposed by the State on vehicles using its roads was treated as a regulatory and compensatory levy, supported by the constitutional allocation of taxing power and the nexus between the levy and the services, benefits and facilities provided on the roads. The Parliament, while introducing Section 63(7), did not lay down any principle requiring States to continue exemptions or to align their tax laws with the permit scheme. The withdrawal of exemption, even if it increased the burden on operators moving across States, did not amount to an impairment of Article 301. The challenge based on Article 14, promissory estoppel, and arbitrariness was also found to be without merit, since the State was entitled to revise its fiscal policy in response to misuse of the scheme.

Conclusion: The withdrawal of exemption was valid and did not violate Article 301, Article 14, or any promissory obligation; the challenge failed.

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