Retrospective withdrawal of tax exemption needs clear statutory authority; reasonable fiscal classification can survive constitutional challenge.

A tax notification on motor vehicles was treated as a compensatory and regulatory levy, and the Court held that a reasonable territorial classification tied to reciprocal State arrangements did not violate Article 14 or the freedom of trade and commerce under Articles 301 and 304(b). The constitutional challenge therefore failed. However, the Court held that delegated legislative power does not include an implied authority to withdraw an exemption retrospectively unless the statute expressly or necessarily authorises it. Because the Act required advance tax payment and contained no such authorisation, the retrospective cancellation of exemption was invalid.

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Issues: (i) Whether the impugned tax notification and the differential treatment of interstate operators offended Article 14 or the freedom of trade and commerce under Articles 301 and 304(b) of the Constitution; (ii) whether the Government had authority to withdraw the exemption retrospectively and levy tax from the earlier date.

Issue (i): Whether the impugned tax notification and the differential treatment of interstate operators offended Article 14 or the freedom of trade and commerce under Articles 301 and 304(b) of the Constitution

Analysis: The tax on motor vehicles was treated as a compensatory and regulatory levy. The impugned classification was between operators governed by reciprocal arrangements and those not so governed, and the Court held that Article 14 does not prohibit a reasonable territorial classification having a nexus with the object of the legislation. The alleged discrimination did not arise from the Andhra Pradesh legislation itself but from the different fiscal arrangements operating between the States. The Court further held that where a tax is validly imposed under the State's taxing power and does not amount to an unreasonable restriction on trade, the challenge under Part XIII does not succeed.

Conclusion: The challenge based on Articles 14, 301 and 304(b) failed.

Issue (ii): Whether the Government had authority to withdraw the exemption retrospectively and levy tax from the earlier date

Analysis: The Court held that delegated legislative power does not carry an implied authority to operate retrospectively unless such power is expressly granted or necessarily implied by the statute. The scheme of the Act required advance payment of tax within fixed periods, which was inconsistent with a retrospective withdrawal of exemption that would expose owners to tax and penalty for a past period when compliance was impossible. The statutory provisions did not disclose an express or implied delegation of retrospective power.

Conclusion: The retrospective withdrawal of exemption was invalid.

Final Conclusion: The tax notification was upheld against the constitutional challenge, but the retrospective cancellation of exemption was struck down for want of delegated authority.

Ratio Decidendi: A delegated authority cannot give retrospective effect to a notification or exemption withdrawal unless the statute expressly or by necessary implication authorises such retrospective operation, and a reasonable territorial classification in fiscal matters does not offend Article 14 merely because similar operators in different States are treated differently under different State laws.

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