ATIABARI TEA CO., LTD. versus THE STATE OF ASSAM AND OTHERS. (AND CONNECTED PETITION AND APPEALS)

Citation: [1961] 1 S.C.R. 809 · Decided: 26-09-1960 · Supreme Court of India · Bench: BHUVNESHWAR PRASAD SINHA · Disposal: Appeal(s) allowed

Cited by 25 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

l S.C.R. SUPREME COURT REPORTS 
809 
ATIABARI TEA CO., LTD. 
v. 
THE .STATE OF ASSAM AND OTHERS. 
(AND CO.~NECTED PETITION AND APPEALS) 
(B. P. SINHA, c. J., P. B. GAJENDRAGADKAR, 
IC N. WANCHOO, K. C. DAs GUPTA and 
J. c. SHAH, JJ.) 
Freedom of Trade-If includes freedom from laxation·-State 
Law imposing tax on goods carried by road or inland waterways--
Constitutionaly of-Constitution of India, Arts. JOI and 304-
Assani Taxation (on goods carried by Roads and Inland Waterways) 
Act, Ip54 (Ass. XIII of I954). 
The Assam Taxation (on goods carried by Roads and Inland 
Waterways) Act, 1954, was passed under Entry 56 of List II of 
Seventh Schedule to the Constitution. The appellants contend-
ed that the "Act violated the freedom of trade guaranteed by 
Art. 301 of the Constitution and as it was not passed after ob-
taining the previous sanction of the President as required by 
Art. 304(b) it was ultra vires. The respondent urged that taxing 
Jaws were not governed by Part XIII (which contained Arts. 301 
and 304) but only by Part XII and in the alternative thatthe 
provisions of Part XIII applied only to such legislative entries 
in the Seventh Schedule as dealt specifically with trade, com-
raerce ·and intercourse. 
Held, (per Gajendragadkar, Wanchoo and Das Gupta, JJ.) 
that the Act violated Art. 301 and since it did not comply with 
the provisions of Art. 304(b) it was ultra vires and void. 
The 
freedom of trade, con1metce and intercourse guaranteed by 
Art. J.Ol was wider than that contained in s. 297 of the Govern-
ment of India Act, 1935, and it included freedom from tax laws 
also. 
Article 3or provides that the flow of trade shall run 
smooth and unhampered by any restriction either at the bounda-
ries of the States or at any other points inside the States them-
selves; and if any Act imposes any direct restrictions on the 
movetnent of goods it attracts the provisions of Art. 301, and its 
validity can be sustained only if it satisfied the requirements of 
Art. 302 or Art. 304. The operation of Art. 301 cannot be 
restricted to legislation under the Entries dealing with trade 
and commerce. The Assam Act directly affected the freedom 
contemplated by Art. 3or. 
Ramjilal v. Income-tax Officer, Mohindargarh, [1951] S.C.R. 
127, M. P. V. Sundararamier G Co. v. The State of Andhra Pra-
desh, [r958] S.C.R. 1422, James v. Commonwealth of Aitstralia, 
(1936) A.C. 578, The State of Bombay v. The United Motors (Indio) 
Ltd., [1953] S C.R. 1069, Saghir Ahmed v. The State of U.P., 
September 26. 
1960 
At1abari Tea 
Co., Ltd. 
v. 
The Stal~ of 
· A ssan1 6- Others 
810 
SCPREME COURT REPORTS 
[ 1961] 
[1955] r S.C.R. 707, James v. Stale of South Australia, (1927) 40 
C.L.R. land James v. Cowan, (1932) A.C. 542, referred to. 
Per Sinha, C. ].-The Assam Act did not contravene 
Art. 301 and was not ultra vires. 
~either the one extreme posi-
tion that Art. 301 included freedom from all taxation nor the 
other that taxation was wholly outside the purview of Art. 301 
was correct. The freedom conferred by Art. 301 did not mean 
freedom from taxation simpliciter but only from the erection of 
trade barriers, tariff walls and imposts which had a deleterious 
effect on the free flow of trade, commerce and intercourse. The 
Assam Act was a taxing statute simpliciter and did not suffer 
from any of the vices against which Part XIII of the Constitu-
tion was intended. 
Ramjilal v. Income-lax Officer, Mohi11dargarh, [1951] S.C.R. 
127, referred to. 
Further, the impugned Act was within the competence of 
the State Legislature and fell directly within Entry 56 of 
List II; it was not in conflict with the Tea Act of 1953 enacted 
by Parliament; it did not contravene Art. 14 and it was not 
extra-territorial in operation. 
The Tata Iron & Steel Co. Ltd. v. The State of Bihar, [1958] 
S.C.R. 1355, followed. 
Per Shah, ].-The Assam Act infringed the guarantee of 
freedom of trade and commerce under Art. 301 and as the Bill 
was not moved with the previous sanction of the President as 
required by Art. 304\b) nor was it validated by the assent of the 
President under Art. 255(c), it was ultra vires and void. Arti-
cle 301 guarantees freedom in its widest amplitude, freedom 
from prohibition, control, burden or impediment in commercial 
intercourse. The freedom includes not only freedom from dis-
criminative tariffs and trade barriers hut also from all taxation 
on commercial intercourse. Part XIII of the Constitution places 
restriction

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