In this case, it is considered that if an Act contravenes the freedom conferred by the Constitution of India, it is invalid such as the Assam (On the Goods Transported Through Roads or Water Ways) Tax Act,1954. This case relates to the interpretation of Article 301 of the Constitution, which talks about the freedom of trade, commerce and intercourse throughout the territory of India.
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FACTS OF THE CASE
The plaintiffs were the owners of Tea- gardens in Assam and West Bengal. They were doing the tea trade in Calcutta. The tea was used to be dispatched from Calcutta to other states of the Country as well as to foreign countries for consumption. In this trade, a large quantity was transported through the Roads and Water ways. There was an Act named Assam Tax (On the Goods Transported Through Roads and Water Ways) Act (No. XIII), 1954 passed in the legislative assembly of Assam with the approval of the Governor. This came into force with effect from 01-06-1954. This Act levied tax on the goods transported through Roads and Inland Waterways. Now after the enforcement of the Act, the tea was liable to be taxed under the said Act while passing through Assam for the purpose of transportation to Calcutta.
This tax being levied on the transportation of tea by road or inland waterways was considered bad as the transportation of tea is taxed solely on the ground that the movement of goods are taking place and thus it was found violative of Article 301 of the Constitution.
The plaintiffs moved to the High Court against this Act under Article 226 of the Constitution challenging the validity of the Act. The High Court dismissed the writ petitions filed by the plaintiffs. Thereafter, the plaintiffs obtained the certificates from the High Court that the case involved substantial question of law as to the interpretation of the Constitution. Then, the petitions under Article 32 of the Constitution were presented in the Hon’ble Supreme Court challenging the vires of the said Act.
ISSUES OF THE CASE
The issues came before the Hon’ble Court while questioning the rationality of The Assam Taxation Act,1954 were:-
- Whether the Act is violative of Article 301 or not?
- whether the jurisdiction of Assam legislature is valid in legislating the Act related to tea, when tea being a controlled industry under the provisions of Tea Act XXIX of 1953, where the Union Government alone had the power to regulate the manufacture, production, distribution or transportation of tea?
- Whether the tax under this Act is an encroachment on the field of Central legislature within the meaning of Entry 84 of the Union List of VII Schedule?
Besides these issues, the questioned Act was also challenged on the ground that it was discriminatory and therefore void under Article 14 of the Constitution.And the competence of Assam Legislature to legislate on the subject also got questioned by the appellants.
Contention of the Appellant:-
The appellants in this case contended that the impugned Act imposed restrictions on the free flow of the trade and commerce in respect of tea and jute ( These were the two commodities being dealt in this Act) and therefore, violated the provisions of Article 301 of the Constitution. They also contended that the legislation was beyond the legislative competence of the Assam Legislature and it was also not authorised under the Entry 56 of the State List. It was declared by the Parliament that the tea industry was a controlled industry and it directly came under the Entry 52 of the Union List. Therefore, it was a colourful piece of legislation which was in its true effect, an imposition of duty of excise which was a power in the hands of the Parliament. And this Act also going against the Right to Equality, therefore contravening Article 14 of the Constitution as well.
Contention by the respondents:-
The respondents contended that the taxation was not in the umbrella of Article 301. Taxation is not a restriction under the meaning of Part XIII. It is a feature of sovereignty, which is not enforceable. The Court is not directly concerned with a legislative function, which is a power to take tax and that, therefore, the freedom contemplated by Article 301 does not mean freedom from taxation and taxation does not come under the connotation of the term “Restriction” in Part XIII of the Constitution. As per the respondents, “freedom” in Part XIII meant freedom from discriminatory taxation and trade barriers.
AN OVERVIEW OF ARTICLE 301
The intention of the constitution makers was to have a constitutional sanction for the promotion and protection of the economic unity as well as integrity of the trade and commerce in the Country. They were also having their minds on the fact that the internal trade should not be entangled in the political controversies of the regional interests. There was a desire and want to make the trade and commerce free within the country to make the economy of the country functions as a single economic unit without any restriction or barrier in regard to the internal trade and commerce.
The Constitution also favored and tried for bringing social, political and economic unity in the country and therefore safeguarding the attainment of these three are the objectives of the Indian Constitution. The regional aspirations were already prevalent in our country before and during the making of the Constitution. Therefore, they inserted Articles 301 to 307 in the Indian Constitution, so that the economic integrity of India do not get hampered.
The interpretation of Article 301 is very wide. Article 301 states that “trade, commerce and intercourse throughout the territory of India shall be free”. Part XIII of the Constitution heads “Trade, Commerce and Intercourse within the Territory of India”.
Article 301 of the Constitution:-
“ Subject to the other provisions of this part, trade, commerce and intercourse throughout the territory of India shall be free”.
Part XIII is not subject to the other provisions of the Constitution and the words used in Article 301 is cut down only by the other Articles present in this Part ending with Article 307.
All parties in this case agreed that trade, commerce and intercourse throughout the Indian territory should be free, but the question arose “free from what”. The appellant contention was that the trade, commerce and intercourse throughout India shall be free from everything, which includes taxation as well.
The respondents contended that the freedom under Article 301 does not include the freedom from taxation and freedom means free from trade barriers or tariff walls shutting out commodities, traffic and intercourse between individuals and there should not be shutting in.
Part XIII enlarged the scope of what was there in The Government Act of 1935. It enlarged the scope of inhibitions and laid down the limits within which framework, the Parliament or State Legislature can legislate in regard to trade, commerce and intercourse in the country, whether its inter-State, intra-State or throughout the Country.
Article 301 provided for the removal of all the trade barriers and tariff walls which were in existence in the pre-independence era of India. After independence, when partition has occurred, it was very much required to abolish all the trade barriers and customs in the national interest for solidarity, economic and cultural unity. Therfore, Article 301 does not have its reference limited to the trade and commerce freedom in different parts of India, but also includes the freedom of the movement of individuals in regard to their trade p and other activities.
After considering various Articles of the Constitution, Court found that restrictions have been imposed through Part XIII upon the legislative powers granted under Articles 245, 246 and 248. and also of powers provided under Seventh Schedule to the Parliament as well as State Legislatures. And it is to be noted that these restrictions include the burdens of nature of taxation as well. Therefore, it is pertinent to note that the power to tax commercial intercourse vested to Parliament and State Legislatures is circumscribed by Part XIII of the Constitution and if the power is not conformed to the requirements of Part XIII, that would be considered invalid.
As it is found in this case that the previous sanction of the President was not taken for the moving of the Bill which resulted in the impugned Act. Therefore, even though the Assam legislature had authority to impose this tax under Entry 56 of the State List, the State could not exercise this authority in the absence of the previous sanction of the President. Even this problem in this Act is not cured later.
The primary motive of the Constituent Assembly was to create a strong centre with the objective of building up a healthy economy, and unifying the different States by subordinating parochial interest. In any case, while adjudging the vires of a statute, the impact of the view which the interpretation put up by the court may produce on notion of the sovereign of the component States must be ignored.
Therefore, considering all the factors and section and while interpreting them all, the Hon’ble Supreme Court declared that the Assam Taxation(On Goods carried by Roads or Inland Waters) Act,1954, must be regarded an infringement of the guarantee of freedom of trade and commerce under Article 301 because the Bill moved in the Assembly did not receive the assent of the President as per the requirement under Article 304(b) proviso, and the Act has not been validated by the assent of the President under Article 255(c).
As per the following considerations, the appeals were allowed and the Rule in the two applications made absolute, with costs.
Provisions of the Constitution considered by the Court in this case were:-
- Article 14 in The Constitution Of India
Equality before law :- The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth.
- Article 301 in The Constitution Of India
Freedom of trade, commerce and intercourse:– Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.
- Article 303 in The Constitution Of India
Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce:-
(a) Notwithstanding anything in Article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule
(b) Nothing in clause ( 1 ) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making, or authorising the making of, any discrimination if it is declared by such law that 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.
- Article 304(b) in The Constitution Of India
Restrictions on trade, commerce and intercourse among States Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law.
(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause shall be introduced or moved in the Legislature of a State without the previous sanction of the President.
- Seventh Schedule of the Constitution:-
The VII Schedule of the Indian Constitution deals with the division of powers between the Union government and State governments. It is a present in the Indian Constitution. The division of powers between Union and State is presented in subject or entry wise through three kinds of the list mentioned in the seventh schedule:
- Union List – List I :- 100 subjects (earlier- 97 subjects)
- State List – List II :- 61 subjects (earlier:- 66 subjects)
- Concurrent List – List III :- 52 subjects (earlier:- 47 subjects)
Article 246 of the Constitution of India deals with the Seventh Schedule.
Article 246 in The Constitution Of India
Subject matter of laws made by Parliament and by the Legislatures of States
(1) Notwithstanding anything in clauses ( 2 ) and ( 3 ), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List)
(2) Notwithstanding anything in clause ( 3 ), Parliament, and, subject to clause ( 1 ), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List)
(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the “State List”).
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a State) notwithstanding that such matter is a matter enumerated in the State List
OTHER IMPORTANT TERMINOLOGIES TO KNOW
- Non-obstate clause:-
The non-obstante clause is referred to a provision with a view to provide the enacting part of the provision an overriding effect when the conflict arises. However, it is not required that the non-obstante clause is necessarily and always be co-extensive with the operative part for having the effect of cutting down the clear terms of an enactment and in case the words of the enactment are clear and can be interpreted clearly on a plain and grammatical making of the words, the non-obstante clause wont be able to cut down the construction and restrict its operational scope. In such a scenario, the non-obstante clause has to be read as clearing the whole position and must be incorporated in the enactment with abundant caution by the Legislature.
Through this judgement, the Hon’ble Supreme Court again tried to establish the supremacy of the Constitution. In this judgement, the way the articles related to the trade, commerce and intercourse of Part XIII are interpreted, it tried to give clarity that there should not be any restriction in the freedom of trade, commerce and intercourse except the provisions provided in Part XIII itself. Except these certain provisions, there could not be any effort in this direction to restrict the freedom of trade, commerce and intercourse in any way. This case is considered to be a landmark judgement where the stance of freedom of trade, commerce and intercourse got cleared in a much better way by the Court. And this opened the way of Legislatures as well to think in a new perspective while making a law so that violation of Part XIII does not take place.
 Atibari Tea Co., Ltd. vs The State Of Assam And Ors, AIR 1961 SC 232,1961 1SCR
 IND. CONST. art. 301.
 IND.CONST. art. 226.
 GOI Act (1935)
 IND.CONST.art.304, cl.b.
 IND.CONST.art.255, cl.c.