{"id":244297,"date":"1962-04-09T00:00:00","date_gmt":"1962-04-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/the-automobile-vs-the-state-of-rajasthan-and-on-9-april-1962"},"modified":"2017-12-20T10:45:49","modified_gmt":"2017-12-20T05:15:49","slug":"the-automobile-vs-the-state-of-rajasthan-and-on-9-april-1962","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/the-automobile-vs-the-state-of-rajasthan-and-on-9-april-1962","title":{"rendered":"The Automobile … vs The State Of Rajasthan And … on 9 April, 1962"},"content":{"rendered":"
Supreme Court of India<\/div>\n
The Automobile … vs The State Of Rajasthan And … on 9 April, 1962<\/div>\n
Equivalent citations: 1962 AIR 1406, \t\t 1963 SCR (1) 491<\/div>\n
Author: M R.<\/div>\n
Bench: Sinha, Bhuvneshwar P.(Cj), Kapur, J.L., Sarkar, A.K., Subbarao, K., Hidayatullah, M. & Ayyangar, N.R. & Mudholkar, J.R.<\/div>\n
           PETITIONER:\nTHE AUTOMOBILE TRANSPORT(RAJASTHAN) LTD.\n\n\tVs.\n\nRESPONDENT:\nTHE STATE OF RAJASTHAN AND OTHERS(And Connected Appeals)\n\nDATE OF JUDGMENT:\n09\/04\/1962\n\nBENCH:\nMUDHOLKAR, J.R.\nBENCH:\nMUDHOLKAR, J.R.\nDAS, S.K.\nSINHA, BHUVNESHWAR P.(CJ)\nKAPUR, J.L.\nSARKAR, A.K.\nSUBBARAO, K.\nHIDAYATULLAH, M.\nAYYANGAR, N. RAJAGOPALA\n\nCITATION:\n 1962 AIR 1406\t\t  1963 SCR  (1) 491\n CITATOR INFO :\n R\t    1963 SC 928\t (8,9)\n F\t    1963 SC1207\t (34)\n R\t    1963 SC1667\t (14,21)\n R\t    1964 SC 925\t (2,9,12,13,14,57)\n R\t    1964 SC1006\t (9)\n R\t    1967 SC1189\t (5,7)\n F\t    1967 SC1575\t (12)\n RF\t    1967 SC1643\t (96)\n E\t    1968 SC 599\t (14)\n RF\t    1969 SC 147\t (8,9,26,33)\n E\t    1970 SC1864\t (5)\n RF\t    1970 SC1912\t (7)\n RF\t    1972 SC1061\t (52)\n RF\t    1972 SC1804\t (11)\n RF\t    1973 SC1461\t (887,1229)\n RF\t    1974 SC1389\t (173)\n RF\t    1974 SC1505\t (7)\n RF\t    1975 SC  17\t (15)\n R\t    1975 SC 583\t (13,19,25,27)\n E\t    1975 SC 594\t (4)\n RF\t    1975 SC1443\t (19,21)\n RF\t    1977 SC1825\t (18)\n E&R\t    1978 SC  68\t (252,253,254)\n RF\t    1979 SC1459\t (33)\n RF\t    1981 SC 463\t (24,25,26)\n RF\t    1981 SC 711\t (11)\n R\t    1981 SC 774\t (9,10,11)\n RF\t    1982 SC  29\t (2)\n R\t    1983 SC 634\t (12,14,15)\n OPN\t    1983 SC1005\t (7)\n F\t    1983 SC1283\t (5)\n D\t    1987 SC  56\t (1)\n F\t    1987 SC1911\t (6,7)\n RF\t    1988 SC 567\t (11)\n RF\t    1988 SC2038\t (4)\n RF\t    1989 SC1119\t (14)\n R\t    1989 SC2015\t (8)\n RF\t    1990 SC 781\t (74)\n C\t    1990 SC 820\t (12,20)\n RF\t    1991 SC1650\t (3)\n\n\nACT:\nFreedom of Trade-State carriages-Tax on Vehicles--State\t law\nimposing  tax on vehicles used in public place or  kept\t for\nuse--Constitutional  validity-Rajasthan Motor Vehicles\tTax-\nation\tAct,  1951  (Rajasthan\t11  of\t1951),ss.   4,\t 11,\nSchedules--Constitution\t of India, Arts. 19, 245,  301,\t 304\nSeventh Sch.  List, I, entry 42, List II, entry 57.\n\n\n\nHEADNOTE:\nSub-section  (1)  of s. 4 of the Rajasthan  'Motor  Vehicles\nTaxation  Act,\t1951, provided : \"......  No  motor  vehicle\nshall  be  used\t in  any public place or  kept\tfor  use  in\nRajasthan  unless the owner thereof has paid in\t respect  of\nit, a tax at the appropriate rate specified in the  schedule\n5 to this Act within the time allowed.......\"\nThe appellants were carrying on the business of plying stage\ncarriages  in  the State of Ajmer.  They  held\tpermits\t and\nplied  their buses on diverse routes.  There was  one  route\nwhich lay mainly in Ajmer State but it crossed narrow strips\nof the territory of the State of Rajasthan.  Another  route,\nAjmer  to Kishangarh, was substantially in the Ajmer  State,\nbut a third of it was in Rajasthan.  Formerly, there was  an\nagreement  between the Ajmer State and the former  State  of\nKishangarh,  by which neither State charged any tax or\tfees\non  vehicles  registered  in Ajmer  or\tKishangarh.   Later,\nKishangarh  became a part of Rajasthan.\t On the\t passing  of\nthe  Rajasthan\tMotor Vehicles Taxation Act, 1951,  and\t the\npromulgation  of  the  rules  made  thereunder,\t the   Motor\nVehicles Taxation Officer Jaipur, demanded of the appellants\npayment\t of  the  tax due on their motor  Vehicles  for\t the\nperiod\tApril 1, 1951, to March 31, 1954.  By virtue of\t the\nprovisions of s. 4 of the Act read with the Schedules no one\ncould  use  or\tkeep a motor vehicle  in  Rajasthan  without\npaying\tthe appropriate tax for it and if he did so  he\t was\nmade liable to the penalties imposed under s. II of the Act.\nThe appellants challenged the legality of the demand on\t the\ngrounds\t that  s.  4  of the Act  read\twith  the  Schedules\nconstituted a direct and immediate\n492\nrestriction  on the movement of trade and commerce with\t and\nwithin\tRajasthan inasmuch as motor vehicles  which  carried\npassengers  and\t goods within or through  Rajasthan  had  to\npay  the  tax  which imposed a pecuniary  burden  on  a\t com\nmercial activity and was, therefore, hit by Art. 301 of\t the\nConstitution  of  India\t and was not saved  by\tArt.  304(b)\ninasmuch  as  the proviso to Art. 304(b)  was  not  complied\nwith,  nor was the Act assented to by 'the President  within\nthe   meaning  of  Art.\t 255  of  the\tConstitution.\t The\nrespondents claimed that taxation for the purpose of raising\nrevenue or for the maintenance of roads etc., was not hit by\nArt. 301 and that the Act did not constitute an immediate or\ndirect\timpediment  to the movement of\ttrade  and  commerce\ninasmuch  as  the tax imposed was a consolidate tax  on\t the\nvehicle\t itself though the quantum of the tax was  fixed  in\nsome  instances\t with reference to the seating\tcapacity  or\nloading capacity etc.\nHeld (per S. K. Das, Kapur, Sarkar and Subba Rao, jj.), that\nthe  Rajasthan\tMotor Vehicles Taxation Act 195 1,  did\t not\nviolate\t the provisions of Art. 301 of the  Constitution  of\nIndia  and that the taxes imposed under the Act\t were  comp-\nensatory  or  regulatory  taxes which  did  not\t hinder\t the\nfreedom\t of trade, commerce and intercourse assured by\tthat\nArticle.  Such taxes, therefore, were legal.\nPer  S.\t K. Das, Kapur and Sarkar, JJ--(1)  The\t concept  of\nfreedom\t of  trade, commerce and intercourse  postulated  by\nArt.  301 must be understood in the context of\tan  ordinary\nsociety\t and  as part of a Constitution\t which\tenvisaged  a\ndistribution of powers between the States and the Union, and\nif  so understood, the concept must recognised the need\t and\nlegitimacy of some degree of regulatory control, whether  by\nthe  Union or the States.  Regulatory measures\tor  measures\nimposing   compensatory\t taxes\tfor  the  use\tof   trading\nfacilities  did not hamper trade, commerce  and\t intercourse\nbut rather facilitated them and, therefore, were not hit  by\nthe  freedom declared by Art. 301 ; such measures  need\t out\ncomply\twith  the  requirements of the\tprovisions  of\tArt.\n304(b) of the Constitution. (2) In view of the\tprovision,.;\nof   Art.  245,\t the  restrictions  in\tPart  XIIT  of\t the\nConstitution  applied to taxation laws ; and such laws\twere\nnot  confined  only to legislation with respect\t to  entries\nrelating  to trade and commerce in any of the lists  in\t the\nSeventh\t Schedule. (3) On a proper construction of  the\t Act\nand  the Schedules, the taxes imposed were really taxes\t for\nthe  use of the roads in Rajasthan.  In basing the taxes  on\npassenger capacity or loading capacity, the legislature\t had\nmerely evolved a method and measure of compensation demanded\nby  the\t State, but the taxes were  still  compensation\t and\ncharge for regulation.\n 493\nPer  Subba Rao, J.--(1) The freedom declared under Art.\t 301\nof the Constitution of India referred to the right of  free\nmovement  of  trade  without  any  obstructions\t by  way  of\nbarriers,  inter-State or intra-State, or other\t impediments\noperating  as such barriers ; and the said  freedom  was.not\nimpeded,  but  on the other hand, promoted,  by\t regulations\ncreating conditions for the free movement of trade, such as,\npolice regulations, provisions for services, maintenance  of\nroads,\tprovision  for\taerodromes,  wharfs  etc.,  with  or\nwithout\t compensation.\t(2)  Parliament may  by\t law  impose\nrestrictions on such freedom in the public interest, and the\nStates\talso,  in  exercise of its  legislative\t power,\t may\nimpose\t similar  restrictions,\t subject  to   the   proviso\nmentioned therein. (3) Laws of taxation were not outside the\nfreedom enshrined either in Art. 19 or Art. 301.\nPer   Hidayatullah,  Rajagopala\t Ayyangar   and\t  Mudholkar,\nJJ.--(1)  Section  4(1)\t of  the  Rajasthan  Motor  Vehicles\nTaxation Act, 1951, as read with Schs. 11, III and Part I of\nSch.   IV,  offended Art. 301 of the  Constitution,  and  as\nresort\tto the procedure prescribed by Art. 304(b)  was\t not\ntaken it was ultra vires the Constitution. (2) The pith\t and\nsubstance  of the Act was the levy of tax on motor  vehicles\nin  Rajasthan  or their use in that  State  irrespective  of\nwhere the vehicles came from and not legislation in  respect\nof  interState trade or commerce.  The Act was within  entry\n57  of the List of the Seventh Schedule and not under  entry\n42  of\tUnion List. (3) A tax which is\tmade  the  condition\nprecedent  of the right to enter upon and carry on  business\nis a restriction on the right to carry on trade and commerce\nwithin\tArt.  301.  In the present case,  the  trade,  which\nconsisted  in making use of motor vehicles for\tcarriage  of\npassengers  and goods, could be carried on only if  the\t tax\nwas paid, and, therefore, the taxes imposed by Schs. 11, III\nand  IV(1) operated on trade and commerce directly. (4)\t The\ntax  levied under the Act was not, truly a  fair  recompense\nfor  wear and tear of roads, but a restriction,\t which\tArt,\n301  forbade.  (5) The Act was not, in its  true  character,\nregulatory  because  there was no provision  therein,  which\ncould be regarded as regulatory of motor vehicles.  The\t Act\nplainly\t levied\t a  tax\t upon possession  or  use  of  motor\nvehicles.\nAtiabari  Tea  Co., Ltd. v. The State of  Assam\t and  Others<\/a>\n[1961] 1. S.C.R. 809, discussed.\nAmerican  and  Australian  decisions  with  regard  to\t the\nCommerce  Clause or the American Constitution and s.  92  of\nthe Australian Constitution, considered.\n494\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION :\t Civil Appeals Nos. 42 to 44
\nof 1959.\n<\/p>\n
Appeals\t from the final judament and order dated  August  9,
\n1957,  of the Rajasthan High Court (Jaipur Bench) at  Jaipur
\nin Civil Writ Petitions Nos. 400 to 402 of 1954.
\nG.   S.\t Pathak, J. B. Dadachanji, S. N.  Andley,  Rameshwar
\nNath and P. L. Vohra, for the appellants.\n<\/p>\n
G.   C.\t  Kasliwal,  Advocate-General  for  the\t  State\t  of
\nRajasthan, A. V. Viswanatha Sastri, S. K. Kapur and P. D.
\nMenon,<\/a> for the. respondents.\n<\/p>\n
H.   M.\t  Seervai,   Advocate-General  for  the\t  State\t  of
\nMaharashtra  and  Naunit  Lal,\tfor  the  State\t of   Assam’
\n(Intervener).\n<\/p>\n
V.   K. T. Chari, Advocate-General for the State of  Madras,
\nR. Ganapathy Iyer, T. M. Sen and P. D. Menon, for the  State
\nof Madras (Intervener)
\nS.   N. Sikri, Advocate-General for the State of Punjab,   N.
\nS. Bindra, T. M. Sen and P. D. Menon, for the\t  State\t  of
\nPunjab (Intervener).\n<\/p>\n
H.   M.\t  Seervai”.   Advorate-General\tfor  the  State\t  of
\nMaharashtra,  T.  M. Sen and P. D. Menon, for the  State  of
\nMaharashtra (Intervener).\n<\/p>\n
K. Bhimsankaram, T. M. Sen and P. D. Menon, for the State of
\nAndhra Pradesh (Intervener).\n<\/p>\n
B.   Sen,  S. C. Bose and P. K. Bose, for the State of\tWest
\nBengal (Intervener).\n<\/p>\n
Lal Narain Sinha, Lakshman, Saran, Singh, D. P. Singh, R. K.
\nGarg, M. K. Ramamurthi and S. C. Aggarwal, for the State  of
\nBihar (Intervener).\n<\/p>\n
Dinbandhu Sahu, Advocate-General for the State of Orissa, B.
\nK.P.  Sinha,  T. M. Sen and P. D. Menon, for  the  State  of
\nOrissa (Intervener).\n<\/p>\n
 495<\/span><\/p>\n
K.   L.\t Hathi\tand P. D. Menon, for the  State\t of  Gujarat
\n(Intervener).\n<\/p>\n
M.   Adhikari, Advocate-General for the State of
\nMadhya\tPradesh, B. Sen, B. K. B. Naidu, and I.\t N.  Shroff,
\nfor the State of Madhya Pradesh (Intervener).
\nRanadeb\t Chaudhuri, S. N. Andley, Rameshwar Nath and  P.  L.
\nVohra, for M. A.Tulloch and Co. (Intervener).
\nK.   Srinivasmurty  and\t D. Goburdhun,\tfor  Nazeeria  Motor
\nService,    Motor,   and   Andhra   Pradesh   Motor    Union
\n(Interveners).\n<\/p>\n
N.   C. Chatterjee, S. C. Mazumdar and R. H.\n<\/p>\n
Dhebar, for the Attorney-General for India (Intervener).
\n1962.  April 9. The following judgments were delivered.\t The
\njudgment  of S. K. Das, J. L. Kapur and A. K.  Sarkar,\tJJ.,
\nwas  delivered\tby  S.\tK.  Das,  J.  The  judgment  of\t  M.
\nHidayatullah,  N. Rajagopala Ayyangar and J.  R.  Mudholkar,
\nJJ., was delivered by M. Hidayatullah, J.\n<\/p>\n
S.   K.\t DAS, J.-These are three consolidated appeals  which
\narise  from  the judgment and order of a Division  Bench  of
\nRajasthan High Court dated August, 9, 1957.  They have\tbeen
\npreferred  to  this Court on the strength of  a\t certificate
\ngranted by the said High Court under Art. 132 of the Consti-
\ntution\tcertifying  that  the cases  involve  a\t substantial
\nquestion  of  law as to the interpretation of Art.  301\t and
\nother  connected  articles relating to trade,  commerce\t and
\nintercourse within the territory of India, contained in Part
\nXIII  of  the Constitution.  These appeals  were  originally
\nheard  by a Bench of five Judges and on April 4, 1961,\tthat
\nBench recorded an order to the effect that having regard  to
\nthe importance of the constitutional issues involved
\n496<\/span>
\nand  the  views expressed in the decision of this  Court  in
\nAtiabari Tea Co. Ltd. v. The State of Assam<\/a> (1) the  appeals
\nshould\tbe heard by a larger Bench.  The appeals  were\tthen
\nplaced\tbefore\tthe  learned  Chief  Justice  for  necessary
\norders,\t and  on his orders have now come to this  Bench  of
\nseven  Judges  for disposal.  As the  constitutional  issues
\ninvolved affect the state of the Union, notices were  issued
\nto  the\t Advocates-General  concerned.\tA  notice  was\talso
\nissued\tto  the Attorney General on behalf of the  Union  of
\nIndia.\t The States of Andhra Pradesh, Assam, Bihar  Gujrat,
\nMadras, Maharashtra, Orissa, Punjab, Uttar Pradesh and\tWest
\nBengal\tintervened  and were represented  before  us  either
\nthrough their respective Advocates-General or other  Counsel
\nM\/s.  M. A. Tulloch & Co., Andhra Pradesh Motor Congress and
\nNazeeria Motor Service, Nellore, applied for intervention on
\nthe  ground  that  they\t would\tbe  affected  in  a  pending
\nlitigation   by\t  the  decision\t of  this   Court   on\t the
\nconstitutional\tissues\tinvolved.  Those  applications\twere
\nallowed by us.\tThe result has been that we have heard\tvery
\nfull  arguments\t not  only  from  Counsel  appear  for\t the
\nappellants  and the respondents, but also from\tthe  learned
\nCounsel\t appearing  on\tbehalf of the Union  of\t India,\t the
\nlearned\t Advocates  General  or Counsel\t appearing  for\t the
\nintervening  States and also from learned Counsel  appearing
\non behalf of the three interveners referred to above.
\nThe  appellants in the there appeals are (1) the  Automobile
\nTransport (Raj.) Ltd., Ajmer in Civil Appeal No. 42 of 1959.
\n(2)  the Rajasthan Roadways Ltd., Ajmer in Civil Appeal\t No.
\n43  of\t1959, and (3) Framji C. Framji and others  in  Civil
\nAppeal No. 44 of 1959.\tThe respondents are (1) the State of
\nRajasthan,  (2)\t the Regional Transport Officer who  is\t ex-
\nofficio Motor Vehicles Taxation Officer, Jaipur, and
\n(1)  [1961] 1. S. C. R. 809.\n<\/p>\n
497<\/span><\/p>\n
(3)  the Collector of Jaipur.  The first two Appellants\t are
\nprivate,  limited liability companies registered  under\t the
\nIndian\tCompanies  Act,\t 1913 and  having  their  registered
\noffices at Ajmer.  The third appellant is a partnership firm
\nnamed  Framji  Motor Transport registered  under  the  India
\nPartnership    Act.   These three appellants carried on\t the
\nbusiness of plying stage carriages.  The     first appellant
\nbad nine transport vehicles plying between  two stations  in
\nthe State of Ajmer and between Ajmer and Kishangarh, a\ttown
\nin  Rajasthan at the relevant period.  The two\tstations  in
\nAjmer were Nasirabad and Deoli.\t The road from Nasirabad  to
\nDeoli  was mainly in the former State of Ajmer but for\tsome
\ndistance   it  passed  through\tcertain\t narrow\t strips\t  of
\nterritory  of the State of Rajasthan.  Similarly,  the\troad
\nfrom Ajmer to Kishangarh was partly in the former State\t of
\nAjmer  and partly in the State of  Rajasthan,  approximately
\ntwo-thirds  of\tthe  road lying in Ajmer  and  one-third  in
\nRajasthan.  The second and the third appellant also had some
\ntransport vehicles which plied on the Nasirabad-Deoli  route
\nor  from  Kishangarh  to  Sarwar, a  town  situated  on\t the
\nNasirabad-Deoli\t road  in the State of\tRajasthan.   On\t the
\npassing\t of the Rajasthan Motor Vehicles Taxation Act,\t1951
\n(Rajasthan  Act XI of 1951) (hereinafter referred to as\t the
\nAct), and the promulgation of the rules made thereunder, the
\nsecond respondent demanded of the appellants payment of\t the
\ntax due on their motor Vehicles for the period beginning  on
\nApril  1, 195 1, and ending on March 3 1, 1954.\t  The  first
\nappellant  was\tcalled upon to pay Rs.\t22,260,\t the  second
\nappellant Rs. 6,540 and the third appellant Rs. 10,260 under
\nr. 23 of the Rajasthan Motor Vehicles Taxation Rules.\tWhen
\nthe appellants failed to pay the tax demanded from them, the
\nsecond respondent issued certificates under s. 13 of the Act
\nto the, third respondent for the recovery of the tax due  as
\narrears
\n498<\/span>
\nof  land  revenue.   On receipt of the\tdemand\tnotices\t the
\nsecond\tand  the third appellants filed appeals\t before\t the
\nTransport  Commissioner,  Jaipur, under s. 14  of  the\tAct.
\nThese  appeals\twere however, dismissed by an order  of\t the
\nTransport  Commissioner dated October 21, 1953.\t  The  first
\nappellant  did\tnot file any appeal.  Thereafter  the  three
\nappellants  filed  three  separate  writ  petitions  in\t the
\nRajasthan High Court in which their main contention was that
\nthe  relevant provisions of the Act imposing a tax on  their
\nmotor  vehicles\t were  unconstitutional\t and  void  as\tthey
\ncontravened  the freedom of trade, commerce and\t intercourse
\nthrough out the\t    territory  of India declared by  Art.301
\nof   the Constitution and therefore the demand and attempted
\ncollection   of\t such  tax  were  illegal  and\t should\t  be
\nprohibited.  The prayers which the appellants made in  their
\nrespective  writ petitions were mainly there-(1) that it  be
\ndeclared  that the Rajasthan Motor Vehicles Taxation Act  of
\n1951  and the Rules made thereunder are invalid and  not  in
\naccordance with the provisions of the Constitution of  India
\nand consequently null and void and inoperative, and (2) that
\na  writ of prohibition or mandamus or any other\t appropriate
\nwrit,  direction or order directing the respondents  not  to
\nrealise any tax from the appellants under the provisions  of
\nthe Rajasthan Motor Vehicles Taxation Act of 1951 be issued.
\nThe  three writ petition were heard together by\t a  Division
\nBench consisting of Bapna and Bhandari, JJ.  They dealt with
\nand  disposed of certain other objection to the validity  of
\nthe  Act, with which we are no longer concerned; but  as  to
\nthe contravention of Art. 301 of the Constitution, they felt
\nthat  in view of the complexity of the points  involved\t and
\nthe  apparent  conflict between certain decisions  of  other
\nHigh  Courts,  the  question should be referred\t to  a\tFull
\nBench.\tAccordingly, they referred the question whether\t ss.
\n4 and 11 of the Act infringed
\n499<\/span>
\nthe  right  of\tfreedom of trade,  commerce  or\t intercourse
\ngranted under Art. 301 of the Constitution.  The Full  Bench
\ndealt  with  the question from two different  stand  points.
\nFirstly,  they considered the validity of the Act  from\t the
\nstand  point  of Act, 19 St (1) of  the\t Constitution  which
\nguarantees,  to\t all  citizens of India the  right  to\tmove
\nfreely\tthroughout  the territory of India;  this  the\tFull
\nBench\tdealt  with  under  the\t heading  of’\tfreedom\t  of
\nintercourse  from the stand point of the individual  citizen
\nand  came to the conclusion that restrictions which the\t Act
\nimposed\t  on   the  individual\t citizen   were\t  reasonable
\nrestrictions having regard to the necessity of raising funds
\nfor the maintenance of roads and the making of new roads  in
\nthe State of Rajasthan. Then  the   High  Court\t  considered
\nthe validity of\t    the\t   relevant   provisions   of\t the
\nAct from the   stand  point of trade, commerce and  came  to
\nthe  conclusion\t that the regulation of trade, commerce\t and
\nintercourse within the territory of India, both\t inter-State
\nand  intra-State. was not incompatible with its freedom\t and
\nin  the\t matter of such regulation of  trade,  commerce\t and
\nintercourse a distinction must be drawn between restrictions
\nwhich  are direct and immediate and restrictions  which\t are
\nindirect  and consequential.  The High Court  expressed\t its
\nfinal conclusion in the following words :\n<\/p>\n
\t      “Transport    vehicles   are    provided\t  by
\n\t      individuals  carrying on business in them\t and
\n\t      those  who  carry on trade and commerce  as  a
\n\t      whole, can use these transport vehicles.\t The
\n\t      fact  that  on account of this  taxation,\t the
\n\t      charges of transport vehicles are higher,\t let
\n\t      us say by an anna a maund is, in our  opinion,
\n\t      merely an indirect or consequential result  of
\n\t      this Act, and such an impediment may fairly be
\n\t      called remote.  It would be a different matter
\n\t      if the taxation is so high that
\n\t      500<\/span>
\n\t      it  virtually  kills  trade  and\tcommerce  by
\n\t      compelling  the traders to raise their  prices
\n\t      to an exorbitant rate.  But this being not the
\n\t      nature  of  the  tax in  this  case,  and\t the
\n\t      taxation being not directly on trade, commerce
\n\t      or intercourse……… we are of opinion that
\n\t      this  taxation  can  not\tbe  said  to  offend
\n\t      against Art. 301, for its effect on trade\t and
\n\t      commerce\tis only indirect  and  consequential
\n\t      and  the\timpediment, if any,  may  fairly  be
\n\t      regarded as remote.”\n<\/p>\n
In  view  of  that conclusion the Full\tBench  answered\t the
\nquestion  referred  to it in the negative.  The\t cases\tthen
\nwent back to the Division Bench with the answer given by the
\nFull  Bench  and the writ petitions were  dismissed  by\t the
\nDivision  Bench\t by its judgment and order dated  August  9,
\n1957.  The three appellants then moved the High Court for  a
\ncertificate  under  Art.  132  of  the\tConstitution   which
\ncertificate  the  High\tCourt granted  by  its\torder  dated
\nOctober 16, 1957.\n<\/p>\n
It  may be here stated that neither the Division  Bench\t nor
\nthe Full Bench of the Rajasthan High Court had the advantage
\nof the decision of this Court in Atiabari Tea Co., case (1),
\nwhich  decision came much later in point of time.  The\tmain
\nargument on behalf of the appellants before us has been that
\nthe  provisions of the Act under which the  appellants\twere
\nsought to be taxed in respect of their motor vehicles plying
\non  the Nasirabad-Deoli or Kishangarh road contravened\tArt.
\n301  of the Constitution and were not saved by Art. 304\t (b)
\nof  the Constitution.  We shall presently read the  relevant
\nprovision  of  the Act, but before we do so we\tmay  briefly
\nrefer  to one short point by way of clearing the ground\t for
\nthe  discussion\t which\twill follow.   Article\t305  of\t the
\nConstitution  as  it originally stood said that\t nothing  in
\nArts, 301 and 303 shall affect
\n(1)  [1961] 1. S. C. R. 809.\n<\/p>\n
 501<\/span><\/p>\n
the  provisions of any existing law except in so far as\t the
\nPresident may by order otherwise provide.  This article\t was
\nsubstituted by another article, some what wider in scope, by
\nthe  Constitution  (Fourth Amendment) Act,  1955.   The\t new
\narticle\t repeated the words of the old article in the  first
\npart thereof and in the second part it said that nothing  in
\nArt.  301 shall affect the operation of any law made  before
\nthe commencement of the Constitution (Fourth Amendment) Act,
\n1955,  in so far as it relates to, or prevent Parliament  or
\nthe  Legislature of a State from making any law relates\t to,
\nany such matter as is referred to in sub-cl. (ii) of cl. (6)
\nof Art. 19 that sub-clause refers to the carrying on by\t the
\nState or by a corporation owned or controlled by the  State,
\nof any trade, business, industry or service, whether to\t the
\nexclusion,  complete or partial, of citizens  or  otherwise.
\nThe  first  part of Art. 305 does not apply in\tthe  present
\ncases  because the expression “existing law” means any\tlaw,
\nordinance,  order,  bye-law etc. passed or made\t before\t the
\ncommencement  of  the Constitution.  The Act  which  we\t are
\nconsidering  now  in the present appeals was made  in  1955,
\ni.e.,  after  the  commencement of  the\t Constitution.\t The
\nsecond part of Art. 305 has also no hearing on the questions
\nwhich  we have to consider in these appeals.   Article\t305,
\nold or new, is, therefore, out of our way.\n<\/p>\n
We  now proceed to read the relevant provisions of the\tAct.
\nThe Act was made by the Rajpramukh of the State of Rajasthan
\non  April 1, 1951.  The history of the constitution  of\t the
\nUnited\tState of Rajasthan and the powers of the  Rajpramukh
\nunder the covenant creating the State were stated in  Thakur
\nAmar  Singhji v. State of Rajasthan<\/a>(1) at pp. 312 to 316  of
\nthe report.  With that history ,we are not concerned in\t the
\npresent cases.\tThe competence of the Rajpramukh to make the
\nAct
\n(1)  [1955] 2. S.C.R. 303.\n<\/p>\n
502<\/span><\/p>\n
was challenged in the High Court but was decided against the
\nappellants.  That point has not been agitated before us\t and
\nwe must proceed on the footing that the Act was validly made
\nby  the\t Rajpramukh.  Section 4 of the Act is  the  charging
\nsection, the validity of which has been challenged before us
\non  the\t ground\t that  it violates  the\t freedom  of  trade,
\ncommerce  and  intercourse  granted under Art.\t301  of\t the
\nConstitution.  It is, therefore, necessary to quote s. 4.\n<\/p>\n
\t      “4.  Imposition of tax.-(1) Save as  otherwise
\n\t      provided\t by  this  Act\tor  by\trules\tmade
\n\t      thereunder  or by any other law for  the\ttime
\n\t      being in force, no motor vehicle shall be used
\n\t      in  any  public  place  or  kept\tfor  use  in
\n\t      Rajasthan unless the owner thereof has paid in
\n\t      respect  of it, a tax at the appropriate\trate
\n\t      specified in the Schedules to this Act  within
\n\t      the  time\t allowed by section 5 and,  save  as
\n\t      hereinafter  specified,  such  tax  shall\t  be
\n\t      payable  annually\t notwithstanding  that\t the
\n\t      motor  vehicle may from time to time cease  to
\n\t      be used.\n<\/p><\/blockquote>\n
\t      (2)   An\towner who keeps a motor\t vehicle  of
\n\t      which  the  certificate  of  fitness  and\t the
\n\t      certificate   of\tregistration  are   current,
\n\t      shall,  for  the\tpurposes  of  this  Act\t  be
\n\t      presumed to keep such vehicle for use.
\n\t      (3)   A  person who keeps more than ten  motor
\n\t      vehicles for use solely in the course of trade
\n\t      and industry shall be entitled to a  deduction
\n\t      of ten per cent on the aggregate amount of tax
\n\t      to which he is liable.\n<\/p><\/blockquote>\n
\t      “4.  Explanation.-The  expression\t trade\t and
\n\t      industry” includes transport for hire,”\n<\/p><\/blockquote>\n
Sections  5  to\t 7 deal with (1) payment  of  tax,  (2)\t tax
\npayable\t on first liability to tax, and (3) refund  of\ttax.
\nWith  these  details we are not concerned here.\t  Section  8
\nimposes on the owner of every motor
\n503<\/span>
\nvehicle\t an obligation to make a declaration every  year  in
\nrespect of the motor vehicle in the prescribed form  stating
\nthe   prescribed  particulars  etc.;  it  also\timposes\t  an
\nobligation on every owner to pay the tax which he is  liable
\nto  pay\t in respect of the motor vehicle.  This\t section  is
\nalso  challenged as unconstitutional and it is obvious\tthat
\nit  is connected with s. 4. If s. 4 is unconstitutional,  so
\nmust be s. 8. Section 9 deals with the payment of additional
\ntax in circumstances which need not be stated here.  Section
\n10  deals with the grant of receipt and token.\t Section  11
\nsays :\n<\/p>\n
\t      “11.    Penalties\t under\t this\tAct.-whoever
\n\t      contravenes any of the provisions of this\t Act
\n\t      or  of any rule made thereunder shall on\tcon-
\n\t      viction  be  punishable with  fine  which\t may
\n\t      extend  to  Rs. 100 and in the event  of\tsuch
\n\t      person having been previously convicted of  an
\n\t      offence under this Act or under any rule\tmade
\n\t      thereunder  with fine which may extend to\t Rs.\n<\/p><\/blockquote>\n
\t      200.”\n<\/p><\/blockquote>\n
Section 12 deals with the compounding of offences and s.  13
\nlays down that when any person without any reasonable  cause
\nfails  or refuses to pay the tax, the Taxation\tOfficer\t may
\nforward\t to  the  Collector  of\t the  district\tconcerned  a
\ncertificate over his signature specifying the amount of\t tax
\ndue from such person and the Collector shall recover the tax
\nas  if\tit  were an arrears of\tland  revenue.\t Section  14
\nprovides for appeals to the Transport Commissioner.  Section
\n16  lays down that the liability of a person to pay the\t tax
\nshall  not  be questioned or determined\t otherwise  than  as
\nprovided  in  the  act\tor in  the  rules  made\t thereunder.
\nSections 17 to 21 deal with certain ancillary matters and s.
\n22  enables the Government to make rules for  carrying\tinto
\neffect the purpose of the Act.\tThere are four Schedules  to
\nthe  Act  to which a more detailed reference  will  be\tmade
\nlater.\tIt is enough to state here that the
\n504<\/span>
\nSchedules  divide motor vehicles into two parts\t Schedule  I
\ndeals with vehicles other than transport vehicles plying for
\nhire or reward; Schedule II deals with transport vehicles of
\ntwo  kinds transport vehicles and goods\t vehicles;  Schedule
\nIII  deals with goods vehicles registered outside  Rajasthan
\nbut  using  roads in Rajasthan; and Schedule IV\t deals\twith
\nvehicles used for the carriage of goods in connection with a
\ntrade  or  business carried on by the owner of\tthe  vehicle
\nunder a private carrier’s permit.  Various rates of tax\t are
\nprovided  for various kinds of vehicles in these  Schedules.
\nThe High Court has pointed out that Schedule I is  concerned
\nwith  vehicles other than transport vehicles and  is  mainly
\nconcerned   with   what\t  would\t  come\t within\t  the\tterm
\n“,intercourse” in Art. 301 and the other Schedules deal with
\nwhat would come within the term “trade and commerce” in that
\narticle.   The\tresult\tof  reading s. 4  of  Act  with\t the
\nSchedules is that on one can use ox keep a motor vehicle  in
\nRajasthan  without paying the appropriate tax for it and  if
\nhe does so he is made liable to the penalties imposed  under
\ns.  11 of the Act.  In brief, this appears to be the  scheme
\nof the Act.\n<\/p>\n
Is  this  scheme  in conflict with  the\t freedom  of  trade,
\ncommerce  and  intercourse  within the\tterritory  of  India
\nassured\t by  Art. 301 and other connected articles  in\tPart
\nXIII  of the Constitution ?  That is the problem before\t us.
\nIt  is\tnecessary,  therefore, to read\tat  this  stage\t the
\nrelevant  articles  in Part XIII of the\t Constitution.\t For
\nthis purpose we must read Arts. 301 to 304 as they stood  at
\nthe relevant time.\n<\/p>\n
\t      “301.  Subject to the other provisions of this
\n\t      Part,   trade,   commerce\t  and\t intercourse
\n\t      throughout  the  territory of India  shall  be
\n\t      free.\n<\/p><\/blockquote>\n
\t      302.   Parliament\t may  by  law  impose\tsuch
\n\t      restrictions on the freedom of trade,
\n\t       505<\/span>
\n\t      commerce or intercourse between one State\t and
\n\t      another or within any part of the territory of
\n\t      India  as\t may  be  required  in\tthe   public
\n\t      interest.\n<\/p><\/blockquote>\n
\t      303.  (1) Notwithstanding anything in Articles
\n\t      302, neither Parliament nor the Legislature of
\n\t      a\t State\tshall  have power to  make  any\t law
\n\t      giving,  or  authorising the  giving  of,\t any
\n\t      preference  to  one  State  over\tanother,  or
\n\t      making,  or  authorising the  making  of,\t any
\n\t      discrimination  between one State and  another
\n\t      by  virtue of any entry relating to trade\t and
\n\t      commerce\tin any of the Lists in\tthe  Seventh
\n\t      Schedule.\n<\/p><\/blockquote>\n
\t      (2)   Nothing  in\t clause\t (1)  shall  prevent
\n\t      Parliament  from\tmaking\tany  law  giving  or
\n\t      authorising  the giving of, any preference  or
\n\t      making,  or  authorising the  making  of,\t any
\n\t      discrimination  if it is declared by such\t law
\n\t      that it is necessary to do so for the  purpose
\n\t      of  dealing  with\t a  situation  arising\tfrom
\n\t      scarcity of goods in any part of the territory
\n\t      of India.\n<\/p><\/blockquote>\n
\t      304.  Notwithstanding anything in Article\t 301
\n\t      or Article 303, the Legislature of a State may by
\n\t      law-\n<\/p><\/blockquote>\n
\t      (a)   impose  on\tgoods  imported\t from  other
\n\t      States\t any  tax  to  which  similar  goods
\n\t      manufactured  or\tproduced in that  State\t are
\n\t      subject,\tso, however, as not to\tdiscriminate
\n\t      between\tgoods  so  imported  and  goods\t  so
\n\t      manufactured or produced; and\n<\/p><\/blockquote>\n
\t      (b)   impose  such reasonable restrictions  on
\n\t      the freedom of trade, commerce or\t intercourse
\n\t      with  or within that State as may be  required
\n\t      in the public interest :\n<\/p><\/blockquote>\n
\t      Provided that no Bill or amendment for
\n\t      506<\/span>
\n\t      the purposes of clause (b) shall be introduced
\n\t      or moved in the Legislature of a State without
\n\t      the previous sanction of the President”.\n<\/p><\/blockquote>\n
Article\t 305  we  have already stated is  out  of  our\tway.
\nArticle\t 306, which was later repealed by  the\tConstitution
\n(Seventh Amendment) Act, 1956, is also not material for\t the
\nconsideration of the problem before us.\t Article 307 is also
\nnot  material  as  it  relates\tto  the\t appointment  of  an
\nappropriate authority for carrying out the purposes of Arts.
\n301 to 304.\n<\/p>\n
The series of articles on the true scope and effect of which
\nthe  decision  of  the problem before us  depends  were\t the
\nsubject\t matter\t of  consideration  of\tthis  Court  in\t the
\nAtiabari Tea Co. case (1), In that decision three views were
\nexpressed and one of the questions mooted and argued  before
\nus is whether the principle of the majority decision in that
\ncase  requires\treconsideration,  or  modification  in\t any
\nrespect;  or  whether any of the other two  views  expressed
\ntherein is the correct view.  Another connected question  is
\nthat  if  the majority view is the correct  view,  does\t the
\nprinciple  underlying it apply to the facts of\tthe  present
\ncases  It  is, therefore, necessary to set out\tbriefly\t the
\nfacts  of the Atiabari Tea Co. case (1) and the three  views
\nexpressed  therein.  The three appellants in that case\twere
\ntea companies, two of which carried on the trade of  growing
\ntea  in\t Assam\tand  the  other\t carried  on  its  trade  in
\nJalpaiguri  in\tWest  Bengal.  They  carried  their  tea  to
\nCalcutta  in  order that it might be sold  in  the  Calcutta
\nmarket\tfor home consumption or export outside\tIndia.\t Tea
\nproduced  in Jalpaiguri had to pass through a few  miles  of
\nterritory  in Assam, while the tea produced in Assam had  to
\ngo all the way through Assam to reach Calcutta.\t Besides the
\ntea which was carried by rail, a substantial quantity had to
\ngo by road or by inland water-ways and as such
\n(1)  (1961) 1 S.C.R. 809.\n<\/p>\n
507<\/span><\/p>\n
became\tliable\tto  pay the tax\t leviable  under  the  Assam
\nTaxation  (on  goods carried by Roads or  Inland  Waterways)
\nAct,  1954.  That Act levied a tax on certain goods  carried
\nby  road or inland waterways in the State of Assam  and\t the
\nvalidity  of the levy of such a tax was in question  in\t the
\nAtiabari Tea Co. case. (1).  The principal ground of  attack
\nwas  that the Assam Act violated the provisions of Art.\t 301
\nof  the Constitution and was not saved by the provisions  of
\nArt.  304(b).  We may now summarise the views  expressed  in
\nthat  decision. First, as to the views of the learned  Chief
\nJustice: He expressed the view that taxation simpliciter was
\nnot  within the terms of Art. 301 and a tax on\tmovement  of
\nor  passenger  did  not necessarily  connote  impediment  or
\nrestraint  in the matter of trade and commerce.\t He  draw  a
\ndistinction  between  taxation as such for  the\t purpose  of
\nrevenue\t on  the One hand and taxation for  the\t purpose  of
\nmaking\tdiscrimination\tor giving preference  on  the  other
\nhand; the letter, he said, could be treated as impediment to
\nfree trade and commerce.  He expressed his final  conclusion
\nin these words.\n<\/p>\n
\t      “Thus,  on  a fair construction  of  the\tpro-\n<\/p><\/blockquote>\n
\t      visions\tof   Part   XIII,   the\t   following
\n\t      propositions emerge: (1) trade, commerce,\t and
\n\t      intercourse throughout the territory of  India
\n\t      are  not absolutely free, but are\t subject  to
\n\t      certain powers of legislation by Parliament or
\n\t      the  Legislature of a State; (2)\tthe  freedom
\n\t      declared\tby  Art. 301 does not  mean  freedom
\n\t      from  taxation  simpliciter,  but\t does\tmean
\n\t      freedom from taxation which has the effect  of
\n\t      directly\timpeding  the free  flow  of  trade,
\n\t      commerce\tand  intercourse;  (3)\tthe  freedom
\n\t      envisaged\t in  Art.  301 is  subject  to\tnon-
\n\t      discriminatory\trestrictions   imposed\t  by
\n\t      Parliament in public interest (Art. 392);\t (4)
\n\t      even discriminatory or
\n\t       (1)  [1961] 1.S.C.R.809.\n<\/p><\/blockquote>\n
\t      508<\/span><\/p>\n
\t      preferential  legislation may be made by\tPar-
\n\t      liament  for  the purpose of dealing  with  an
\n\t      emergency like a scarcity of goods in any part
\n\t      of   India  (Art.\t 303(2));   (5)\t  reasonable
\n\t      restrictions may be imposed by the Legislature
\n\t      of  a  State  in\tthe  public  interest  (Art.
\n\t      304(b));\t(6) non-discriminatory taxes may  be
\n\t      imposed by the Legislature of a State on goods
\n\t      imported\tfrom another State or other  States,
\n\t      if similar taxes are imposed on goods produced
\n\t      of  manufactured in that State  (Art.  304(a);
\n\t      and   lastly  (7)\t restrictions\timposed\t  by
\n\t      existing\tlaws have been continued, except  in
\n\t      so far as the President may by order otherwise
\n\t      direct(Art. 305).” (pp. 831-832.)
\n\t      The  majority view differed from that  of\t the
\n\t      learned  Chief  Justice  in that\tit  did\t not
\n\t      accept as correct the contention that tax laws
\n\t      were governed by the provisions of Part XII of
\n\t      the  Constitution only and were  outside\tPart
\n\t      XIII.   The majority expressed the  view\tthat
\n\t      when  Art.  301 provided that trade  shall  be
\n\t      free throughout the territory of India, it was
\n\t      the  movement or transport part of  the  trade
\n\t      that must be free.  The majority said:
\n\t      “It  is  a federal constitution which  we\t are
\n\t      interpreting,  and so the impact of  Art.\t 301
\n\t      must  be judged accordingly.  Besides,  it  is
\n\t      not irrelevant to remember in this  connection
\n\t      that the Article we are construing imposes  a
\n\t      constitutional limitation on the power of\t the
\n\t      Parliament and the State Legislatures to\tlevy
\n\t      taxes, and generally, but for such limitation,
\n\t      the power of taxation would be presumed to  be
\n\t      for  public good and would not be\t subject  to
\n\t      judicial review or scrutiny.  Thus  considered
\n\t      we think it would be reasonable and proper  to
\n\t      hold that restrictions freedom from which is
\n\t\t\t\t   509<\/span>
\n\t      guaranteed by Art. 301, would be such restric-
\n\t      tions as directly and immediately restrict  or
\n\t      impede  the  free flow or movement  of  trade.
\n\t      Taxes  may and do amount to restrictions;\t but
\n\t      it is only such taxes as directly and immedia-
\n\t      tely restrict trade that would fall within the
\n\t      purview  of Art. 301.  The argument  that\t all
\n\t      taxes  should be governed by Art. 301  whether
\n\t      or  not their impact on trade is immediate  or
\n\t      mediate, direct or remote, adopts, in our opi-
\n\t      nion,  an\t extreme approach  which  cannot  be
\n\t      upheld.” (p. 860.)
\n\t      The third view held by Shah, J., was that\t the
\n\t      freedom  contemplated  was freedom  of  trade,
\n\t      commerce\tand intercourse in ill their  varied
\n\t      aspects  inclusive  of  all  activities  which
\n\t      constitute  commercial  intercourse  and\t not
\n\t      merely  restrictions on the  movement  aspect.
\n\t      He said :\n<\/p><\/blockquote>\n
\t      “The   guarantee\tof  freedom  of\t trade\t and
\n\t      commerce\tis  not\t addressed  merely   against
\n\t      prohibitions,  complete  or  partial;  it\t  is
\n\t      addressed\t to  tariffs,  licensing,  marketing
\n\t      regulations,  price-control,  nationalization,
\n\t      economic\tor social  planning,  discriminatory
\n\t      tariffs,\tcompulsory appropriation  of  goods,
\n\t      freezing\tor  stand-still orders\tand  similar
\n\t      other   impediments  operating  directly\t and
\n\t      immediately  on  the  freedom  of\t  commercial
\n\t      intercourse  as well.  Every sequence  in\t the
\n\t      series  of operations which constitutes  trade
\n\t      or commerce is an act of trade or commerce and
\n\t      burdens  or  impediments imposed on  any\tsuch
\n\t      step are restrictions on the freedom of  trade
\n\t      commerce and intercourse.\t What is  guaranteed
\n\t      is  freedom  in its  widest  amplitude-freedom
\n\t      from    prohibition,   control,\tburden\t  or
\n\t      impediment  in  commercial  intercourse.”\t (p.<\/p><\/blockquote>\n
\t      874.)
\nSo  far\t we have set out the factual  and  legal  background
\nagainst which the problem before us
\n\t\t\t    510<\/span>
\nhas to be solved.  We must now say a few words regarding the
\nhistorical  background.\t  It  is  necessary    to  do  this,
\nbecause\t extensive references have been made  to  Australian
\nand American decisions, Australian decisions with regard  to
\nthe  interpretation of s. 92 of the Australian\tConstitution
\nand American decisions with regard to the Commerce Clause of
\nthe  American Constitution.  This Court pointed out  in\t the
\nAtiabari  Tea Co. case (1) that it would not be always\tsafe
\nto  rely  upon\tthe  American  or  Australian  decisions  in
\ninterpreting  the provisions of our Constitution.   Valuable
\nas  those decisions might be in showing how the\t problem  of
\nfreedom of trade, commerce and intercourse was dealt with in
\nother\tfederal\t  constitutions,  the  provisions   of\t our
\nConstitution  must  be interpreted  against  the  historical
\nbackground   in\t which\tour  Constitution  was\t made;\t the
\nbackground  of problems which the Constitution makers  tried
\nto  solve according to the genius of the Indian people\twhom
\nthe  Constitution-makers  represented  in  the\t Constituent
\nAssembly.  The first thing to be noticed in this  connection
\nis that the Constitution-makers were not writing on a  clean
\nslate.\tThey had the Government of India Act. 1935, and they
\nalso had the administrative set up which that Act envisaged.
\nIndia  then consisted of various administrative units  known
\nas  Provinces,\teach  with its own  administrative  set\t up.
\nThere  were differences of language, religion etc.  Some  of
\nthe  Provinces\twere economically more\tdeveloped  than\t the
\nothers.\t  Even inside the same Province, there\twere  under-
\ndeveloped and highly developed areas from the point of\tview
\nof industries, communications etc.  The problem of  economic
\nintegration  with which the Constitution-makers\t were  faced
\nwas  a\tproblem with many facts.   Two\tquestions,  however,
\nstood  out,;  one  question was how to\tachieve\t a  federal,
\neconomic  and fiscal integration, so that economic  policies
\naffecting the interests of India as a whole could be carried
\nout
\n(1)  [1961] 1. S. C. R. 809.\n<\/p>\n
\t\t\t    511<\/span><\/p>\n
without\t putting an ever-increasincg strain on the unity  of
\nIndia, particularly in the context of a developing  economy.
\nThe  second  question was how to foster the  development  of
\nareas which were under developed   without creating too many
\npreferential   or  discriminative  barriers.   Besides\t the
\nProvince, there were the Indian States also known as  Indian
\nIndia.\tAfter India attained political freedom in  1947\t and
\nbefore\tthe Constitution was adopted, the process of  merger
\nand  integration of the Indian States with the rest  of\t the
\ncountry had been accomplished so that when the\tConstitution
\nwas first passed the territory of India consisted of Part  A
\nStates,\t which broadly stated, represented the Provinces  in
\nBritish\t India,\t and  Part B States which were\tmade  up  of
\nIndian\tStates.\t  There were trade barriers  raised  by\t the
\nIndian\tStates in the exercise of their\t legislative  powers
\nand  the  Constitution-makers had to  make  provisions\twith
\nregard to those trade barriers as well.\t The evolution of  a
\nfederal\t structure or a quasi-federal structure\t necessarily
\ninvolved, in the context of the conditions then\t prevailing,
\na  distribution of powers and a basic part of our  Constitu-
\ntion relates to that distribution with the three legislative
\nlists in the Seventh Schedule.\tThe Constitution itself says
\nby  Art.   1  that  India  is  a  Union\t of  States  and  in
\ninterpreting  the  Constitution one must keep  in  view\t the
\nessential   structure\tof  a\tfederal\t  or   quasi-federal
\nConstitution, namely, that the units of the Union have\talso
\ncertain powers as has the Union itself One of the grievances
\nmade on behalf of the intervening States before us was\tthat
\nthe  majority view in the Atiabari Tea Co. case(1)  did\t not
\ngive sufficient importance to the power of the States  under
\nthe Indian Constitution to raise revenue by taxes under\t the
\nlegislative  heads  entrusted to them, in  interpreting\t the
\nseries\t of  articles  relating\t to  trade,   commerce\t and
\nintercourse  in Part XIII of the Constitution.\tIt has\tbeen
\noften stated that freedom of
\n(1)  [1931] 1.S.C.R. 809.\n<\/p>\n
512<\/span><\/p>\n
inter-State  trade and commerce in a federation has  been  a
\nbaffling problem to constitutional experts in Australia,  in
\nAmerica and in other federal constitutions.  In evolving  an
\nintegrated  policy on this subject  our\t Constitution-makers
\nseem  to have kept in mind three main  considerations  which
\nmay  be broadly stated thus: first, in the larger  interests
\nof  India  there must be free flow of  trade,  commerce\t and
\nintercourse,  both inter-State and intra-State; second,\t the
\nregional  interests  must  not be  ignored  altogether;\t and
\nthird, there must be a power of intervention by the Union in
\nany case of crisis to deal with particular problems that may
\narise in any part of India.  As we shall presently show, all
\nthese  three  considerations have played their part  in\t the
\nseries of articles which we have to consider in Part XIII of
\nthe  Constitution.  Therefore, in interpreting the  relevant
\narticles  in  Part XIII we must have regard to\tthe  general
\nscheme\tof the Constitution of India with special  reference
\nto  Part  III  (Fundamental  Rights),  Part  XII   (Finance,
\nProperty etc. containing Arts. 276 and 286) and their inter-
\nrelation to Part XIII in the context of a federal or  quasi-
\nfederal constitution in which the States have certain powers
\nincluding the power to raise revenues for their purposes  by
\ntaxation.\n<\/p>\n
On behalf of the appellants it has been contended before  us
\nthat  s. 4 of the Act read with the Schedules constitutes  a
\ndirect\tand immediate restriction on the movement  of  trade
\nand  commerce  with and within Rajasthan inasmuch  as  motor
\nvehicles which carry passengers and goods within or  through
\nRajasthan have to pay the tax which, it is stated, imposes a
\npecuniary burden on a commercial activity and is, therefore,
\nhit by Art. 301 of the Constitution and is not saved by Art.
\n304(b)\tin  as much as the proviso to Art.  304(b)  was\t not
\ncomplied  with nor was the Act assented to by the  President
\nwithin the meaning of Art. 255 of the Constitution.\n<\/p>\n
 513<\/span><\/p>\n
Learned\t Counsel for the appellants has submitted before  us
\nthat  the correct interpretation of the series\tof  relevant
\narticles in Part XIII of the Constitution is the one made by
\nShah, J., in the Atiabari Tea Co. case(1).  He has, however,
\nsubmitted  that even on the interpretation accepted  by\t the
\nmajority  of  Judges in the Atiabari Tea Co. case(1)  he  is
\nentitled to succeed, because the relevant provisions of\t the
\nAct  constitute\t a direct and immediate restriction  on\t the
\nmovement part of trade, commerce and intercourse.  On behalf
\nof the respondents the argument has proceeded on the footing
\nthat  taxation\tper  so i.e. taxation  for  the\t purpose  of
\nraising revenue or for the maintenance of roads etc. is\t not
\nhit  by Art. 301 and the impugned provisions of the  Act  in
\nquestion  did  not  constitute an immediate  or\t direct\t im-
\npediment  on the movement of trade and commerce inasmuch  as
\nthe tax imposed was a consolidated tax on the vehicle itself
\nthough\tthe quantum of the tax was fixed in  some  instances
\nwith  reference to the seating capacity or loading  capacity
\netc  The argument is that in this respect the facts  of\t the
\npresent cases differ from the facts of the Atiabari Tea\t Co.
\ncase(1); it is argued that in the latter the tax was on\t the
\ncarriage of goods, whereas in the present cases the tax is a
\nconsolidated tax on the vehicle itself, like a property tax,
\nand,  therefore, it does not relate to the movement part  of
\ntrade,\tcommerce  and  intercourse, though it  may  have  an
\nindirect effect on trade, and commerce by raising the tariff
\nor  fare for passengers and goods.  The learned Counsel\t for
\nthe  respondents  has in this way tried to  distinguish\t the
\nmajority  decision in the Atiabari Tea Co. case(1),  but  he
\nhas  mainly  argued in favour of the view expressed  by\t the
\nlearned\t Chief Justice.\t On behalf of the interveners,\tsome
\nhave   supported   the\tmajority  view\t with\tor   without
\nmodifications  and  some  the other two views.\t Mr.  N.  C.
\nChatterjee  appearing  on  behalf  of  the  Union  of  India
\nsupported  the majority view, though the stand taken by\t the
\nAttorney
\n(1)  [1961] 1. S. C. R. 809.\n<\/p>\n
514<\/span><\/p>\n
General on behalf of the Union of India in the Atiabari\t Tea
\nCo.  case(1) was somewhat different.  Mr. Ranadeb  Chaudhuri
\nappearing  on behalf of one of the interveners\t(M\/s.\tM.A.
\nTulloch\t &  Co.) has accepted the majority  view  with\tsome
\nmodifications.\t He  has  stated that Art.  301\t relates  to
\nmovement  or carriage; he has called it the “channeling”  of
\ntrade and commerce.  He has, however, tried to reconcile the
\nvarious provisions in Part XIII by suggesting that there are
\ntwo  connected but independent subjects dealt with  therein;
\none  is\t freedom  of movement of  trade,  and  commerce\t and
\nin course (this, he has described, as “channeling” of trade,
\ncommerce and intercourse), and the second is protection from
\ndiscrimination\tand  preference\t which\tis  not\t necessarily
\nconnected  with\t movement but may arise\t from  subsidy\tetc.
\nThese  are the two ideas which, according to  him,  inspired
\nthe relevant series of articles in Part XIII.  On behalf  of
\nsome  of  the  interveners the argument has  been  that\t the
\nfreedom\t declared  under Art. 301 is not freedom  from\tsuch
\nregulatory  measures  as do not impede trade,  commerce\t and
\nintercourse  but rather facilitate such trade, commerce\t and
\nintercourse,  e.g.  traffic  regulations  for\tsafeguarding
\npublic health, such as, prohibiting the sale of\t adulterated
\nfood  etc.   This  view\t suggests  that\t in  the  matter  of
\ntaxation,  such\t taxes are compensatory in  nature,  namely,
\nthose levied for the maintenance of roads on which  traffic,
\nis to move, do not come within the restrictions freedom from
\nwhich  is contemplated by Art. 301.  This is the view  which
\nMr. Sikri, Advocate-General of Punjab, has mainly  contended
\nfor.   Mr,  Seervai  appearing on behalf  of  the  State  of
\nMaharashtra  and some other States has contended  that\tPart
\nXIII  of  the  Constitution  is\t confined  to  such  action,
\nlegislative or executive, as is taken in relation to any  of
\nthe  entries  relating to trade and commerce in any  of\t the
\nlists  in the Seventh Schedule, namely, entries relating  to
\n41 and 42 in list
\n(1)  [1964] 1. S. C. R. 809.\n<\/p>\n
515<\/span><\/p>\n
I,  entry  26  of list II, and entry 33 of  list  III.\t The
\nexpression “throughout the territory of India” occurring  in
\nArt.  301  has reference, according to this view,  to  space
\nrather than to movement.  According to Mr. Seervai the\tmode
\nof  approach should be to consider (i) the position  of\t the
\nStates\tin  the Indian Constitution with plenary  powers  in
\ntheir  respective fields; (ii) the historical background  of
\ns.  297\t of  the Government of India Act,  1935;  (iii)\t the
\ndecisions  of  the  Australian\tcases  upto  1950  when\t the
\nConstitution  of India was made; and (iv) Part XIII  of\t the
\nConstitution  as compared and contrasted with Part  III\t and
\nPart XII thereof.  As to taxation, his contention is that it
\ndoes  not  come\t within\t Part  XIII  except  to\t the  extent
\nmentioned in Art. 304(a).  Mr. Lalnarain Sinha appearing for
\nthe  State  of Bihar has supported the view of\tthe  learned
\nChief Justice in Atiabari Tea Co. case(1) though the reasons
\ngiven by him are somewhat different.  His argument has\tbeen
\nthat  Art. 301 secures for trade, commerce  and\t intercourse
\nthroughout  the territory of India a qualified freedom\tfrom
\nrestrictions based on geographical classifications only; the
\nfreedom\t thus  secured\tis in regard  to  barriers  (in\t the
\ngeographical sense) impeding trade, commerce and intercourse
\nbetween\t one State and another or between one territory\t and
\nanother\t within or without the same State, and also  against
\nterritorial  discriminations in respect of  trade,  commerce
\nand  intercourse  either inter-State or\t intra-state.\tWith
\nregard to taxation, his contention is that taxes (meant\t for
\nraising revenue only and called fiscal taxes) do not operate
\nas inter-State or inter-territorial barriers nor involve any
\nterritorial  discriminations,  and they do not\tcome  within
\nPart  XIII.  Mr. D. Sahu appearing for the State  of  Orissa
\nargued that the freedom granted by Art. 301 was confined  to\n<\/p>\n
(i) inter-State barriers, and (ii) customs-barriers which at
\none time existed between the Indian States and adjacent
\n(1)  [1961] 1 S.C.R. 809.\n<\/p>\n
516<\/span><\/p>\n
British Indian territory.  According to him, the  intraState
\naspect\tof the freedom assured by Art. 301 was\tconfined  to
\nold  customs-barriers only which some of the  Indian  States
\nwhich  have  now merged in particular States of\t the  Indian
\nRepublic had earlier imposed.  Mr. C. B. Agarwala  appearing
\nfor  the  State\t of Uttar Pradesh argued  that\tthe  subject
\nmatter\tof  Art. 301 was trade,\t commerce  and\tintercourse,
\nnamely the entries relating to trade and commerce in any  of
\nthe  lists  in the Seventh Schedule ; but  the\trestrictions
\nfrom which freedom was granted might come from any direction
\n;  they\t might\tcome from legislative  or  executive  action
\nrelating to other entries also.\n<\/p>\n
We  have tried to summarise above the various  stand  points
\nand  views which were canvassed before us and we  shall\t now
\nproceed\t to consider which, according to us, is the  correct
\ninterpretation of the relevant articles in Part XIII of\t the
\nConstitution.\tWe may first take the widest view, the\tview
\nexpressed  by  Shah, J., in the Atiabari Tea Co.  case(1)  a
\nview  which has been supported by the appellants and one  or
\ntwo of the interveners before us.  This view, we  apprehend,
\nis based on a purely textual interpretation of the  relevant
\narticles  in part XIII of the Constitution and this  textual
\ninterpretation\tproceeds in the following way.\tArticle\t 301
\nwhich  is in general terms and is made subject to the  other
\nprovisions of Part XIII imposes a general limitation on\t the
\nexercise  of legislative power, whether by the Union or\t the
\nStates,\t under any of the topics-taxation topics as well  as
\nother  topics-enumerated in the three lists of\tthe  Seventh
\nSchedule, in order to make certain that “trade, commerce and
\nintercourse  thought the territory of India shall be  free”.
\nHaving\tplaced\ta  general limitation  on  the\texercise  of
\nlegislative powers by Parliament and the State Legislatures,
\nArt. 302 relaxes that restriction in favour of Parliament by
\nproviding that
\n(1) [1961] 1. S. C. R. 809.\n<\/p>\n
517<\/span><\/p>\n
authority  “may\t by  law impose\t such  restrictions  on\t the
\nfreedom of trade, commerce or intercourse between one  State
\nand another or within any part the territory of India as may
\nbe  required  in the public interest”.\tHaving\trelaxed\t the
\nrestriction  in\t respect  of Parliament under  Art.  302,  a
\nrestriction is put upon the relaxation by Art. 303(1) to the
\neffect that Parliament shall not have the power to make\t any
\nlaw  giving any preference to any one State over another  or
\ndiscriminating\tbetween one State and another by  virtue  of
\nany entry relating to trade and commerce in lists I and\t III
\nof the Seventh Schedule.  Article 303(1) which places a\t ban
\non Parliament against the giving of preferences to one State
\nover  another  or of discriminating between  one  State\t and
\nanother,  also provides that the same kind of ban should  be
\nplaced upon the State Legislature also legislating by virtue
\nof any entry relating to trade and commerce in lists II\t and
\nIII  of the Seventh Schedule.  Article 303 (2) again  carves
\nout an exception to the restriction placed by Art. 303(1) on
\nthe powers of Parliament, by providing that nothing in\tArt.
\n303(1)\tshall prevent Parliament from making any law  giving
\npreference  to\tone  State over\t another  or  discriminating
\nbetween\t one State and another, if it is necessary to do  so
\nfor  the  purpose of dealing with a situation  arising\tfrom
\nscarcity  of  goods in any part of the territory  of  India.
\nThis  exception\t applies only to Parliament and not  to\t the
\nState  Legislatures.  Article 304 comprises two clauses\t and
\neach  clause  operates as a proviso to Arts.  301  and\t303.
\nClause (a) of that article provides that the Legislature  of
\na State may “impose on goods imported from other States\t any
\ntax to which similar goods manufactured or produced in\tthat
\nState  are  subject,  so, however, as  not  to\tdiscriminate
\nbetween\t goods\tso  imported and goods\tso  manufactured  or
\nproduced.” This clause, therefore, permits the levy on goods
\nimported from
\n518<\/span>
\nsister\tStates any tax which similar goods  manufactured  or
\nproduced in that State are subject to under its taxing laws.
\nIn other words, goods imported from sister States are placed
\non a par with similar goods manufactured or produced  inside
\nthe  State  in\tregard to State taxation  within  the  State
\nallocated  field.  Thus the States in India have full  power
\nof imposing what in American State legislation is called the
\nuse  tax,  gross  receipts tax etc., not  to  speak  of\t the
\nfamiliar  property tax, subject only to the  condition\tthat
\nsuch  tax is imposed on all goods of the same kind  produced
\nor manufactured in the taxing State, although such  taxation
\nis  undoubtedly\t calculated to fetter interState  trade\t and
\ncommerce.   As\twas observed by Patinjali Sastri,  C.J.,  in
\nState of Bombay v. United Motors<\/a>(1) the commercial unity  of
\nIndia is made to give way before the State power of imposing
\n‘any’  non-discriminatory tax on goods imported from  sister
\nStates.\t   Now\t cl.   (b)  of\tArt.   301   provides\tthat
\nnotwithstanding\t anything  in  Art. 301\t or  Art.  303,\t the
\nLegislature  of\t a State may by law impose  such  reasonable
\nrestrictions   on   the\t freedom  of  trade,   commerce\t  or
\nintercourse with or within that State as may be required  in
\nthe  public interest.  The proviso to el. (b) says  that  no
\nbill  or  amendment  for the purpose of\t cl.  (b)  shall  be
\nintroduced  or moved in the Legislature of a  State  without
\nthe  previous  sanction of the\tPresident.   This  provision
\nappears\t to  be the State analog to the\t Union\tParliament’s
\nauthority  defined by Art. 302, in spite of the omission  of
\nthe  word “reasonable’ before the word restrictions’ in\t the
\nlatter article.\t Leaving aside the prerequisite of  previous
\nPresidential sanction for the validity of State\t legislation
\nunder cl. (b) provided in the proviso thereto, there are two
\nimportant differences between Art. 302 and Art. 301(b) which
\nrequire special mention.  The first is that while the  power
\nof Parliament under
\n(1)  [1953] S.C.R. 1069.\n<\/p>\n
519<\/span><\/p>\n
Art.  302 is subject to the prohibition of  preferences\t and
\ndiscriminations\t decreed  by Art. 303(1)  unless  Parliament
\nmakes the declaration contained in Art. 303(2), the  State’s
\npower  contained in Art. 304(b) is made expressly free\tfrom
\nthe prohibition contained in Art. 303(1), because the  open-
\ning words of Art. 304 contain a non obstante clause both  to
\nArt.  301 and Art. 303.\t The second difference springs\tfrom
\nthe   fact   that  while  Parliament’s\t power\t to   impose
\nrestrictions under Art. 302 upon freedom of commerce in\t the
\npublic\tinterest  is  not  subject  to\tthe  requirement  of
\nreasonableness,\t  the\tpower  of  the\tStates\t to   impose
\nrestrictions  on  the  freedom of  commerce  in\t the  public
\ninterest  under\t Art. 304 is subject to the  condition\tthat
\nthey are reasonable.\n<\/p>\n
On the basis of the aforesaid textual construction, which is
\nperhaps\t correct  so far as it goes, the view  expressed  is
\nthat  the  freedom  granted by Art. 301\t is  of\t the  widest
\namplitude  and is subject only to such restrictions  as\t are
\ncontained in the succeeding articles in Part XIII.  But even
\nin   the   matter   of\ttextual\t  construction\t there\t are
\ndifficulties.  One of the difficulties which was adverted to
\nduring\tthe  Constituent  Assembly debates  related  to\t the
\nsomewhat   indiscriminate  or  inappropriate  use   of\t the
\nexpressions  “subject  to”  and\t “”notwithstanding”  in\t the
\narticles in question.  Article 302, as we have seen, makes a
\nrelaxation  in\tfavour\tof Parliament.\t Article  303  again
\nimposes\t a restriction on that\trelaxation  “notwithstanding
\nanything  in  Article  302  but Art.  303  relates  both  to
\nParliament and the State Legislature, though Art. 302  makes
\nno  relaxation in favour of the State Legislature.  The\t non
\nobstante   clause  in  Art.  303  is,  therefore,   somewhat
\ninappropriate.\t Clause\t (2)  of  Art.\t303  carves  out  an
\nexception from the restriction imposed on Parliament by\t cl.
\n(1)  of\t Art.  303.   But again\t cl.  (2)  relates  only  to
\nParliament and not to the State Legislature even though\t cl.
\n(1) relates to both.  Article 304
\n520<\/span>
\nagain begins with a non obstante clause mentioning both Art.
\n301  and  Art.\t303, though Art. 304  relates  only  to\t the
\nLegislature  of\t a State.  Article 303 relates to  both\t the
\nState Legislature and Parliament and again the non  obstante
\nclause\tin Art. 304 is somewhat inappropriate.\tThe fact  of
\nthe matter is that there is such a mix up of exception\tupon
\nexception  in  the series of articles in ]Part XIII  that  a
\npurely\ttextual\t interpretation may not\t disclose  the\ttrue
\nintendment  of\tthe articles.  This does not mean  that\t the
\ntext  of  the articles, the words used\ttherein,  should  be
\nignored.   Indeed,  the\t text of the  articles\tis  a  vital
\nconsideration in interpreting them; but we must at the\tsame
\ntime remember that we are dealing with the Constitution of a
\ncountry\t and the inter-connection of the different parts  of
\nthe  constitution forming part of an integrated\t whole\tmust
\nnot be lost sight of.  Even textually, we must ascertain the
\ntrue meaning of the word “free’ occurring in Art. 301.\tFrom
\nwhat  burdens or restrictions is the freedom assured ?\tThis
\nis  a  question of vital importance even in  the  matter  of
\nconstruction.\tIn s. 92 of the Australian Constitution\t the
\nexpression  used  was ‘absolutely free’ and  repeatedly\t the
\nquestion was posed as to what this freedom meant.  We do not
\npropose\t to  recite the somewhat checkered  history  of\t the
\nAustralian decisions in respect of which Lord Porter,  after
\na  review  of  the earlier cases, said\tin  Commonwealth  of
\nAustralia  v.  Bank  of\t New South Wales  (1)  that  in\t the
\n“labyrinth of cases decided under s. 92 there was no  golden
\nthread.”  What is more important for our purpose is that  he
\nexpressed  the view that two general propositions stood\t out
\nfrom  the decisions: (i) that regulation of trade,  commerce
\nand  intercourse  among the States is  compatible  with\t its
\nabsolute  freedom,  and (ii) that s. 92\t of  the  Australian
\nConstitution is violated only when a legislative or
\n(1)  [1950] A.C. 235,
\n521<\/span>
\nexecutive act operates to restrict such trade, commerce\t and
\nintercourse  directly  and  immediately\t as  distinct\tfrom
\ncreating  some indirect or inconsequential impediment  which
\nmay  fairly  be regarded as remote.   Lord  Porter  admitted
\n“that  in the application of these general propositions,  in
\ndetermining whether an enactment is regulatory or  something
\nmore  or, whether a restriction is direct or only remote  or
\nincidental, there cannot fail to be differences of opinion.”
\nIt  seems  clear,  however, that since\t“the  conception  of
\nfreedom\t of trade, commerce and intercourse in\ta  community
\nregulated by law presupposes some degree of restriction upon
\nthe individual”, that freedom must necessarily be  delimited
\nby  considerations  of social orderliness.  In\tone  of\t the
\nearlier Australian decisions (Duncan v. The\tState\t  of
\nQueensland) (1), Griffith, C.J., said :\n<\/p>\n
\t      “‘But  the  word “free” does  not\t mean  extra
\n\t      legem,  any more than freedom  means  anarchy.<\/p><\/blockquote>\n
\t      We  boast of being an absolutely free  people,
\n\t      but that does not mean that we are not subject
\n\t      to law”. (p. 573)
\nAs  the language employed in Art. 301 runs  unqualified\t the
\nCourt,\tbearing\t in mind the fact that provision has  to  be
\napplied\t  in  the  working  of\tan  orderly   society,\t has
\nnecessarily  to add certain qualifications subject to  which
\nalone  that freedom may be exercised.  This point  has\tbeen
\nvery  lucidly  discussed  in the  dissenting  opinion  which
\nFullagar,  J., wrote in Mc Carter v. Brodie (2), an  opinion
\nwhich  was  substantially approved by the Privy\t Council  in
\nHughes and Vale Proprietary Ltd. v. State of New South Wales
\n(3).   The learned Judge gave several examples to  show\t the
\ndistinction between what was merely permitted regulation and
\nwhat  true interference with freedom of trade and  commerce.
\nHe pointed out that in the matter of motor vehicles
\n(1) [1916] 22 C.L.R. 556  (2) [1950] 80 C.L.R. 432.\n<\/p>\n
\t\t    (3) [1955] A.C. 241.\n<\/p>\n
522<\/span><\/p>\n
most  countries\t have legislation which requires  the  motor
\nvehicle\t  to  be  registered  and  a  fee  to  be  paid\t  on
\nregistration.\tEvery  motor vehicle must carry lamps  of  a
\nspecified kind in front and at the rear and in the hours  of
\ndarkness these lamps must be alight if the vehicle is  being
\ndriven on the road, every motor vehicle must carry a warning
\ndevice, such as a horn; it must not be driven at a speed  or
\nin  a manner which is dangerous to the public.\t In  certain
\nlocalities a motor vehicle must not be driven at more than a
\ncertain speed.\tThe weight of the load which may be  carried
\non  a  motor vehicle on a public highway is  limited.\tSuch
\nexamples may be multiplied indefinitely.  Nobody doubts that
\nthe  application  of rules like the above  does\t not  really
\naffect\tthe freedom of trade and commerce; on  the  contrary
\nthey  facilitate  the free flow of trade and  commerce.\t the
\nreason is that these rules cannot fairly be said to impose a
\nburden\ton a trader or deter him from trading: it  would  be
\nabsurd,\t for  example, to suggest that freedom of  trade  is
\nimpaired  or hindered by laws which require a motor  vehicle
\nto  keep to the left of the road and not drive in  a  manner
\ndangerous  to  the public.  If the word ‘free’ in  Art.\t 301
\nmeans  ‘freedom to do whatever one wants to do,\t then  chaos
\nmay be the result; for example, one owner of a motor vehicle
\nmay wish to drive on the left of the road while another\t may
\nwish  to drive on the right of the road.  If they come\tfrom
\nopposite  directions,  there will be  an  inevitable  clash.
\nAnother class of examples relates to making a charge for the
\nuse   of  trading  facilities,\tsuch  as,  roads,   bridges,
\naerodromes  etc.  The collection of a toll or a tax for\t the
\nuse  of a road or for the use of a bridge or for the use  of
\nan aerodrome is no barrier or burden or deterrent to traders
\nwho,  in  their absence, may have to take a longer  or\tless
\nconvenient or more expensive route. such compensatory  taxes
\nare no hindrance to anybody’s freedom so long as they remain
\nreasonable;  but  they could of course be converted  into  a
\nhindrance to the freedom of trade.  If the
\n 523<\/span>
\nauthorities  concerned\treally wanted  to  hamper  anybody’s
\ntrade, they could easily raise the amount of tax or toll  to
\nan amount which would be prohibitive or deterrent or  create
\nother  impediments which instead of facilitating  trade\t and
\ncommerce  would hamper them.  It is here that the  contrast,
\nbetween\t ‘freedom’ (Art. 301) and restrictions’\t (Arts.\t 302
\nand 304) clearly appears: that which in reality\t facilitates
\ntrade  and commerce is not a restriction, and that which  in
\nreality\t  hampers  or  burdens\ttrade  and  commerce  is   a
\nrestriction.   It is the reality or substance of the  matter
\nthat  has to be determined.  It is not possible a priori  to
\ndraw  a dividing line between that which would really  be  a
\ncharge\tfor a facility provided and that which would  really
\nbe a deterrent to a trade; but the distinction: if it has to
\nbe  drawn,  is\treal and clear.\t For the  tax  to  become  a
\nprohibited tax it has to be a direct tax the effect of which
\nis  to hinder the movement part of trade.  So long as a\t tax
\nremains\t compensatory or regulatory it cannot operate  as  a
\nhindrance.\n<\/p>\n
The  most  serious objection to the  widest  view  canvassed
\nbefore\tus  is\tthat  it  ignores  altogether  that  in\t the
\nconception of freedom of trade, commerce and intercourse  in
\na  community regulated by law freedom must be understood  in
\nthe  context  of  the working of an  orderly  society.\t The
\nwidest view proceeds on the footing that Art. 301 imposes  a
\ngeneral\t restriction  on  legislative  power  and  grants  a
\nfreedom of trade, commerce and intercourse in all its series
\nof  operations,\t from all barriers, from  all  restrictions,
\nfrom  all regulation, and the only qualification that is  to
\nbe  found  in  the article is the  opening  clause,  namely,
\nsubject\t to  the  other provisions of Part  XIII.   This  in
\nactual\tpractice  will mean that if  the  State\t Legislature
\nwishes\t to   control  or  regulate  trade,   commerce\t and
\nintercourse  in\t such  a  way  as  to  facilitate  its\tfree
\nmovement,  it  must  yet proceed to make a  law\t under\tArt.
\n304(b) and
\n524<\/span>
\nno  such bill can be introduced or moved in the\t Legislature
\nof  a State without the previous sanction of the  President.
\nThe  practical\teffect would be to stop or  delay  effective
\nlegislation  which  may be urgently  necessary.\t  Take,\t for
\nexample, a case where in the interests of public health,  it
\nis  necessary  to introduce  urgently  legislation  stopping
\ntrade  in  goods which are deleterious to health,  like\t the
\ntrade  in  diseased  potatoes in Australia.   If  the  State
\nLegislature  wishes to introduce such a bill, it  must\thave
\nthe  sanction  of the President.  Even such  legislation  as
\nimposes\t traffic regulations would require the\tsanction  of
\nthe  President.\t  Such\tan  interpretation  would,  in\t our
\nopinion, seriously affect the legislative power of the State
\nLegislatures  which power has been held to be  plenary\twith
\nregard\tto subjects in list 11.\t The States must  also\thave
\nrevenue\t to  carry out their administration  and  there\t are
\nseveral\t items relating to the imposition of taxes  in\tlist\n<\/p>\n
11.   The Constitution-makers must have intended that  under
\nthose items the States will be entitled to raise revenue for
\ntheir  own purposes.  If the widest view is  accepted,\tthen
\nthere  would be for all practical purposes, an end of  State
\nautonomy  even within the fields allotted to them under\t the
\ndistribution  of powers envisaged by our  Constitution.\t  An
\nexamination  of\t the  entries in the lists  of\tthe  Seventh
\nSchedule  to  the Constitution would show that there  are  a
\nlarge number of entries in the State list (list II) and\t the
\nConcurrent  list (list III) under which a State\t Legislature
\nhas  power  to make laws.  Under some of these\tentries\t the
\nState  Legislature may impose different kinds of  taxes\t and
\nduties, such as property tax,, sales tax, excise duty  etc.,
\nand  legislation in respect of any one of these\t items,\t may
\nhave  an indirect effect on trade and commerce.\t  Even\tlaws
\nother  than taxation laws, made under different\t entries  in
\nthe  lists  referred to above, may  indirectly\tor  remotely
\naffect\ttrade  and commerce.  If it be held that  every\t law
\nmade by
\n525<\/span>
\nthe  Legislature  of  a\t State\twhich  has  repercussion  on
\ntariffs,  licensing  marketing\tregulations,   price-control
\netc., must have the previous sanction of the President, then
\nthe Constitution in so far as it gives plenary power to\t the
\nStates\tand  State Legislatures in the fields  allocated  to
\nthem  would  be\t meaningless.  In our view  the\t concept  of
\nfreedom\t of  trade, commerce and intercourse  postulated  by
\nArt.  301  must be understood in the context of\t an  orderly
\nsociety\t and  as part of a Constitution\t which\tenvisages  a
\ndistribution of powers between the States and the Union, and
\nif  so understood, the concept must recognise the  need\t and
\nthe legitimacy of some degree of regulatory control, whether
\nby  the\t Union or the States: this is  irrespective  of\t the
\nrestrictions  imposed by the other articles in Part XIII  of
\nthe  Constitution.  We are, therefore, unable to accept\t the
\nwidest\tview as the correct interpretation of  the  relevant
\narticles in Part XIII of the Constitution.
\nWe  proceed now to deal with another interpretation  of\t the
\nrelevant  provisions in Part XIII : this interpretation\t may
\nbe characterised as the narrow interpretation.\tAccording to
\nthis   interpretation  taxing  laws  are  governed  by\t the
\nprovisions  of Part XII of the Constitution and except\tArt.
\n304(a)\tnone of the other provisions of Part XIII extend  to
\ntaxing laws.  An additional argument is that the  provisions
\nof Part XIII apply only to such legislation as is made under
\nentries\t in  the  Seventh Schedule which  deal\twith  trade,
\ncommerce and intercourse.  According to this argument  entry
\n42  in\tlist  1, which refers to  inter.   State  trade\t and
\ncommerce,  entry  26 in list II which deals with  trade\t and
\ncommerce within the State subject to the provisions of entry
\n33  in list III, and entry 33 in list III which\t deals\twith
\ntrade  and  commerce  as specified  therein,  are  the\tonly
\nentries\t  legislation\trelating  to  which   attracts\t the
\nprovisions of Part XIII, and legislation on other topics  is
\nnot affected by these provisions.  In support argument
\n526<\/span>
\nassistance has been sought from the heading of Part XIII and
\nfrom  the use of the expression “subject to’ in Art.301.  It
\nhas  been pointed out that the title of Part XIII is  trade,
\ncommerce  and  an intercourse ; intercourse, it\t is  stated,
\nmeans\tcommercial  intercourse\t there\tbeing  no   separate
\nlegislative  entry  in\tany of the three  list\trelating  to
\nintercourse and the word throughout’ has reference to  space
\nrather than to movement.  The expression ,subject to’ it  is
\nstated,\t  means\t conditional  upon’,  thus  connecting\t the
\nprovisions  of\tArt. 303 with the provisions  of  Art.\t301.
\nArticle\t 303 specifically uses the expression “by virtue  of
\nany entry relating to trade and commerce in any of the lists
\nin the Seventh Schedule.” It is argued that by reason of the
\nconnection  between  Art. 301 and Art. 303,  the  words\t “by
\nvirtue\tof  any entry relating to trade and  commerce  etc.”
\nmust  be read into Art. 301 also so that Art. 301 will\tthen
\nbe  construed as a fetter on the commerce power i.  e.,\t the
\npower  given to the Legislature to make laws  under  entries
\nrelating  to trade and commerce only.  As to taxation  being
\nout  of\t the  provisions of Part XIIL  of  the\tConstitution
\nexcept for Art. 304(a), the argument is that we must look to
\nthe  historical\t background of s. 297 of the  Government  of
\nIndia  Act, 1935, and Arts. 274, 276 and 285 to 288 in\tPart
\nXII  of the Constitution.  It is pointed out that the  power
\nto  tax\t is  an incident of sovereignty and  it\t is  divided
\nbetween\t the Union and the States under the  Constitution  ;
\nPart  XII of the Constitution deals with several aspects  of
\ntaxation  and all the restrictions on the power to  tax\t are
\ncontained   in\t Part\tXII   which,   according   to\tthis
\ninterpretation,\t is  self contained.  Therefore,  so  it  is
\nargued,\t the  freedom guaranteed by Art.301  does  not\tmean
\nfreedom from taxation, because taxation is not a restriction
\nwithin the meaning of the relevant articles in Part XIII.\n<\/p>\n
\t\t\t    527<\/span><\/p>\n
It  would  appear from what we have stated above  that\tthis
\ninterpretation consists of two main parts : one part is that
\ntaxation simpliciter is not within the terms of Art. 301 and
\nthe  second part is that Art. 301 must take colour from\t the
\nprovisions  of Art. 303 which, it is said, is restricted  to
\nlegislation  with respect to entries relating to  trade\t and
\ncommerce  in  any of the lists in the Seventh  Schedule,  In
\nAtiabari  Tea  Co.  Case  ( 1)\tthis  Court  deal  with\t the
\ncorrectness  or otherwise of this narrow interpretation\t and
\nby  the\t majority decision held against\t it.   The  majority
\njudgement  in the Atiabari Tea Co. Case (1) deals, with\t the
\narguments  advanced  in\t support of  the  interpretation  in
\ndetail\tand  as we are substantially in agreement  with\t the
\nreasons\t given\tin that judgment, we do not think  that\t any
\nuseful\tpurpose\t would be served by repeating them.   It  is
\nenough to point out that though the power of levying tax  is
\nessentially  for  the  very  existence\tof  government,\t its
\nexercise may be controlled by constitutional provisions made
\nin  that  behalf.   It\tcannot be laid\tdown  as  a  general
\nproposition that the power to tax is outside the purview  of
\nany constitutional limitations.\t We have carefully  examined
\nthe  provisions\t in  Part XII of the  Constitution  and\t are
\nunable\tto  agree  that those  provisions  exhaust  all\t the
\nlimitations  on\t the power to impose a tax.  The  effect  of
\nArt. 265 was considered in the majority decision and it\t was
\npointed\t  out\tthat  the  power  of  taxation\t under\t our
\nConstitution was subject to the condition that no tax  shall
\nbe levied or collected except by authority of law.   Article
\n245  which deals with the extent of laws made by  Parliament
\nand by the Legislatures of States expressly states that\t the
\npower  of Parliament and of the State Legislatures  to\tmake
\nlaws  is `subject to the provisions of\tthis  Constitution.”
\nThe   expression   “subject  to\t the  provisions   of\tthis
\nConstitution” is surely wide enough to take in
\n(1)  [1961] 1. S. C. R. 809.\n<\/p>\n
528<\/span><\/p>\n
the  provisions of both Part XII and Part XIII.\t In view  of
\nthe  provisions of Art, 245, we find it difficult to  accept
\nthe  argument  that  the restrictions in Part  XIII  of\t the
\nConstitution  do  not  apply to taxation laws.\t As  to\t the
\nargument  that Art. 301 must take colour from Art.  303,  we
\nare  unable  to\t accept as correct  the\t argument  that\t the
\nprovisions  of\tArt. 303 must delimit the general  terms  of
\nArt.  301.   It\t seems to us that so far  as  Parliament  is
\nconcerned,  Art.  303(1) carves out an\texception  from\t the
\nrelaxation  given  in favour of Parliament by\tArt.  302  ;
\nthe relaxation given by Art. 302 is itself in the nature  of
\nan  exception to the general terms of Art. 301. It would  be
\nagainst\t the  ordinary canons of construction  to  treat  an
\nexception  or proviso as having such a repercussion  on\t the
\ninterpretation\tof the main enactment so as to exclude\tfrom
\nit  by\timplication what clearly falls\twithin\tits  express
\nterms.\n<\/p>\n
After carefully considering the arguments advanced before us
\nwe   have   come   to  the  conclusion\t that\tthe   narrow
\ninterpretation\tcanvassed for on behalf of the\tmajority  of
\nthe  State  cannot be accepted, namely,\t that  the  relevant
\narticles  in Part XIII apply only to legislation in  respect
\nof the entries relating to trade and commerce in any of\t the
\nlists  of the Seventh Schedule.\t But we must advert here  to
\none exception which we have already indicated in an  earlier
\npart  of this judgment.\t Such regulatory measures as do\t not
\nimpede\tthe freedom of trade, commerce and  intercourse\t and
\ncompensatory taxes for the use of trading facilities are not
\nhit by the freedom declared by Art. 301.  They are  excluded
\nfrom  the  purview  of the provisions of Part  XIII  of\t the
\nConstitution  for the simple reason that they do not  hamper
\ntrade, commerce and intercourse but rather facilitate them.
\nThis disposes of two of the main interpretations which\thave
\nbeen canvassed before us.  We
\n\t\t\t    529<\/span>
\naccept\tneither\t the widest interpretation  nor\t the  narrow
\ninterpretation\tfor  the  reasons  which  we  have   already
\nindicated.   It\t remains now to consider some of  the  other
\ninterpretations\t which have been canvassed before  us.\t Mr.
\nLalnarain Sinha has in substance contended that Art. 301  is
\nrestricted to freedom from geographical barriers only ;\t Mr.
\nD.   Sahu  has\tcontended that Art. 301 is confined  to\t (i)
\ninterstate barriers, and (ii) customs-barriers which at\t one
\ntime  existed  between the Indian States  and  the  adjacent
\nBritish\t Indian\t territory.   In  our  opinion\tboth   these
\ninterpretations\t proceed on a somewhat narrow basis and\t are
\nnot justified by the general words used in Art. 301 and\t the
\nother  relevant articles in Part XIII of  the  Constitution.
\nIn  our opinion the ambit of the relevant articles  in\tPart
\nXIII  is wider than what these interpretations assume it  to
\nbe.  While on this point it may be advisable to refer to the
\ncontrast  between Art. 19 in Part III and Art. 301  in\tPart
\nXIII  of  the Constitution.  Article 19\t guarantees  to\t all
\ncitizens certain rights which are compendiously stated to be
\nthe  right  to\tfreedom ; two such rights are  (i)  to\tmove
\nfreely\tthroughout the territory of India and (ii) to  carry
\non  any\t occupation, trade or business.\t The right  to\tmove
\nfreely\tthroughout  the\t territory of India  is\t subject  to
\nreasonable  restrictions  in the interests  of\tthe  general
\npublic\tor for the protection of any scheduled\ttribe.\t The
\nright  to  carry  on any occupation, trade  or\tbusiness  is
\nsubject\t to reasonable restrictions in the interests of\t the
\ngeneral public and in particular to any law relating to\t the
\ncarrying  on  by  the State, of any  trade,  business  etc.,
\nwhether\t to the exclusion, complete or partial, of  citizens
\nor  otherwise.\tThe first contrast between Art. 19 and\tArt.
\n301  is\t that Art. 19 guarantees the right to freedom  to  a
\ncitizen whereas freedom granted by Art. 301 is not  confined
\nto  citizens.  Another distinction which has been  drawn  is
\nthat Art. 19 looks at the right from the
\n530<\/span>
\npoint  of view of an individual, whereas Art. 301  looks  at
\nthe  matter from the point of freedom of the general  volume
\nof  trade, commerce and intercourse.  We do not\t think\tthat
\nthis distinction, if any such distinction at all exists,  is
\nmaterial  in the present cases, because an individual  trade
\nmay complain of a violation of his freedom guaranteed  under
\nArt.  19(1)(g)\tand  he may also  complain  if\tthe  freedom
\nassured by Art. 301 has been violated.\tIn a particular\t set
\nof  circumstances the two freedoms need not be the  same  or
\nneed  not coalesce.  In some of the Australian\tdecisions  a
\ndistinction was sought to be drawn between the free flow  of
\nthe  same volume of inter-State trade and  the\tindividual’s
\nright  to carry on his trade in more than one State  and  it
\nwas argued that s. 92 of the Australian Constitution related
\nto  the\t free flow of the volume of trade  as  distinguished
\nfrom  an individual’s right to carry on his trade.   Such  a
\ndistinction was negatived and the Privy Council pointed\t out
\nthat the redoubtable Mr. James who fought many a battle\t for
\nthe  freedom, of his trade and occupation was after  all  an
\nindividual.  Another aspect of this contrast between Art. 19
\nand Art. 301 of the Constitution which has been adverted  to
\nbefore us is this; it has been argued that if a law imposing
\na  restriction\ton the right of a citizen to  carry  on\t his
\ntrade  or business is justified under el. (6) of Art. 19  as
\nbeing  in  the\tinterests of the general  public,  that\t law
\ncannot\tagain be impeached as being violative of  Art.\t301;
\notherwise, so it is argued, the Constitution will be  taking
\naway by Art. 301 what it has granted by cl. (6) of Art.\t 19.
\nThe  argument  is that trade or business must be such  as  a
\nperson is entitled to carry on before be can complain of any
\nimpediment  to the freedom of that trade or business.\tThis
\nis  an\taspect\tof  the problem which  may  require  a\tmore
\ndetailed and careful examination in an appropriate case.  If
\nwe
\n532<\/span>
\nacross geographical barriers.  We are for this reason unable
\nto  accept  Mr. Sinha’s contention.  Mr.  Ranadeb  Chaudhuri
\nappearing  on behalf of one of the interveners accepted\t the
\nmajority view that Art. 301 was aimed at the movement aspect
\nof  trade,  commerce and intercourse; this  lie\t called\t the
\n“channelling”.\tof trade, commerce and intercourse.  But  he
\nraised the question of subsidy and said that Art. 303  which
\nrelated\t to discrimination and preference also aimed at\t the
\nmischief  of subsidy which might be given to a State by\t way
\nof  preference\tor discrimination; that mischief,  he  said,
\nwould come within Art. 303 even if it did not relate to\t the
\nmovement aspect of trade and commerce.\tWe are not concerned
\nin  the present cases with the question of subsidy and\tneed
\nnot,  therefore,  consider  the\t argument  of  Mr.   Ranadeb
\nChaudhuri with regard to it.\n<\/p>\n
As  to\tthe  word ,intercourse” there bar,  also  been\tsome
\nargument before us.  On behalf of some of the States it\t has
\nbeen contended that the word ,intercourse’ in the context in
\nwhich  it occurs in Art. 301 means  commercial\tintercourse.
\nOn  behalf  of the appellants it hat; been argued  that\t the
\nword ,intercourse’ takes in not merely trade and commerce in
\nthe strict sense, but also activities, such as, movement  of
\npersons\t for  the purpose of friendly association  with\t one
\nanother, telephonic communications etc.\t For the purpose  of
\nthe  cases which we are considering nothing very much  turns
\nupon  whether we take the word intercourse’ in a wide  sense
\nor in a narrow sense.  Even taking the word ,intercourse’ in
\na wide sense, the question will still be what does the\tword
\n,free’ mean?  Does it mean free from all regulation which is
\nnecessary  for an orderly society?  We have  already  stated
\nthat  the word ‘free’ in Art. 301 cannot be given that\twide
\nmeaning.\n<\/p>\n
We have, therefore, come to the conclusion that neither\t the
\nwidest interpretation nor the narrow
\n\t\t\t    533<\/span>
\ninterpretations\t canvassed  before us are  acceptable.\t The
\ninterpretation\twhich  was accepted by the majority  in\t the
\nAtiabari  Tea Co. case (1) is correct, but subject  to\tthis
\nclarification.\t Regulatory  measures or  measures  imposing
\ncompensatory  taxes for the s use of trading  facilities  do
\nnot come within the purview of the restrictions contemplated
\nby  Art.  301  and such measures need not  comply  with\t the
\nrequirements   of  the\tproviso\t to  Art.  304(b)   of\t the
\nConstitution.\n<\/p>\n
Now  the question is, do the relevant provisions of the\t Act
\nread  with  the Schedules fall within what  we\thave  called
\npermitted  regulation  which does not really  or  materially
\naffect freedom of trade, commerce and intercourse; or do the
\ntaxes  imposed\tby the relevant provisions of the  Act\tread
\nwith the Schedules come within the category of\tcompensatory
\ntaxes  which are no hindrance to freedom of trade,  commerce
\nand  intercourse,  being  taxes\t for  the  use\tof   trading
\nfacilities  in\tthe  shape of roads, bridges,  etc.   In  an
\nearlier\t part of this judgment we have quoted s. 4 which  is
\nthe  charging  section.\t That section makes it\tquite  clear
\nthat  the tax is imposed on a motor vehicle which  shall  be
\nused  in any public place or kept for use in Rajasthan;\t the
\ntax is to be at appropriate rates specified in the Schedules
\nto the Act and save as specified in the Act the tax shall be
\npayable annually notwithstanding that the motor vehicle may,
\nfrom  time  to time, cease to be used.\tSection\t 7  says  in
\neffect\tthat if the motor vehicle in respect of\t which\tsuch
\ntax has been paid has not been used for a continuous  period
\nof  not\t less  than three months, then the  owner  shall  be
\nentitled  to  a\t refund of an amount equal to  1\/12  of\t the
\nannual rate of the tax paid.  It appears from the  Schedules
\nthat  a\t vehicle other than a transport vehicle\t is  charged
\nwith  a consolidated tax, according as the motor vehicle  is
\nfitted with pneumatic tyres or not.  The rate of tax varies
\n(1)  [1961] 1. S. C. R. 809.\n<\/p>\n
534<\/span><\/p>\n
according  to  the nature of the vehicle, whether  it  is  a
\nmotor  cycle,  or a motor tricycle drawing a tractor,  or  a
\nside  car  etc.\t Schedule If relates to\t transport  vehicles
\nwith  again  are classified into various  categories,  those
\nfitted\twith pneumatic tyres and those not so fitted,  motor
\nvehicles  plying  for  conveyance of  passengers  and  light
\npersonal   luggage  goods  vehicles  plying   under   public
\ncarrier’s permit etc.  The quantum of tax fixed with  regard
\nto  the seating capacity in some cases and loading  capacity
\nin other cases.\t The tax on some goods vehicles is fixed per
\nday  or per annum.  Schedule III relates the goods  vehicles
\nonly.\tA  classification is again  made  between  different
\nclasses\t of  goods  vehicles fitted  with  pneumatic  tyres,
\nconveying a trailer etc.  The tax fixed is a tax for use per
\nday.  Schedule IV deals with vehicles plying with a  private
\ncarrier’s  permit.  Here again a classification is  made  of
\nvehicles fitted with pneumatic tyres, with a general  permit
\nfor  use  in  Rajasthan and those with a  permit  for  lying
\nwithin\tthe  limits  of one region  only.   The\t tax  varies
\naccording to the loading capacity etc.
\nAn examination of these provisions indicates clearly  enough
\nthat  the taxes imposed are really taxes on  motor  vehicles
\nwhich  use  the\t roads\tin Rajasthan or\t are  kept  for\t use
\ntherein,  either throughout the whole area or parts  of\t it.
\nThe tax is payable by all owners of motor vehicles,  traders
\nor  otherwise.\tIn dealing with the question  whether  these
\ntaxes\twere  reasonable  restrictions\ton  the\t  right\t  of
\nindividuals to move freely throughout the territory of India
\netc. the High Court said:\n<\/p>\n
\t      “In  this connection, it is well\tto  remember
\n\t      that the State maintains old roads, and  makes
\n\t      new ones, and these roads are at the  disposal
\n\t      of  those\t who use motor vehicles\t either\t for
\n\t      private  purposes\t or for trade  or  commerce.
\n\t      This  naturally  costs  the  State.   It\thas,
\n\t      therefore, to find funds for making
\n\t      535<\/span>
\n\t      new  roads and maintenance of those  that\t are
\n\t      already  in existence.  These funds  can\tonly
\n\t      the raised through taxation, and if the  State
\n\t      taxes the users of motor vehicles in order  to
\n\t      make and maintain roads, it can hardly be said
\n\t      that   the  State\t is   putting\tunreasonable
\n\t      restrictions on the individuals’ right to move
\n\t      freely  throughout the territory of India,  or
\n\t      to practice any profession or to carry on\t any
\n\t      occupation, trade or business.  We have looked
\n\t      into figures of income and expenditure in this
\n\t      connection  of  the Rajasthan State  to  judge
\n\t      whether this taxation is reasonable.   We-find
\n\t      that  in\t1952-53 income from  motor  vehicles
\n\t      taxation under the Act was in neighbourhood of
\n\t      34 lakhs.\t In that very year, the\t expenditure
\n\t      on new roads and maintenance of old roads\t was
\n\t      in the neighbourhood of 60 lakhs.\t In 1954-55,
\n\t      the  estimated  income  from the\ttax  was  35
\n\t      lakhs,  while  the estimated  expenditure\t was
\n\t      over  65\tlakhs.\t It is\tobvious\t from  these
\n\t      figures  that the State is charging  from\t the
\n\t      users  of\t motor\tvehicles  something  in\t the
\n\t      neighbourhood  of\t 50% of the cost it  has  to
\n\t      incur in maintaining and making roads.”\n<\/p><\/blockquote>\n
The  High  Court  further pointed out that in  the  case  of
\nprivate\t motor cars the tax was Rs. 12 per seat and  for  an
\nordinary  five-seater car, it came to Rs. 60 per  year.\t  On
\npayment of this amount the owner of the motor vehicle  could
\nuse the car anywhere in Rajasthan and the roads were open to
\nhim.   In the case of a goods vehicle, the tax was Rs.\t2000
\nper  year for a goods vehicle with a load capacity  of\tover
\nfive  tons  i.e.  over 135 maunds.   Assuming  that  such  a
\nvehicle could be reasonably used for 200 days in a year, the
\ntax amounted to Rs. 10 per day for about 140 maunds of goods
\ncarried\t over  any length of the road  in  Rajasthan.\tThis
\nworked out to about Rs.\t 1 for 14 maunds i. e. almost
\n536<\/span>
\nan  anna  a maund.  If the Act and  the\t Schedules  appended
\nthereto are examined in this manner, it will be noticed that
\nthe tax imposed is really a    tax for the use of  the roads
\nin  Rajasthan and it\tcannot be said that  it\t hinders the
\nfree movement of trade, commerce and intercourse.  The taxes
\nare  compensatory  taxes which instead of  hindering  trade,
\ncommerce and intercourse facilitate them by providing  roads
\nand  maintaining  the  roads in a  good\t state\tof  repairs.
\nWhether\t a  tax\t is compensatory or nor cannot\tbe  made  to
\ndepend\ton the preamble of the statute imposing it.  Nor  do
\nwe  think  that it would be right to say that a tax  is\t not
\ncompensatory   because\tthe  precise  or   specific   amount
\ncollected is not actually used to providing any\t facilities.
\nIt is obvious that if the preamble decided the matter,\tthen
\nthe  mercantile community would be helpless and it would  be
\nthe easiest thing for the Legislature to defeat the  freedom
\nassured\t by Art. 341 by stating in the preamble that  it  is
\nmeant  to  provide facilities to  the  tradesmen.   Likewise
\nactual\tuser would often be unknown to trades. men and\tsuch
\nuser may at some time be compensatory and at others not\t so.
\nIt  seems to us that a working test for deciding  whether  a
\ntax is compensatory or not is to enquire whether the  trades
\npeople\tare  having the use of certain\tfacilities  for\t the
\nbetter\tconduct\t of their business and paying  not  patently
\nmuch   more  than  what\t is  required  for   providing\t the
\nfacilities.    It   would  be  impossible   to\t judge\t the
\ncompensatory  nature of a tax by a meticulous test,  and  in
\nthe nature of things that cannot be done.\n<\/p>\n
Nor do we think that it xi ill make any difference that\t the
\nmoney collected from the tax is not put into a separate fund
\nso long as facilities for the trades people who pay the\t tax
\nare provided and the expenses incurred in providing them are
\nborn by the State out of whatever source it may be.  In
\n538<\/span>
\nthe  instruments of commerce that have been mentioned is  no
\nviolation  of the freedom of inter-State trades lies in\t the
\nrelation to inter-state trade which their nature and purpose
\ngive  them.  The reason why public authority  must  maintain
\nthem is in order that the commerce may use them, and so\t for
\nthe  commerce  to bear or contribute to the  cost  of  their
\nupkeep\tcan  involve  no  detraction  from  the\t freedom  of
\ncommercial inter. course between States.” (p. 43)
\nThe  learned  Chief  Justice reiterated\t the  same  view  in
\nCommonwealth Freighters Property Ltd. v. Sneddon (1)
\nWe have, therefore, come to the conclusion that the Act does
\nnot  violate the provisions of Art. 301 of the\tConstitution
\nand  the taxes imposed under the Act are compensatory  taxes
\nwhich  do  not\tbinder the freedom of  trade,  commerce\t and
\nintercourse  assured  by that article.\t The  taxes  imposed
\nwere, therefore, legal and the High Court rightly  dismissed
\nthe  writ petitions filed by the appellants.  In the  result
\nthe appeals fail and are dismissed with costs ; one  hearing
\nfee.\n<\/p>\n
  SUBBA RAO, J.-I agree with the conclusion arrived at by my
\nlearned\t brother,  S.  K.  Das, J.,  but,  in  view  of\t the
\nimportance of the question raised, I would prefer to give my
\nown reasons for the construction of the relevant  provisions
\nof Part XIII of the Constitution.\n<\/p>\n
The  question in these appeals is, what is the ambit of\t the
\nfreedom\t enshrined in Art. 301 of the Constitution and\twhat
\nare  the  limitations  implicit in it or  envisaged  in\t the
\nsucceeding articles ?\n<\/p>\n
The conflicting and sometimes mutually destructive arguments
\nof  learned  counsel appearing for the various\tparties\t and
\ninterveners, omitting the
\n(1)  (1959) 102 C. L. R. 280, 291.\n<\/p>\n
 539<\/span><\/p>\n
immaterial  variations,\t may conveniently  be  placed  under
\nfollowing  heads: (1) Trade, commerce and intercourse” is  a
\nterm  of widest amplitude taking in the gamut of  activities
\nstarting from production or manufacture and ending with\t the
\ncompletion  of\ta particular commercial transactions  ;\t and
\nevery restriction imposed by any law or executive action  on
\nany part of the said integrated activity would be  violative
\nof  the freedom under Art. 301. (2) The\t expression  “trade,
\ncommerce  and intercourse” means only transportation in\t the
\ncourse of trade across the State or interState barriers, and
\nany   law  be,\tit  taxation  or  otherwise,  directly\t and
\nmaterially affecting the said transportation, would infringe
\nthe  freedom. (3) The freedom recognized under Art.  301  is
\nonly  the  freedom  against  geographical  barriers  between
\nStates\tor  intrastate\tunits created by  law  ;  and  laws,
\nincluding only discriminatory laws of taxation, creating the
\nsaid barriers would offend against Art. 301. (4) The freedom
\nenvisaged  by Art. 301 is only a freedom from  laws  showing
\npreference  to\tone State over\tanother\t and  discrimination
\nbetween one State and another made only by virtue of  entry,
\n42 of List I entry 26 of List If and entry 33 of List III of
\nthe  Seventh  Schedule to the Constitution. (5) The  law  of
\nfiscal
\ntaxation is entirely outside the domain of freedom  declared
\nby Art. 301.  All the learned counsel appearing in the\tcase
\nhas  agreed, or at any rate no argument was advanced to\t the
\ncontrary,  that the freedom, whatever may be its content  or
\nscope  on which there is difference of opinion,\t relates  to
\nboth inter-State and intra-State trade.\n<\/p>\n
Before\tconsidering the provisions of the said articles,  it
\nwill  be  useful to make certain general  observations.\t  We
\nhave  to bear in mind in approaching the  problem  presented
\nbefore\tus  that our Constitution was not written  on  clean
\nslate.\t Many  of  the\tconcepts  were\tborrowed  from\t the
\nGovernment
\n540<\/span>
\nof India Act or from other Constitutions and adapted to suit
\nthe  conditions of our country.\t We cannot ignore  the\tfact
\nthat  the Constitution was drafted by persons some  of\twhom
\nhad a deep knowledge of the constitutional problems of other
\ncountries;  and therefore, they must be assumed to have\t had
\nthe  knowledge of the interpretation put upon certain  legal
\nconcepts  by the highest tribunals of those  countries.\t  At
\nthe  same time, it can be reasonably assumed that they\thave
\nmade  a sincere attempt to accept the good and to avoid\t the
\ndefects\t found by experience in the other constitutions\t and
\nalso to could them to suit our conditions.  Further, a brief
\nsurvey\tof the relevant provisions of  those  constitutions,
\nwhich\tform  the  background  of  this\t article,  and\t the
\ninterpretation\tput on them by the highest tribunals of\t the
\nrespective countries would not only be relevant but also  be
\nnecessary for appreciating the correct scope of Art. 301  of
\nour  Constitution.  Our Constitution provides for a  federal
\nstructure  with\t a bias towards a Central  Government.\t But
\nreal  and substantial autonomy was conferred on\t the  States
\nwithin\tthe boundaries of the fields chalked out  for  them.
\nTherefore,  in\tapproaching the problem\t of  construing\t the
\nprovisions  of\tPart XIII of our  Constitution,\t unless\t the
\nterms  of  the\tprovisions of the said Part  are  clear\t and
\nunambiguous, it would be the duty of this Court to  construe
\nthem in such a manner as not to disturb the framework of the
\nConstitution.\tBefore\tI attempt to construe  the  relevant
\nprovisions  of the Constitution, it would be  convenient  at
\nthis  stage to consider briefly the American and  Australian
\nlaw material to the present inquiry.\n<\/p>\n
Clause\t3  of  s. 8 of Art.  1 of the  Constitution  of\t the
\nUnited\tStates of America says that the Congress shall\thave
\npower  to regulate commerce with foreign nations  and  among
\nthe several States and with the Indian tribes.\tThis  clause
\nhas  two  aspects, namely, (i) it is a\tsource\tof  national
\npower  and (ii) it operates as a curb on state power.\tThis
\nclause gave rise,
\n 541<\/span>
\namong  others,\tto two questions, namely, (i) what  was\t the
\nscope  and  content of the commerce power? and (ii)  bow  to
\nresolve\t the conflicts that arose between the, law  made  by
\nthe  Congress in exercise of that power and the law made  by
\nthe  State in exercise of its police power, or their  powers
\nexpressed or implied, when they came into conflict with each
\nother?\t An authoritative definition of the word  “commerce”
\nwas  given  by\tMarshall, C. J., in  Gibbons  v.  Oden\t(1),
\nwherein he observed:\n<\/p>\n
\t      “This would restrict a general term applicable
\n\t      to  many objects to one of its  significations
\n\t      Commerce,\t undoubtedly. is traffic  but  some-
\n\t      thing more-it is intercourse.”\n<\/p><\/blockquote>\n
The  decisions of the Supreme Court of the United States  of
\nAmerica\t on the subject are not uniform.  Indeed, they\thave
\nadopted the commerce power to meet all the demands,  namely,
\neconomic,  commercial, industrial and transport\t revolutions
\nof that country.  It is not necessary for    the purpose  of
\nthis case to consider the     conflict\t or   the    various
\nnuances of the decision the   concept\tof   commerce\t was
\nenlarged  or  reduced to meet the  exigencies  of  different
\nsituations;  but the common thread was\tthat  transportation
\nacross\tthe borders, either physically or conceptually,\t was
\nuniformly   held  to  be  a  necessary\tingredient  of\t the
\nexpression “commerce”.\tAfter noticing the conflict,  Willis
\nin  his\t book on Constitutional Law, summarizes\t the  latest
\nposition thus, at p. 288:\n<\/p>\n
\t      “…………… today the correct  definition
\n\t      of   commerce  is\t that  it  is  traffic\t and
\n\t      commercial  intercourse.\t This,\tof   course,
\n\t      gives  Congress  power  wherever\ttraffic\t  or
\n\t      intercourse  concerns an\tinter-State  market.
\n\t      When   “commerce”\t is  properly\tdefined\t  as
\n\t      traffic, and the mental picture is formed, not
\n\t      of an isolated journey across a state boundary
\n\t      line, but of an onward
\n\t      (1)   (1824) 9 Wheat 1; 6 L. ed. 23.\n<\/p><\/blockquote>\n
\t      542<\/span><\/p>\n
\t      coursing\tstream\tof business which  knows  no
\n\t      state  lines, which is constantly fed  and  as
\n\t      constantly  feeds the streams  of\t production,
\n\t      and  which  debauches  into  the\t inter-state
\n\t      market, then regulations of it by Congress, J.
\n\t      whether  taking the form of a  prohibition  of
\n\t      certain phases of transportation or some other
\n\t      form ” ceases to be open to\t  the charge
\n\t      of an ulterior intention to usurp their power,
\n\t      because it operates most upon the very subject
\n\t      matter entrusted to Congress or, at most, upon
\n\t      local  incidents\tthereof, the fringe,  so  to
\n\t      speak, of a nation-spread fabric.”\n<\/p><\/blockquote>\n
In  this context the following references  are\tinstructive:
\nCarter v. Carter Coal Company(1), Kidd v. Pearson(2), Welton
\nv.  State  of Mussouri (3), Public Utilities  Commission  v.
\nLandon\t(4).   It  may be stated  broadly  that\t in  America
\n“commerce”  means traffic in its operation across the  State
\nborders.\n<\/p>\n
On  the\t second\t question some\tof  the\t American  decisions
\nadopted\t a pragmatic approach to resolve the  conflict.\t  To
\nsolve  the conflict that arose between the laws made by\t the
\nCongress regulating commerce and those made by the State  in
\nexercise  of its police power, the Supreme Court of  America
\nevolved\t certain  doctrines, such  as,\t“original  package”,
\n,silence of Congress”, “preemption”, “undue and unreasonable
\nburden”,  and “direct and indirect effect”.   The  following
\ndecisions  dealing  with  ‘direct and  indirect\t effect”  on
\ninter-State  trade  can\t be usefully  referred\tto  in\tthis
\nregard,\t for, in my view, they afford some guide to  resolve
\nthe difficulties that might arise under our Constitution: M’
\nCulloch v. The State of Maryland (5) John T. Hendrick v. The
\nState of Maryland(6),
\n(1)  (1936) 298 U.S. 238. 80 L. ed.1160.\n<\/p>\n
(2)  (1888) 128 U.S. 132 L. ed. 346.\n<\/p>\n
(3)  (1876) 91 U.S. 27S; 23 L. ed. 347.\n<\/p>\n
(4)  (1919) 249 U.S. 2 36; 63 L. ed. 577.\n<\/p>\n
(5)  (1819) 17 U.S. 316; 4 L. ed. 579.\n<\/p>\n
(6)  (1915) 235 U.S. 610; 59 L. ed. 385,
\n543<\/span>
\nInterstate  Busses  Corporation v. William  H.\tBlodgett(1),
\nInterstate Transit v Dick Lindsey(2), and A. L.A. Schechter
\nPoultry Corporation v. United State of America(3).  The said
\ndecisions  show that in America the principle  accepted\t was
\nthat every restriction imposed by a State law did not offend
\nthe  commerce  clause, unless it directly affected  it,\t and
\nthat  even taxation was permissible, if it was for  services
\nrendered by the State to promote trade.\n<\/p>\n
The Commonwealth of Australia Constitution Act was passed in
\n1900.\tAt the time that Act was made, the framers  of\tthat
\nAct had the background of the evolution of the American\t law
\non  the\t commerce clause.  Under that Act,  certain  defined
\npowers\tof legislation are conferred on the Commonwealth  in
\nrespect of trade and commerce.\tSection 51 reads: “Trade and
\ncommerce  with\tother  countries  and  among  the   States”.
\nSection\t 98 says: “The power of the Parliament to make\tlaws
\nwith respect to trade and commerce extends to navigation and
\nshipping  and  to  railways  the  property  of\tany  State”.
\nSection\t 99  prohibits\tthe  Commonwealth,  by\tany  law  or
\nregulation  of\ttrade,\tcommerce, or  revenue,\tfrom  giving
\npreference  to\tone State or any part thereof  over  another
\nState  or  any\tpart thereof.\tSection\t 100  prohibits\t the
\nCommonwealth from abridging, the right of a State or of\t the
\nresidents  therein  to the reasonable use of the  waters  of
\nrivers\tfor conservation or irrigation.\t  Other\t legislative
\npowers\tare  conferred in respect of specific  subjects’  of
\ntrade  and commerce, such as, bounties,\t currency,  coinage,
\nbills of exchange, bankruptcy, copy-rights, customs, excise,
\netc.  Section 92 says: “On the imposition of uniform  duties
\nof  customs,  trade, commerce, and  intercourse,  among\t the
\nStates,\t whether  by  means of internal\t carriage  or  ocean
\nnavigation, shall be
\n(1)  (1928) 276 U.S. 245; 72 L. ed. 551.\n<\/p>\n
(2)  (1931) 283 U.S. 183; 75 L. ed. 953.\n<\/p>\n
(3)  (1935) 72 U.S 495; 79 L. ed. 1570.\n<\/p>\n
544<\/span><\/p>\n
absolutely  free”.   Unlike the American  Constitution,\t the
\nAustralian  Constitution confers a legislative power on\t the
\nCommonwealth Parliament to make laws in respect of trade and
\ncommerce with other countries and among the States, and also
\nin  respect  of\t certain  specific  subjects  of  trade\t and
\ncommerce   and\tthen  declares\tthat  trade,  commerce\t and
\nintercourse  among  the\t States shall  be  absolutely  free.
\nUnlike\t the  American\tConstitution,  in   the\t  Australian
\nConstitution,  there is a declaration of freedom  of  trade,
\ncommerce and intercourse among the States.  While in America
\nthe  expression\t used  is  “commerce”,\tin  a.\t92  of\t the
\nAustralian Constitution the expression, “trade, commerce and
\nintercourse”  is used.\tThe Australian Constitution Act\t not
\nonly does not provide for any restrictions on the freedom of
\ntrade, commerce and intercourse, but also used an expression
\nof the widest amplitude, viz., “absolutely free” emphasizing
\nthe freedom declared by the section, This section, just like
\nthe  commerce clause in the American Constitution,  was\t the
\nsubject of judicial scrutiny and conflict of decision.\t The
\ninterpretation of this sub-section fell to be considered  in
\nthe context of marketing, banking and transport legislation.
\nThe  question  raised  was whether  the\t freedom  of  trade,
\ncommerce and intercourse was interfered by the laws made  by
\nthe  State.  Paradoxically, the Courts of Australia and,  in
\nappeals\t from  some  decisions of those\t Courts,  the  Privy
\nCouncil\t evolved the power to restrict the said\t freedom  by
\nthe  States  from the concept, of absolute  freedom  itself.
\nThis  was  necessitated\t because  there\t were  no  statutory
\nprovisions   limiting\tthe   absolute\t freedom   and,\t  as
\nuncontrolled freedom in the field of interState Commerce may
\nlead  to chaos, limitations of the freedom were\t evolved  to
\nsave  the  said\t freedom The scope  of\tthe  limitations  so
\nevolved would be useful to construe the relevant  provisions
\nof  all\t Constitution which expressly provides\tfor  similar
\nlimitations.  The scope of the freedom and it
\n545<\/span>
\nlimitations  are  found\t in the\t leading  decisions  on\t the
\nsubject, which throw considerable light on the question\t now
\nraised,\t and they are : Smither’s case(1), W. & A.  McArthur
\nLtd.  v. The State of Queensland (2), James v.\tCommonwealth
\nof  Australia (3)  Commonwealth of Australia v. Bank of\t New
\nSouth Wales (4).  In the aforesaid Australian decisions\t the
\nexpression  “trade,  commerce,\tand  intercourse  among\t the
\nStates” has been understood in the widest sense as including
\ntrade in all its manifestations involving transportation  or
\nmovement across the frontiers of the State it also  includes
\nnon-commercial intercourse.\n<\/p>\n
On  the\t second\t question, some of  the\t leading  Australian
\ndecisions contain an interesting and instructive  exposition
\nof  the conflict of jurisdiction and useful suggestions\t for
\nresolving  it.\tIn this context the following decisions\t may
\nusefully be consulted : James v. Cowan (5), Commonwealth  of
\nAustralia  v.  Bank of New South Wales (4),Hughes  and\tVale
\nProprietary Ltd. v. State of New South Wales (6), Hughes and
\nVale Private Limited v. The State of New South Wales [No. 2]
\n(7)   Grannall\tv. Marrickville Margarine  Proprietary\tLtd.
\n(8),  Armstrong\t v. State of Victoria [No. 2]  (9),  Common-
\nwealth\tFreighters  Proprietary Ltd. v. Sneddon\t (10).\t The
\nAustralian  decisions broadly laid down the following  three
\npropositions  :\t (i)  the impugned law,\t whether  fiscal  or
\notherwise,  shall directly and immediately restrict  traffic
\nacross\tthe borders before it could be said to\tviolate\t the
\nfreedom\t under\ta.  92\tof  the\t Commonwealth  of  Australia
\nConstitution  Act  ;  (ii)  compensatory  measures  for\t the
\npurpose\t of regulating commerce are not restrictions on\t the
\nsaid  freedom ; and (iii) when a question arises  whether  a
\nfiscal statute amounts to a restriction on
\n(1) (1912) 16 C.L.R. 99.(2) (1920) 28 C.L.R. 530.
\n(3) [1936] A.C. 578.\t (4) [1950] A.C. 235.\n<\/p>\n
(5) [1930] 43 C.L.R.  386.(6) (1955] A.C. 241.
\n(7) [1956] 93 C.L.R. 127.(8) [1955] 93 C.L.R. 155.
\n(9) [1957] 99 C.L.R. 28.(10) [1959] 102 C.L.R. 280.\n<\/p>\n
546<\/span><\/p>\n
the  said freedom, a careful scrutiny of the provisions\t may
\nrebut  the  presumption that otherwise may  arise  that\t the
\nimpugned  Act  is  really a  compensatory  measure  for\t the
\namenities provided or services rendered.
\nThe following principles emerge from the foregoing  American
\nand  Australian decisions : (1) Though in American  law\t the
\ncommerce  clause  only confers a power\tupon  the  Congress,
\nunder  the  Australian Constitution Act, freedom  of  trade,
\ncommerce  and  intercourse  is\tenshrined  in  s.  92  as  a
\ncherished freedom : the composite expression in s. 92 of the
\nsaid  Act was borrowed from the American decisions. (2)\t The
\nexpression  “trade commerce and intercourse”, though  it  is
\nnot an expression of art, has acquired a definite significa-
\ntion  in  the  constitutional law  of  both  the  countries,
\nnamely, it is traffic and commercial intercourse  concerning
\nan  inter-State market, or, to put it differently, the\tfree
\nflow or movement of trade across the State borders. (3)\t The
\nsaid  freedom should not ,be infringed by any  law,  whether
\ntaxation  or  otherwise\t or by\texecutive  action.  (4)\t The
\nrestriction  may be before or after movement : it may  be  a
\nprior  restraint  or  a\t subsequent  burden.  (5)  The\tword
\n“freedom”  does not mean anarchy, but  assumes\ttransactions
\nbased  on law and carried out under the superintendence\t and
\ndirection  of  law : such laws are, (a)\t laws  of  contract,
\nproperty,  tort,  etc., (b) regulations for  preserving\t and
\nmaintaining  the freedom, such as, police regulations  about
\nsafety,\t speed, lighting, rule of the road, etc.,  (e)\tlaws
\nproviding  for\tservices and for compensation  for  services
\nrendered,  namely,  the\t construction  and  maintenance\t  of
\nwharfs,\t roads, aerodromes, etc., and the levy of  taxes  to
\nmeet the expenditure incurred in connection therewith ;\t the
\nsaid laws are not restrictions on the said freedom but\tonly
\nfacilities to promote the same.\n<\/p>\n
\t\t\t    547<\/span><\/p>\n
Now,  let  us  look at the provisions of  Art.\t301  of\t the
\nConstitution.  The article reads :\n<\/p>\n
“Subject  to  the  other provisions  of\t this  Part,  trade,
\ncommerce  and intercourse throughout the territory of  India
\nshall be free.”\n<\/p>\n
Three  groups  of  words  in  the  said\t article,  in  their
\njuxtaposition  and  interaction,  furnish  the\tkey  to\t the
\nproblem, and they are : (i) trade, commerce and intercourse,\n<\/p>\n
(ii)  throughout the territory of India, and (iii) shall  be
\nfree.  The expression “trade, commerce and intercourse” is a
\ncomposite  one\tand has received, as  already  noticed,\t the
\nfullest\t judicial  attention  from  the\t highest  courts  of
\nAmerica and Australia : though they may not be words of art,
\nthey  have acquired a secondary meaning or significance.   I
\nshall accept the meaning acquired by that expression by\t the
\ngradual evolution of law in those countries.
\nNow,  let  us  analyse the words  “shall  be  free”.   Three
\nquestions occur to one’s mind in regard to this, namely, (i)
\nwhat  is free ? (ii) free from what ? and (iii) where is  it
\nfree  ?\t As  I have already indicated,\tthe  said  composite
\nexpression  means trade across the borders: what is free  is
\nthat  trade.  It is implicit in the concept of freedom\tthat
\nthere  will  be obstructions to it.   Such  obstructions  or
\nbarriers  may be, in the present context, to the freedom  to
\ntrade across the borders.  Article 301 provides for  freedom
\nfrom the said barriers or impediments in effect operating as
\nbarriers.   This  freedom from barriers\t cannot\t operate  in
\nvacuum\tand must be limited by space.  A barrier may be\t put
\nup  between  two  States at the boundary of  the  States  or
\nbetween two districts, two taluks, two towns or between\t two
\nparts  of a town.  The barrier may be at a particular  point
\nat  a  boundary\t or  might take the  form  of  a  continuous
\nimpediment till the boundary is
\n548<\/span>
\ncrossed.  It may take different forms.\tThe restrictions may
\nbe before or after movement.  It may be a prior restraint or
\na  subsequent  burden.\t But the essential idea\t is  that  a
\nbarrier\t is  an\t obstacle put across trade in  motion  at  a
\nparticular point or different points.  The expression “shall
\nbe  free”  declares in a mandatory from a  freedom  of\tsuch
\ntransport or movement from such barriers.
\nThe  next  question  is,  where is  it\tfree  ?\t The  second
\nexpression  “throughout the territory of  India”  demarcates
\nthe  extensive field of operation of the said freedom.\t The
\nsaid  intercourse shall be free throughout the territory  of
\nIndia.\tThe use of the words “territory of India” instead of
\n“‘among\t  the\tseveral\t States”  found\t in   the   American
\nConstitution  or “among the States” found in the  Australian
\nConstitution,\tremoves\t all  inter-State   or\t intra-State
\nbarriers and brings out the idea that for the purpose of the
\nfreedom\t declared,  the whole country is  one  unit.   Trade
\ncannot\tbe free throughout the territory of India, if  there
\nare  barriers  in any part of India, be\t it  inter-State  or
\nintra-State.   So  long\t as  there  is\timpediment  to\tthat
\nfreedom, its nature or extent is irrelevant.  The difference
\nwill be in degree and not in quality.  The freedom  declared
\nunder Art. 301 may be defined as a right to free movement of
\npersons\t or  things, tangible or intangible,  commercial  or
\nnon-commercial,\t unobstructed  by barriers,  inter-State  or
\nintra-State  or\t any  other  impediment\t operating  as\tsuch
\nbarriers.   To\tState  it differently  all  obstructions  or
\nimpediments whatever shape they may\ttake,  to  the\tfree
\nflow or movement of trade,    or non-commercial intercourse,
\noffend Art. 301\t    of the Constitution except in so far  as
\nthey are saved by the succeeding provisions.  But we are not
\nconcerned in this case with non-commercial intercourse.
\nThe next question is, what is the content of the concept  of
\nfreedom ? The word “freedom” is
\n549<\/span>
\nnot capable of precise definition, but it can be stated what
\nwould  infringe or detract from the said freedom.  Before  a
\nparticular law can be said to infringe the said freedom,  it
\nmust be ascertained whether the impugned provision  operates
\nas a restriction impeding the free movement of trade or only
\nas   a\tregulation  facilitating  the  same.\tRestrictions
\nobstruct  the  freedom,\t whereas  regulations  promote\t it.
\nPolice regulations, though they may superficially appear  to
\nrestrict the freedom of movement, in fact provide the neces-
\nsary  conditions for the free movement.\t Regulations such  a
\nprovision  for lighting, speed, good condition of  vehicles,
\ntimings,  rule\tof  the\t road  and  similar  others,  really
\nfacilitate  the freedom of movement rather than\t retard\t it.
\nSo too, licensing system with compensatory fees would not be
\nrestrictions but regulatory provisions ; for without it, the
\nnecessary  lines of communication, such as roads,  waterways
\nand  air-ways  cannot  effectively  be\tmaintained  and\t the
\nfreedom\t declared  may in practice turn out to be  an  empty
\none.   So too, regulations providing for necessary  services
\nto  enable the free movement of traffic, whether charged  or
\nnot,  cannot also be described as restrictions impeding\t the
\nfreedom.   To  say  all\t these is  not\tto  say\t that  every
\nprovision  couched in the form of regulation but  in  effect
\nand  substance a restriction can pass off as  a\t permissible
\nregulation.   It is for the Court in a given case to  decide
\nwhether a provision purporting to regulate trade is in\tfact
\na restriction on freedom.  If it be a colourable exercise of
\npower  and the regulatory provision in fact  a\trestriction,
\nunless\tthe  said  provision  is  one  of  the\t permissible
\nrestrictions  under  the succeeding articles,  it  would  be
\nstruck\tdown.  This view is consistent with  the  principles
\nlaid down by the Australian High Court and the Privy Council
\nin  the context of interpretation of the  words\t “absolutely
\nfree” in a. 92 of the Commonwealth of Australia Constitution
\nAct, which is more emphatic than the word “free” in Art. 301
\nof our Constitution.\n<\/p>\n
550<\/span><\/p>\n
The  Constitution  confers on the Parliament and  the  State
\nLegislatures  extensive\t powers to make laws in\t respect  of
\nvarious\t matters.  A glance at the entries in the  Lists  of
\nthe  Seventh  Schedule to the Constitution would  show\tthat
\nevery law so made may have some repercussion on the declared
\nfreedom.   Property tax, Profession tax,  sales-tax,  excise
\nduty and other taxes may all have an indirect effect on\t the
\nfree  flow  of\ttrade.\tSo too, laws, other  than  those  of
\ntaxation,made  by virtue of different entries in the  Lists,
\nmay  remotely affect trade.  Should it be held that any\t law
\nwhich  may have such repercussion must either be  passed  by
\nthe Parliament or by the State Legislature with the previous
\nconsent\t of  the  President,  there  would  be\tan  end\t  of
\nprovincial   autonomy,\t for  in  that\tevent,\t with\tsome
\nexceptions,  all the said laws should either be made by\t the
\nParliament  or by the State Legislature with the consent  of
\nthe  Central  Executive Government.  By\t so  construing,  we
\nwould be making the Legislature of a State elected on  adult
\nfranchise  the handmaid of the Central executive.  We  would
\nbe re-writting the Constitution and introducing by  sidewind
\nautocracy  in  the  field of  legislation  allotted  to\t the
\nStates, while our Constitution has provided meticulously for
\ndemocracy.   Therefore,\t any construction  which  may  bring
\nabout such an unexpected result shall be avoided, unless the
\nConstitution  compels us by express words to do\t so.   There
\nare  admittedly no such words of compulsion.  At,  the\tsame
\ntime it is also difficult to accept the argument advanced by
\nthe  States  that the laws made under entry 42\tof  List  I,
\nentry 26 of List II and entry 33 of List III, of the Seventh
\nSchedule  to  the  Constitution only  are  subject  to\tthat
\nfreedom\t ;  for firstly, the article does not  restrict\t the
\nfreedom to the area covered by those entries, and, secondly,
\nlaws  made under the other entries may more effectively\t and
\ndirectly affect the movement of trade.\tIf a law directly
\n 551<\/span>
\nand  immediately imposes a tax for general revenue  purposes
\non the movement of trade, it would be violating the freedom.
\nOn the other hand, if the impact is indirect and remote,  it
\nwould be unobjectionable.  The Court will have to  ascertain
\nwhether\t the impugned law in a given case  affects  directly
\nthe said movement or indirectly and remotely affects it.
\nAt this stage, an argument elaborated by Mr. Lalnarain Sinha
\nmay  also  be noticed.\tThe learned Advocate said  that\t the
\nfiled  occupied by Art. 19 of Part III of  the\tConstitution
\nand  that occupied by Part XIII thereof are  distinct,\tthat
\nArt. 19 deals generally with freedom of trade and that\tArt.
\n301  with discriminatory barriers and that  fiscal  statutes
\ncould not be restrictions under Art. 19 and, therefore, they
\ncould not equally be restrictions under Art. 301.  He  would
\nsay  that  whatever might be said of “regulatory  taxes”  or
\n‘,’destructive\tones”.\tfiscal taxes are  always  in  public
\ninterest  and  it  is not possible for\ta  court  to  decide
\nwhether\t a  particular tax is reasonable or  not.   On\tthis
\npremises, the argument proceeds, a reasonable restriction is
\na restriction, the reasonableness whereof can be ascertained
\nby  court,  and\t in a case where  the  reasonableness  of  a
\nparticular  restriction is impossible of ascertainment by  a
\ncourt, such as a law fixing a rate, the Constitution must be
\ndeemed\tto have released such a restriction from the  impact
\nof  the\t concept  of the freedom.  This is  an\targument  in
\nreverse\t gear.\t The freedom declared  by  the\tConstitution
\ncannot\tbe controlled by an involved process  of  reasoning.
\nIt is not permissible to limit the content of the freedom by
\nthe  criterion\tof  a  court’s\tability\t to  ascertain\t the
\nreasonableness\tof a restriction imposed thereon.   What  is
\nguaranteed to a citizen by the Constitution is a fundamental
\nright to carry on business.  If cl. (5) of Art. 19 were\t not
\nin the Constitution, every restriction on that right, be  it
\nby a
\n552<\/span>
\nlaw  of\t taxation or otherwise, which limited  the  freedom,
\nwould  certainly  violate  the\tsame.\tThe  fact  that\t the
\nConstitution\tsaves\tlaws   made   imposing\t  reasonable
\nrestrictions on the freedom has no relevance to the  content
\nof  the\t freedom,  though  it  protects\t certain  laws\tmade
\ninfringing  that  freedom.   If on  a  construction  of\t the
\nprovisions  of Art. 19(6), it should be held that  a  fiscal
\ntaxation  was  not a restriction within the meaning  of\t the
\nsaid  clause, every law imposing such a tax  would  infringe
\nthe  fundamental  right.  This result could  not  have\tbeen
\nintended by the makers of the Constitution.  Therefore,\t the
\ncontention  should  be\tthat  every law\t of  taxation  is  a
\nreasonable  restriction\t in public interest.  There  are  no
\nmerits\tin the contention either.  It is said that  taxation
\nis  always in public interest, and that it is  not  possible
\nfor any court to ascertain on the material placed before  it
\nthat  a\t rate  is reasonable or not.  It  is  conceded\tthat
\nregulatory taxes or laws of taxation intended to prohibit or
\nrestrict  an activity and not to raise a general tax in\t the
\ninterest of revenue may be a restriction and a court may  be
\nin  a position to see whether such laws pass the  test\tlaid
\ndown  in  Art.\t19 (6) of Constitution.\t  The  arguments  is
\nconfined only to what is described as “fiscal taxation” that
\nis  taxation  solely intended for raising  revenue  for\t the
\nState.\t It is also not denied that unreasonable  procedural
\nrestrictions  imposed by law of taxation would infringe\t the
\nfreedom.   It is also admitted that a fiscal law may  offend
\nthe   fundamental  right  enshrined  in\t Art.  14   of\t the
\nConstitution. If so, it is beyond my comprehension on  what
\nprinciple the law of taxation could offend with impunity the
\nfreedom enshrined in Art. 19 (1) (g).  Article 13(2) says in
\nexpress terms
\n\t      “The State shall not make any law which  takes
\n\t      away or abridges the rights conferred by\tthis
\n\t      Part and any law made in contravention of this
\n\t      clause   shall   to   the\t  extent   of\t the
\n\t      contravention, be void.”\n<\/p>\n
\t\t\t    553<\/span><\/p>\n
A  law of taxation is made by Parliament or the\t Legislature
\nof  a  State, as the case may be, in exercise of  the  power
\nconferred  under the Constitution by virtue of the  entries,
\nfound  therein.\t  It is a law just like any other  law\tmade
\nunder the Constitution.\t This Court, in K. Thathunni  Moopil
\nNair  v. State of Kerala<\/a> (1) and in Balaji v. I. T.  Officer
\n(2),  hold  that  a  law of taxation would  be\tvoid  if  it
\ninfringed the fundamental right guaranteed under Art. 19  of
\nthe  Constitution.   Therefore,\t the law  of  taxation\talso
\nshould satisfy the two tests laid down in Art. 19(6) of\t the
\nConstitution.\tIt is said that a law of taxation is  always
\nin public interest.  Ordinarily it may be so, but it  cannot
\nbe  posited  that there cannot be any exceptions to  it.   A
\ntaxing\tlaw may be in public interest in the sense that\t the
\nincome\trealised may be used for public good, but there\t may
\nbe  occasions, when the rate or the mode of taxation may  be
\nso abhorrent to the principles of natural justice or even to
\nwell  settled  principles  of taxation\tthat  it  may  cause
\nirremediable  harm to the public rather than promote  public
\ngood,  that  the Court may have to hold that it\t is  not  in
\npublic\tinterest.  Nor can I agree with the contention\tthat
\nit is impossible for a court to hold in any case that a rate
\nof  taxation is reasonable or not.  As a proposition  it  is
\nunsound.   It  may  be legitimately  contended\tthat  it  is
\ndifficult  for a court to come to a definite  conclusion  on
\nthe correctness of a rate fixed by the Legislature.   Dixon,
\nC.  J.,\t in Commonwealth Freighters Proprietary\t Limited  v.
\nSneddon (3), gives a very cogent answer to such an  argument
\nin a different context.\t The learned Chief Justice said :\n<\/p>\n
\t      “Highly inconvenient as it may be, it is\ttrue
\n\t      of   some\t  legislative  powers\tlimited\t  by
\n\t      definition,  whether  according  to   subject-
\n\t      matter  to  purpose  or  otherwise,  that\t the
\n\t      validity of
\n\t      (1)  [1961]  3 S.C.R.77.\t      (2)  [1962]  2
\n\t      S.C.R. 98 3.\n<\/p><\/blockquote>\n
\t      (3) (1959) 102 C. L.R. 280, 292.\n<\/p><\/blockquote>\n
\t      554<\/span><\/p>\n
\t      the  exercise  of\t the  power  must  sometimes
\n\t      depend on facts, facts which some how must  be
\n\t      ascertained by the court responsible for deci-
\n\t      ding\t the\t  validity\tof\t the
\n\t      law……………………   All\t  that\t  is
\n\t      necessary\t is  to\t make the point\t that  if  a
\n\t      criterion of constitutional validity  consists
\n\t      in  matter  of fact, the fact must  be  ascer-
\n\t      tained  by the court as best it can, when\t the
\n\t      court   is  called  upon\tto  pronounce\tupon
\n\t      validity.”\n<\/p><\/blockquote>\n
I  entirely  agree with these observations.   It  is  common
\nplace  to  point out that intricate problems come  before  a
\ncourt  involving  decision  on\tdifferent  and\t complicated
\naspects\t of  human activity.  Questions\t involving  science,
\nmedicine,   engineering,   geology,   biology,\t  economics,
\nPsychology, etc. all come for judicial scrutiny, and I\thave
\nnever heard any court saying that it is difficult to  decide
\nupon such a question and, therefore, the proceeding  raising
\nsuch a question is outside the jurisdiction of such a court.
\nIn saying this, I am not ignoring the difficulties  inherent
\nin  a  problem\tof  fixing the rate of\ttaxes  by  a  court.
\nExperience   shows   that   the\t  court\t  applies    certain
\npresumptions, such as that of the wisdom, knowledge and\t the
\ngood intentions of the Legislature, and does not also  meti-
\nculously go in to the question, but only looks at the  broad
\nfeatures.   On\tthe argument of learned counsel when  it  is
\npermissible and possible for a court to ascertain whether  a
\ntax  is\t fiscal or regulatory, I do not see how\t it  becomes
\nimpossible,  though it may be difficult, to hold  whether  a
\nfiscal\ttax is reasonable or not.  The distinction lies\t not
\nin  the\t nature\t of the enquiry but only  in  degree.\tThat
\napart,\tno restriction, if it is unreasonable, can  be\tmore
\ndeleterious  to\t the freedom than the imposition  of  fiscal
\nburden on it, which may in certain circumstances destroy the
\nvery freedom.  I, therefore, hold, on a true construction of
\nthe expressed words of Art. 19
\n\t\t\t    555<\/span>
\nof  the\t Constitution,\tthat  it is  not  possible  or\teven
\npermissible  to hold that laws of taxation are\toutside\t the
\nscope of the freedom enshrined therein.\t As the premises  of
\nMr.  Lalnarain Sinha’s argument lack a reasonable basis\t his
\nfurther argument that the freedom in Art. 301 excludes\tfrom
\nits scope fiscal laws must be rejected.\n<\/p>\n
Having\tascertained  the scope and content  of\tthe  freedom
\nenvisaged  in Art. 301 of the Constitution, let us  look  at
\nthe  succeeding\t provisions which place limitations  on\t the
\nsaid freedom.  Under Art. 302.\n<\/p>\n
“Parliament  may  by  law impose such  restrictions  on\t the
\nfreedom of trade, commerce or intercourse between one  State
\nand another or within any part of the territory of India, as
\nmay be required in the public interest.”\n<\/p>\n
This  is  an  exception\t to  Art.  301.\t  The\trestrictions
\ncontemplated  therein are restrictions on the said  freedom.
\nBut  the restrictions can be imposed by Parliament  only  by
\nlaw.   Parliament’s power to make law is derived from  Arts.
\n245  and  246 of the Constitution.  Thereunder it  can\tmake
\nlaws with respect to any of the matters enumerated in  Lists
\nI  and\tIII  of the Seventh Schedule and  in  respect  of  a
\nterritory  not included in a States with respect to  matters
\nenumerated  in\tany  of\t the  three  Lists.   Therefore,  in
\nexercise of the said power and by virtue of the language  of
\nthe  entries correlated to that power, Parliament  can\tmake
\nany  law  imposing restrictions on the\tsaid  freedom.\t The
\narticle in terms, or even by necessary implication, does not
\nexclude\t restrictions  by way of taxation.  It\tis  not\t the
\nsource or the nature of the law that matters but the  impact
\nof  that law, be it a law of taxation or otherwise,  on\t the
\nfreedom that is crucial.  It is
\n556<\/span>
\nalso  not  possible  to accept the argument  that  Art.\t 302
\nconfers\t an independent power on the Parliament, that is,  a
\npower  in addition to that conferred on it by Arts. 245\t and\n<\/p>\n
246.  There is no room for this argument, for the words ,,by
\nlaw”  in  the  article clearly refer to\t the  power  of\t the
\nParliament to make law under the Constitution.\tThat  apart,
\nif  it\twas  the intention of the  Constituent\tAssembly  to
\nconfer a fresh power, those world not have been used in Art.
\n302,  but  instead  world suitable to confer  a\t new  power,
\nnamely,\t ‘”shall  have\tthe power”  would  have\t been  used.
\nTherefore, under this article the Parliament can only impose
\nrestrictions by virtue of any of the entries in the Lists in
\nrespect of which it can make laws. peruse on the entries  in
\nList  I\t shows that laws can be made  restricting  the\tsaid
\nfreedom under most of the entries, for instance, entries 22,
\n23,  24,  25,  27,  29, 42, 52, 53, 56,\t 81,  89,  91,\tetc.
\nWhether there is a restriction or not, does not depend\tupon
\nthe  relevant entry, but on the nature of the impact of\t the
\nlaw on the freedom.  But a limitation is sought to be placed
\nupon  this power by an attempt to confine it to the  entries
\nmentioned  in  Art. 303.  Article 303, which  prohibits\t the
\nParliament from making a law giving preference to one  State
\nover another or making any discrimination between one  State
\nand  another,  is confined only to the entries\trelating  to
\ntrade  and  commerce.  But Art. 303 is in the nature  of  an
\nexception  or proviso to Art. 302.  “The proviso leaves\t the
\ngenerality  of the substantive enactment unqualified  except
\nin  so far as it concerns the particular subjects  to  which
\nthe  proviso  relates.”\t “Where the  language  of  the\tmain
\nenactment  is clear and unambiguous, a proviso can  have  no
\nrepercussion on the interpretation of the main enactment  so
\nas  to exclude from it, by implication, what  clearly  falls
\nwithin\tits  expressed\tterms”: see M. & S.  M.\t Railway  v.
\nBezwada Municipality (1).  The words
\n(1)  A. I. R. 1944 P. C. 71, 73.\n<\/p>\n
 557<\/span><\/p>\n
in  Art.  302  are clear and unambiguous  and  they  do\t not
\nconfine\t its  operation\t to  any  particular  entries\tand,
\ntherefore,  the\t limitation imposed under  Art.\t 303  cannot
\ncurtail\t the  generality  of  the  provisions  of  the\tsaid
\narticle.\n<\/p>\n
But  the  more\tdifficult question is, what  does  the\tword
\n“,restrictions” mean in Art. 302?  The dictionary meaning of
\nthe   word  ,’restrict”\t it  “to  confine,  bound,   limit.”
\nTherefore,  any\t limitations placed upon the  freedom  is  a
\nrestriction  on\t that freedom.\tBut the limitation  must  be
\nreal,  direct and immediate, but not fanciful,\tindirect  or
\nremote.\t In this context, the principles evolved by American
\nand  Australian decision in their attempt to  reconcile\t the
\ncommerce power and the State police power or the freedom  of
\ncommerce  and the Commonwealth power to make laws  affecting
\nthat   freedom\tcan  usefully  be  invoked   with   suitable
\nmodifications\tand  adjustments.   Of\tall  the   doctrines
\nevolved,  in my view, the doctrine of “direct and  immediate
\neffect” on the freedom would be a reasonable solvent to\t the
\ndifficult situation that might arise under our Constitution.
\nIf  a law, whatever may have been its source,  directly\t and
\nimmediately affects the free movement of trade, it would  be
\nrestriction  on the said freedom.  But a law which may\thave
\nonly  indirect and remote repercussion on the  said  freedom
\ncannot be considered to be a restriction on it.\t Taking\t the
\nillustration  from taxation law, a law may impose a  tax  on
\nthe  movement  of  goods or persons by\ta  motor-vehicle  it
\ndirectly  operates as a restriction on the free movement  of
\ntrade, except when it is compensatory or regulatory.  On the
\nother  hand,  a law may tax a vehicle as  property,  or\t the
\ngarage wherein the vehicle used for conveyance is kept.\t The
\nsaid law may have indirect repercussion on the movement\t but
\nthe said law is not one directly imposing    restrictions on
\nthe free movement. In this    context, two difficulties\t may
\nhave to be  faced: firstly, though a  law purporting
\n558<\/span>
\nto  impose  a tax on a property or a motor-vehicle,  as\t the
\ncase may be, may in fact and in reality impose a tax on\t the
\nmovement itself, secondly, a law may not be on the  movement
\nof trade, but on the property itself, but the burden may  be
\nso  high  that\tit may indirectly affect the  free  flow  of
\ntrade.\tIn the former case, the court may have to scrutinize
\nthe provisions of a particular statute to ascertain  whether
\nthe  tax is on the movement.  If the provisions\t disclose  a
\ntax  on\t the movement, it will be a restriction\t within\t the
\nmeaning of Art. 302.  In the latter case, if the  provisions
\nshow that the tax is on property, the reasonableness of\t the
\ntax may have to be tested against the provisions of Art.  19
\nof  the Constitution.  The question whether a law imposes  a
\nrestriction or not depends on the question whether the\tsaid
\nlaw  imposes  directly and immediately a limitation  on\t the
\nfreedom of movement of trade.  If it does, the extent of the
\nimpediment relates to the question of degree rather than  to
\nthe  nature of it. If it is a restriction, it  must  satisfy
\nthe conditions laid down in Art. 302 of the Constitution.
\nArticle\t 303  is  an exception or a  proviso  to  Art.\t302.
\nArticle\t 303 opens out with a non-obstante  clause,  namely,
\n“Notwithstanding  anything in article 302”.  This phrase  is
\nequivalent to saying that “in spite of article 302” or\tthat
\n“article  302  shall be no impediment to  the  operation  of
\narticle\t 303”.\tIt is accepted on all hands that there is  a
\ndefect\tin  the\t phraseology used  in  this  article.\tThis
\narticle prohibits both Parliament and the State\t Legislature
\nfrom making a law giving preference to a State or States  or
\nmaking a discrimination among the States.  The\tnon-obstante
\nclause has no relevance so far as the Legislature of a State
\nis concerned, for Art. 302 does not deal with Legislature of
\na  State.  In these circumstances, the\tnon-obstante  clause
\ncan  only  be  made  applicable\t to  that  to  which  it  is
\nappropriate  i.e.,  only  to  the  limitations\timposed\t  on
\nParliament under Art. 303.  The
\n559<\/span>
\narticle, so far as it relates to Parliament, may be read :\n<\/p>\n
\t      “Notwithstanding anything in article 302,\t the
\n\t      Parliament  shall not have power to  make\t any
\n\t      law giving, or authorising the giving of,\t any
\n\t      preference  to  one  State  over\tanother,  or
\n\t      making,  or  authorising the  making  of,\t any
\n\t      discrimination between one State and  another,
\n\t      by  virtue of any entry relating to trade\t and
\n\t      commerce\tin any of the Lists in\tthe  Seventh
\n\t      Schedule”.\n<\/p><\/blockquote>\n
Now  this  provision  prohibits the making of  laws  of\t the
\nnature\tmentioned  therein  only by virtue  of\tthe  entries
\nrelating  to trade and commerce in any of the Lists  in\t the
\nSeventh\t Schedule.  This article clearly says  that  neither
\nParliament  nor\t the Legislature of a State can make  a\t law
\nimposing  a  restriction  which has  the  effect  of  giving
\npreference  or\tmaking discrimination as the  case  may\t be,
\namong  the States.  But a difficulty that confronts  one  is
\nwhether\t the limitation on the laws is confined only to\t the
\nlaw  made  by virtue of the entries referring to  trade\t and
\ncommerce or by virtue of any entry in the Seventh  Schedule,
\nwhich  may  affect trade and commerce.\t‘The  entries  which
\nrefer to trade and commerce are entries 41 and 42 of List I,
\nentry 26 of List II and entry 33 of List III of the  Seventh
\nSchedule to the Constitution.  But it is contended that\t the
\nwords  “by  virtue  of the entries  relating  to  trade\t and
\ncommerce in any of the Lists in the Seventh Schedule” are of
\nwider import than the words ,by virtue of the said  entries”
\nand, therefore, any law specified in Art. 303 made by virtue
\nof any entry in any of the Lists in the Seventh Schedule, if
\nit  relates to trade and commerce, would be covered  by\t the
\nexception.   The  words\t “any entry relating  to  trade\t and
\ncommerce  in any of the Lists” are of the widest import\t and
\nthey   yield   to  a  very  liberal   interpretation.\t The
\nphraseology used supports
\n560<\/span>
\nthis  interpretation.\tThe reason for\tthe  exception\talso
\nsustains it.  There cannot be any distinction on  principle,
\nfrom  the standpoint of the mischief sought to\tbe  averted,
\nbetween a law made by virtue of an entry ex facie  referring
\nto  trade and commerce and that made by virtue of any  entry
\naffecting  trade and commerce.\tFor instance, a law  may  be
\nmade  by  Parliament  under entries  relating  to  railways,
\nhighways, shipping etc.-these entries do not expressly refer
\nto trade and commerce, though they may directly affect trade
\nand  commerce.\t If  a law made under entry 26\tof  List  If
\ngiving preference or making discrimination among the  States
\nis  objectionable, it should also be objectionable, if\tmade
\nby virtue of any other entry.  I would, therefore, hold that
\nany  law made by Parliament by virtue of any entry  imposing
\nthe said discriminatory restrictions would be bad Under\t the
\nsaid article.\n<\/p>\n
Article\t 303 (2) lifts the ban imposed on  Parliament  under
\nArt.  303  (1), if a law made by  Parliament  imposing\tsuch
\ndiscriminatory restrictions is necessary for the purpose  of
\ndealing with a situation arising out of scarcity of goods in
\nany part of the territory of India.  That part of Art.\t303,
\nwhich prohibits the Legislature of a State from making a law
\nof  the\t nature\t mentioned  therein,  also  bears  the\tsame
\nconstructions and it is not necessary to restate it,  except
\nto mention that clause (2) of Art. 303 does not lift the ban
\nin respect of the State Legislature.\n<\/p>\n
Coming to Art. 304, we are again confronted with a defect in
\nphraseology.   The  article  opens out\tagain  with  a\tnon-
\nobstante   clause,  namely,  “Notwithstanding  anything\t  in
\narticle\t 301  or  article 303”.\t Under\tArt.  301  (a),\t the
\nLegislature  of a State may by law impose on goods  imported
\nfrom other States or the Union territories any tax to  which
\nsimilar\t goods\tmanufactured or produced in that  State\t are
\nsubject so, however, as not to discriminate between
\n561<\/span>
\nthem;  and  Art. 304 (b) enables the  State  Legislature  to
\nimpose such reasonable restrictions on the freedom of trade,
\ncommerce or intercourse with or without that State as may be
\nrequired  in the public interest.  But no Bill or  amendment
\nfor the purpose St. of cl. (b) shall be introduced or  moved
\nin the Legislature of a State without the previous  sanction
\nof  the President.  Clause (a), therefore, only enables\t the
\nLegislature of a State to impose non-discriminatory taxes on
\ngoods  imported from other States or the Union\tterritories.
\nThe non-obstante clause vis-a-vis Art. 304 (a) may have some
\nrelevance  so far as Art. 301 is concerned, for\t it  enables
\nthe  Legislature of a State to impose an impediment  on\t the
\nfree  movement\tof trade in spite of  the  freedom  declared
\nunder Art. 301.\t But it has no relevance to Art. 303,  which
\nonly   prohibits  the  State  Legislature  from\t  making   a
\ndiscriminatory\tlaw and it does not in any way prohibit\t the
\nState  Legislature  from imposing a  non-discriminatory\t tax
\npermitted  under Art. 304 (a).\tBut, with reference to\tArt.
\n304  (b),  the\tnon-obstante  clause  has  significance\t and
\nmeaning even in regard to Art. 303, as cl. (b) lifts the ban
\nimposed\t by Art. 303, subject to the  limitations  mentioned
\ntherein.  Therefore, the non-obstante clause must be  deemed
\nto  apply only to that part of Art. 304 appropriate  to\t the
\nsaid clause.  If so read, the difficulty in the construction
\ndisappears.   Article 304 (a) lifts the general ban  imposed
\nby  Art. 301 in respect of imposition of  non-discriminatory
\ntaxes  on goods imported, which indicates that but  for\t the
\nsaid  provision\t the law of taxation in\t that  regard  would
\ninfringe the freedom declared under Art. 301.  Clause (b) of
\nArt.  304 enables a State to make laws\timposing  reasonable
\nrestrictions   on  the\tfreedom\t of  trade,   commerce\t and
\nintercourse;  and I would interpret the word  “restrictions”
\nin the same way as I have interpreted the said expression in
\nArt.  302.  It cannot be said, as it is contended, that\t cl.\n<\/p>\n
(b) only lifts the ban imposed by Art. 303
\n562<\/span>
\non the power of the Legislature of a State, but it does more
\nthan  that.  It enables the State Legislature to impose\t all
\nreasonable  restrictions on the said freedom in the sense  I
\nhave already explained, all subject to the proviso.
\nAgain, in the context of Art. 304 (b), a strong plea is made
\nby  some of the learned Advocates appearing for the  States,
\nrelying\t upon the other provisions of the  Constitution\t for
\nholding\t that taxation laws are outside the ken of the\tsaid
\nprovisions.  Reference is made to Arts. 31 (5) (b) (i), 248,
\n265,  276, 285, 287 and 288.  I do not propose\tto  consider
\nthe  arguments based on the said articles in detail, as,  in
\nmy  view, these and similar articles of the Constitution  do
\nnot even remotely touch the question raised before us.\tThey
\nfit  in\t the scheme of the Constitution.   The\tConstitution
\nconfers power on the Legislatures to make laws of  taxation,
\ncircumscribes  that power with reference to the\t entries  in
\nthe  Seventh Schedule and other\t constitutional\t provisions,
\nand   provides\tfor  resolving\tconflict  of  powers.\t The
\naforesaid articles, except Art. 31 (5) (b) (i) and Art. 248,
\nappear\tin  Ch.\t  I of Part XII under  the  general  heading
\nFinance”,  Article 265 declares that no tax shall be  levied
\nor collected except by authority of law; that is to say, tax
\ncannot be levied or collected by an executive flat.  Article
\n276  fixes  a ceiling on taxes payable to  local  boards  on
\nprofessions, trades, callings and employments.\tArticle\t 285
\nexempts\t property of the Union from State  taxation  Article
\n286 prohibits the States from imposing a tax on\t inter-State
\nsales, subject to a proviso.  Article 287 exempts the  Union
\nfrom the State law of taxation on electricity; and Art.\t 288
\ngives a similar exemption to the Union from taxes by  States
\nin  respect  of\t water\tor  electricity\t in  certain  cases.
\nArticle\t 31(5)(b)(i) exempts a law imposing or\tlevying\t any
\ntax  from the impact of the fundamental rights enshrined  in
\nArt. 31(2)
\n 563<\/span>
\nof  the Constitution.  Article 248 preserves  the  residuary
\npower  of  the\tParliament  in respect\tof  any\t matter\t not
\nenumerated   in\t the  Concurrent-List  or  the\t State-List,
\nincluding  the\tpower  to  impose  taxes.   These  articles,
\ntherefore,  generally impose limitations on the\t appropriate
\nlegislative power of taxation of States or give exemption in
\nspecial cases.\tBy and large, the said articles and  similar
\nothers operate as limitations, or restrictions on the  power
\nof  taxation conferred upon Parliament and  the\t appropriate
\nLegislatures  under Art. 246 of the Constitution.   But,  in
\nexercise  of  the  power  of  taxation,\t subject  to   these
\nlimitations,  the appropriate legislature cannot make a\t law
\ninfringing  the freedoms conferred under  the  Constitution.
\nThe conditions prescribed for imposing a tax or the ceilings
\nfixed  thereon may affect the ambit of the power but  cannot
\neither\tsanction encroachment on the freedom  guaranteed  by
\nArt.  331  or curtail the same.\t Assuming that some  of\t the
\nconditions  prescribed\tin  Art. 286  appear  to  come\tinto
\nConflict  with those in Art. 304(b) in my view, there is  no
\nsuch conflict-the said articles can co-exist by a process of
\nharmonious construction.  In short, these articles may limit
\nthe  power of the appropriate legislature in  imposing\ttax,
\nbut  cannot  be\t relied upon to curtail\t the  ambit  of\t the
\nfreedom under Art. 301 of the Constitution.
\nReliance is also placed on Art. 26 which provides that every
\nreligious denomination or any section thereof shall have the
\nright, inter alia, to own and acquire movable and  immovable
\nproperty.   It\tis said that the freedom conferred  by\tthat
\narticle cannot preclude the State from imposing a tax on the
\nsaid  property, and that, by the same parity  of  reasoning,
\nArt.  301  which  confers the freedom  cannot  preclude\t the
\nLegislative power imposing a tax affecting that freedom.  It
\nis  true  that\tthe  marginal heading  of  this\t article  is
\n“Freedom  to  manage religious affairs”,  but  the  subject-
\nmatter\tof Art. 26 cannot be equated to that of the  freedom
\nof trade
\n564<\/span>
\ndeclared under Art. 301.  I should not be understood to have
\nexpressed  any view on the construction of that\t article  in
\nthe present case.\n<\/p>\n
  Article  305, as it stood before the Constitution  (Fourth
\nAmendment) Art. 1955, only saves the existing laws from\t the
\noperation  of Art. 301, and Art. 303, and it does not  throw
\nany light on the construction of Art. 301.  Article 306\t was
\nomitted ‘by the Constitution (Seventh Amendment) Act,  1956;
\nbut the said article saved the operation of any law made  by
\nany States specified in Part B in the First Schedule  before
\nthe commencement of the Constitution levying any tax or duty
\non the import of any goods in to the State from other States
\nor on the export of goods from the State to other States and
\nenacted that if there be an agreement between the Government
\nof  India and the Government of that State in  that  behalf,
\nthe  said tax or duty might be levied or collected for\tsuch
\nperiod not exceeding ten years from the commencement of\t the
\nConstitution,  subject to the terms of the  said  agreement.
\nIf   a\tlaw  of\t taxation  cannot,  under  any\t conceivable
\ncircumstances, be a restriction on the freedom of trade, why
\ndid  it\t become necessary to introduce a  saving  clause  in
\nterms of Art. 306 in the group of articles in Part XIII?  It
\nis  suggested  that  the saving\t clause\t might\thave  become
\nnecessary as there was an impediment under the other  provi-
\nsions  of  the Constitution.  But that\tcircumstance  cannot
\ndeprive the force of the non-obstante clause in Art. 301  in
\nits  application  to  the provisions  of  Part\tXIII.\tThis
\narticle\t indicates  the consciousness of the makers  of\t the
\nConstitution  that  restrictions contemplated in  that\tPart
\ntake  in restrictions by way of taxation and, therefore,  it
\nwas  necessary\tto provide for an exemption in the  case  of
\nPart B States for a specified period of time.
\nThe foregoing discussion may be summarized in the  following
\npropositions (1) Art. 301 declared
\n\t\t\t    565<\/span>
\na  right of free movement of trade without any\tobstructions
\nby  way\t of barriers, inter-State, or  intraState  or  other
\nimpediments operating as such barriers. (2) The said freedom
\nis  not\t impeded,  but,\t on the\t other\thand,  promoted,  by
\nregulations  creating  conditions for the free\tmovement  of
\ntrade, such as, police regulations, provision for  services,
\nmaintenance of roads, provision for aerodromes, Wharfs etc.,
\nwith  or  without compensation. (3) Parliament\tmay  be\t law
\nimpose restrictions on such freedom in the public  interest;
\nand  the  said law can be made by virtue of any\t entry\twith
\nrespect where of Parliament has power to make a law. (4) The
\nState also, in exercise of its legislative power, may impose
\nsimilar\t restrictions,\tsubject to the two  conditions\tlaid
\ndown  in Art. 304 (b) and subject to the  proviso  mentioned
\ntherein.  (5) Neither Parliament nor the  State\t Legislature
\ncan  make a law giving preference to one State over  another
\nor  making discrimination between one State and another,  by
\nvirtue\tof  any\t entry in the Lists,,  infringing  the\tsaid
\nfreedom.  (6) This ban is lifted in the case  of  Parliament
\nfor  the purpose of dealing with situations arising  out  of
\nscarcity of goods in any part of the territory of India\t and
\nalso  in the case of a State under Art. 304 (b), subject  to
\nthe  conditions\t mentioned therein.  And (7) The  State\t can
\nimpose a non-discriminatory tax on goods imported from other
\nStates\tor  the\t Union\tterritory  to  which  similar  goods
\nmanufactured or produced in that State are subject.
\nThe  construction  I have placed on the\t provisions  of\t the
\nConstitution  brings  out the harmony  between\tthe  various
\narticles in Part XIII of the Constitution and also discloses
\nan  integrated\tscheme of freedom of  trade,,  commerce\t and
\nintercourse  maintaining  a balance between  federalism\t and
\nprovincial autonomy.\n<\/p>\n
I  agree  with\tmy  learned brother.,  Dan,  J…  that\t the
\nprovisions of the Rajasthan Motor Vehicles Taxation Act\t (XI
\nof 1951) are regulatory in character
\n566<\/span>
\nand that they do not infringe the freedom enshrined in\tArt.
\n301 of the Constitution.\n<\/p>\n
The appeals fail and are dismissed with costs.
\nHIDAYATULLAH, J.-The Rajasthan Motor Vehicles Taxation\tAct,
\n1951 (No.  XI of 1951), in s. 4 provided:\n<\/p>\n
\t      “(1) Save as otherwise provided by this Act or
\n\t      by  rules made thereunder or by any other\t law
\n\t      for the time being in force, no motor  vehicle
\n\t      shall be used in any public place or kept
\n\t      for use in Rajasthan unless the owner  thereof
\n\t      has  paid\t in  respect of it,  a\ttax  at\t the
\n\t      appropriate rate specified in the schedules to
\n\t      this Act within the time allowed by section  5
\n\t      and,  save as hereinafter specified, such\t tax
\n\t      shall be payable actually notwithstanding that
\n\t      the motor vehicle may from time to time  cease
\n\t      to be used.\n<\/p><\/blockquote>\n
\t      (2)An  owner who keeps a motor  vehicle  of
\n\t      which  the  certificate  of  fitness  and\t the
\n\t      certificate of registration are current shall,
\n\t      for  the purposes of this Act be\tpresumed  to
\n\t      keep such vehicle for use.\n<\/p><\/blockquote>\n
\t      (3)A  person  who keeps more  than  ten  motor
\n\t      vehicles for use solely in the course of trade
\n\t      and industry shall be entitled to a  deduction
\n\t      of ten per cent on the aggregate amount of tax
\n\t      to which he his liable.\n<\/p><\/blockquote>\n
\t      Explanation.-The\t  expression   “trade\t and
\n\t      industry” includes transport for hire.”
\n\t      The  Schedules referred to in the\t first\tsub-
\n\t      section are four in number.  They specify\t the
\n\t      kind of vehicles liable to the tax, the  rates
\n\t      of  the tax applicable to each kind, and\tsome
\n\t      other conditions.\t A detailed reference to the
\n\t      Schedules will be made by
\n\t\t\t\t   567<\/span>
\n\t      us later.\t Section 11, which created penalties
\n\t      for contravention of the Act, was follows:
\n\t      “Whoever contravenes any of the provisions  of
\n\t      this Act or of any rule made thereunder  shall
\n\t      on  conviction be punishable with\t fine  which
\n\t      may extend to Rs. 100 and in the event of such
\n\t      person having been previously convicted of  an
\n\t      offence under this Act or under any rule\tmade
\n\t      thereunder  with fine which may extend to\t Rs.\n<\/p><\/blockquote>\n
\t      200.”\n<\/p><\/blockquote>\n
\t      The  appellants who held permits, plied  their
\n\t      buses  from the State of Ajmer.  Their  routes
\n\t      passed through the territory of Rajasthan, and
\n\t      they   were  required  to\t pay  the   tax\t  in
\n\t      Rajasthan.   They filed petitions\t under\tArt.
\n\t      226  of the Constitution in the High Court  of
\n\t      Rajasthan,   impugning   the   demand   as   a
\n\t      contravention  of the provisions of Part\tXIII
\n\t      and  of  Art.  19\t of  the  Constitution.\t   A
\n\t      Divisional  Bench\t of the\t High  Court,  which
\n\t      heard the petition, referred for the  decision
\n\t      of a Full Bench the following question:
\n\t      “Whether\tss. 4 and II of the Rajasthan  Motor
\n\t      Vehicles\tTaxation  Act,\t1951,  infringe\t the
\n\t      right   of  freedom  of  trade,  commerce\t  or
\n\t      intercourse  granted under Article 301 of\t the
\n\t      Constitution?”\n<\/p><\/blockquote>\n
The Full Bench answered the question in the negative, and in
\nview  of  the  answer, the petitions  were  dismissed.\t The
\nappellants  were, however, granted a certificate under\tArt.
\n132  of the Constitution, and the present appeals have\tbeen
\nfiled.\n<\/p>\n
The  appellants\t contend that the Rajasthan  Motor  Vehicles
\nTaxation  Act, 1951, is outside the competence of the  State
\nLegislature  inasmuch as its pith and substance is  “,Inter-
\nState  trade  and commerce which is a  Union  subject  under
\nEntry 42 of
\n568<\/span>
\nUnion  List; that it is null and void being in violation  of
\nArt. 19(1) (d), (f) and (g) of the Constitution; that it  is
\nultra  vires  and  illegal, as it  contravenes\tthe  freedom
\nguaranteed  under Art. 301; that even if permissible, it  is
\nnot  a reasonable restriction of =and commerce\twithin\tArt.
\n304,  and  that not having been enacted\t with  the  previous
\nsanction of the President, it is not effective as law  under
\nArt. 265.\n<\/p>\n
At  an\tearlier hearing, the attention of  the\tConstitution
\nBench  of this Court was drawn to Atiabari Tea Co.  Ltd.  v.
\nState of Assam<\/a> (1), where this Court struck down by majority
\nthe  Assam  Taxation (on Goods Carried by  Roads  or  Inland
\nWaterways)  Act, 1954, as offending against the\t freedom  of
\ntrade,\tcommerce and intercourse.  On that  occasion,  three
\nviews  were expressed.\tSinha, C. J.. held that the  freedom
\nguaranteed  by Art. 301 was against “trade barriers,  tariff
\nwalls,\tor  imposts which have a deleterious effect  on\t the
\nfree  flow  of\ttrade, commerce\t and  intercourse”  but\t not
\nagainst\t taxation  Simpliciter.\t  Shah, J.,  held  that\t the
\nfreedom\t envisaged  was\t wide enough  to  comprehend  within
\nitself\ta ban of prohibition, control or impediment  of\t any
\nkind whatever and of taxes whether they fell on movement of
\ntrade\t or   commerce\t or   otherwise.     The    majority
\n(Gajendragadkar,  Das  Gupta  and Wanchoo,  JJ.)  hold\tthat
\nthough\ttaxes as such were not within the ban of Part  XIII,
\nsuch  taxes  as\t impeded the free flow\tof  trade  and\twere
\ndirectly  placed  on  movement were  included  in  it.\t The
\nappellants  relied  on the views of Shah,  J.,\tand  failing
\nthat, on the majority view which, they contended, also\theld
\ngood  here, while the State Government based its  case\tupon
\nthe  views of the learned Chief Justice.   The\tConstitution
\nBench  was  thus of the opinion that “having regard  to\t the
\nimportance  of\tthe Constitutional issues involved  and\t the
\nviews  expressed in Atiabari Tea Co. Ltd. v. State of  Assam<\/a>
\n(1)”, this case
\n(1)  [1961] 1 S.C.R. 809.\n<\/p>\n
\t\t\t    569<\/span><\/p>\n
should\tbe heard by a larger Bench, and these  appeals\thave
\nthus come before this special Bench.’ Certain other  parties
\nobtained permission to intervene, and notices having  issued
\nto  the Advocate-General of States, we have had the  benefit
\nof arguments from various angles.\n<\/p>\n
That  freedom of trade, commerce and intercourse is  secured
\nby  Art. 301, subject to the other provisions of Part  XIII,
\nhas not been disputed in this case.  The dispute is only  as
\nto  what is comprehended within that freedom, and a  further
\nquestion  is whether the powers of Parliament and the  State
\nLegislatures  to levy taxes according to the Sundry  Entries
\nin  the Legislative Lists are meant to be  circumscribed  in
\nany way, and if so, to what extent.\n<\/p>\n
Art.  301 of the Constitution, so far as its language  goes,
\nis  fairly modelled on s. 92 of the Australian\tCommonwealth
\nAct,  1900,  and  numerous decisions of the  High  Court  of
\nAustralia  and on appeal, by the Privy Council,\t were  cited
\nbefore\tus to define the content and extent of\tthe  freedom
\nenvisaged.  Besides, the Government of India Act, 1935, also
\ncontained in a. 297 a provision on the subject of freedom of
\ntrade  and commerce, and the contention of the State  partly
\nhas  been  that Part XIII enacts little more than  what\t was
\ncontained there.\n<\/p>\n
Since the arguments made much of these two analogies, it  is
\nnecessary  to  state  first certain well.  known  and  well-
\naccepted  propositions\trelating to  the  interpretation  of
\nConstitutions,\tin which there are fundamental\tlimits\tupon
\nthe  power  to\tlegislate.   In Queen  v.  Burah  (1),\tLord
\nSelborne laid down a proposition which in its exposition  of
\nthe  subject  and  the manner of expression  can  hardly  be
\nimproved.  Lord Selborne said:\n<\/p>\n
\t      “The  established\t Courts of  justice  when  a
\n\t      question arises whether the prescribed limits
\n\t      (1)   (1878) 3 App.cas.889.\n<\/p><\/blockquote>\n
\t      570<\/span><\/p>\n
\t      have  been exceeded, must of necessity  deter-
\n\t      mine that question; and the only way in  which
\n\t      they can properly do so, is by looking to\t the
\n\t      terms  of the instrument by which,  affirmati-
\n\t      vely, the legislative powers were created, and
\n\t      by which, negatively, they are restricted.  If
\n\t      what  has been done is legislation within\t the
\n\t      general  scope of the affirmative words  which
\n\t      give the power, and if it violates no  express
\n\t      condition\t or restriction by which that  power
\n\t      is limited it is not for any Court of  Justice
\n\t      to  inquire further, or two  enlarge  constru-
\n\t      ctively those conditions or restrictions.”<\/p><\/blockquote>\n
\t      We   have\t thus  to  see\twhat   powers\thave
\n\t      affirmatively    been   conferred\t   on\t the
\n\t      legislatures  of\tthe State and what  are\t the
\n\t      restrictions   on\t  that\t power.\t   In\tthis
\n\t      connection,  we  must also bear  in  mind\t the
\n\t      weighty observations of Gwyer, C. J., in Bhola
\n\t      Prasad v. The King Emperor (1)
\n\t       “We  must  again\t refer\tto  the\t fundamental
\n\t      proposition   enunciated\tin  The\t Queen.\t  v.
\n\t      Burah(2) that Indian Legislatures within their
\n\t      own sphere have plenary powers of\t legislation
\n\t      as  large and of the same nature as  those  of
\n\t      Parliament itself.  If that was true in  1878,
\n\t      it  cannot  be  less  true  in  1942.    Every
\n\t      intendment  ought\t therefore  to\tbe  made  in
\n\t      favour  of a Legislature which  is  exercising
\n\t      the powers conferred on it.”\n<\/p><\/blockquote>\n
The legislative powers of the States after the establishment
\nof the Republic of India are certainly not any the less; and
\nit  must be conceded at once that within the range of  their
\npowers\tas conferred the legislative entries in\t Sch.\tVII,
\nthe  State Legislatures are supreme, subject, of course,  to
\nsuch  restrictions  as are to be found in  the\tConstitution
\nitself
\n(1) [1942] F.C.R. 17, 27.  (2) (1878) 3 App. cas. 889
\n571<\/span>
\nThe  power to tax motor vehicles is the subject of Entry  57
\nin the State List, and it reads:-\n<\/p>\n
\t      “Taxes   on  vehicles,  whether\tmechanically
\n\t      propelled\t or not, suitable for use on  roads,
\n\t      including\t tramcars subject to the  provisions
\n\t      of entry 35 of List III.”\n<\/p><\/blockquote>\n
The words “suitable for use on roads” describe the kinds  of
\nvehicles  and  not their condition.  They exclude  from\t the
\nEntry,\tfarm  machinery,  aeroplanes,  Railways\t etc.  which
\nthough\tmechanically propelled are not suitable for  use  on
\nroads.\tThe inclusion of trams using tracks which may be  on
\nroads  or  off\tthem,  makes  the  distinction\tstill\tmore
\napparent.   It\tis thus clear that the power  to  tax  motor
\nvehicles  is plenary, subject to Entry 35 of the  Concurrent
\nList  or any other restriction to be found elsewhere in\t the
\nConstitution.  Entry 35 above referred to reads:\n<\/p>\n
\t      “35.     Mechanically    propelled    vehicles
\n\t      including\t the  principles on which  taxes  on
\n\t      such vehicles are to be levied.”\n<\/p>\n
The  existence of such an Entry in the Concurrent List\tcuts
\ndown the supremacy of the State Legislatures, and in respect
\nof taxation of motor vehicles, if the principles of taxation
\nare  laid down by Parliamentary legislation, the State\tlaws
\nrepugnant thereto must be void, in view of the provision  of
\nArt.  254  of the Constitution.\t The  question\twhether\t the
\npower of Parliament to legislate and lay down principles  of
\ntaxation  under Entry 35 of the Concurrent List\t would\talso
\nhave  to  be considered under Part XIII, does not  arise  in
\nthis case, for admittedly there is no law by Parliament that
\nEntry either prior or subsequent to the State Act.  Thus, so
\nfar as the taxing power of the State Legislature is  concer-
\nned,  it  must be admitted that it was\tnot  only  exercised
\nunder Entry 57, but, if judged solely under that Entry, that
\nit was properly exercised.\n<\/p>\n
572<\/span><\/p>\n
The  question thus is whether on the exercise of this  power
\nthere  are  to be found other curbs in other  parts  of\t the
\nConstitution,\tand  whether  those  curbs  have  not\tbeen
\nobserved.  Such curbs may be of three kinds.  The first\t may
\narise from the operation of the power of legislation granted
\nto  Parliament\tby  Entry  42 of the  Union  List,  and\t the
\ncontention  in this connection is that the present  impugned
\nAct  in\t its pith and substance is  legislation\t under\tthat
\nEntry  and  thus void.\tThe second may arise from  Art.\t 19,
\nsub-cls.  (d),\t(f) and (g) if the law\tdeprives  the  motor
\noperators  of  the right (a) to move freely  throughout\t the
\nterritory  of  India’ (b) to acquire, hold  and\t dispose  of
\nproperty, and (c) to practice any profession, or to carry on
\nany  occupation, trade or business, and the  restriction  is
\nincapable  of being justified as reasonable.  The third\t may
\narise  from  the provisions of Part XIII  where\t freedom  of
\ntrade, commerce and intercourse throughout the territory  of
\nIndia has been ,guaranteed’, subject only to the  provisions
\nof that Part.  These, in the main, are also the contentions.
\nand these appeals can be effectively disposed of from  these
\nthree view points.\n<\/p>\n
The first contention that the impugned Act is bad because it
\nis  legislation\t directly under Entry 42 of the\t Union\tList
\nneed  not  detain us long.  The subject of Entry 42  of\t the
\nUnion  List  is\t not taxation  but  “inter-State  trade\t and
\ncommerce”.   The scheme of the Legislative Lists shows\tthat
\ntaxation  entries are separate from other entries,  and\t the
\nother entries do not include a power to impose a tax, though
\nthe  power  to levy fees is included as it is  expressly  so
\nstated.\t  The  subject\tof Entry 57 of\tthe  State  List  is
\ntaxation on vehicles.  An Act which seeks directly to levy a
\ntax  on motor vehicles even though there may  be  incidental
\nand   subsidiary  provisions  about  the  regulation  of   a
\nparticular  inter-State trade carried on with the aid of  or
\nin
\n573<\/span>
\nmotor vehicles is legislation really within Entry 57 and not
\nwithin the other Entry though it may, touch it, and is\tthus
\nwithin the competence of the State Legislature.\t That  these
\nmotor  vehicles\t come into the taxing State  from  an  extra
\nState point and are taxed within the taxing State by  reason
\nof  their  use or presence there, may raise  problems  under
\nPart  XIII  but not under Entry 42 of the Union\t List.\t The
\nwords of the charging section are :\n<\/p>\n
\t      “No motor vehicle shall be used in any  public
\n\t      place or kept for use in Rajasthan unless\t the
\n\t      owner  thereof has paid, in respect of  it,  a
\n\t      tax  at the appropriate rate specified in\t the
\n\t      Schedule to this Act……..”\n<\/p><\/blockquote>\n
The  pith and substance of the Act is the levy of a  tax  on
\nmotor  vehicles\t in  Rajasthan or their use  in\t that  State
\nirrespective of where the vehicles come from.  In one sense,
\nit  does  not seek directly or immediately to  legislate  on
\ninter-State  trade or commerce or to prohibit the  entry  of
\nsuch motor vehicles it the tax be paid, except in so far  as
\na  person deterred by the tax may keep out.  This may  be  a
\npoint  for consideration under Part XIII or even Art. 19  of
\nthe Constitution, but not under Entry 42 of the Union  List.
\nEven if the levy of the tax may be said to touch inter-State
\ntrade  or  commerce,  it is not legislation  in\t respect  of
\ninterstate trade or commerce.  It has been held consistently
\nby this Court, the Privy Council and the Federal Court\tthat
\na law substantially in its pith and substance under an Entry
\nin one List may touch incidentally on a topic of legislation
\nin a rival List without being void or ultra vires.  This, in
\nour opinion, is sufficient to dispose of the first point.
\nThe  next  attack  is  with  the  aid  of  Art.\t 19  of\t the
\nConstitution.\tThat Article guarantees to the\tcitizens  of
\nIndia certain basic freedoms.  Freedom from taxation is\t not
\none of them.  It is hardly
\n574<\/span>
\nnecessary in this case to examine the subject from the angle
\nof Art. 19, because a law to be good under that Article must
\nsatisfy\t the  test  of\treasonableness.\t  If  the   impugned
\nsections  here are declared to be unreasonable\trestrictions
\nupon  the freedom of trade, commerce and  intercourse,\tthey
\nwould fall also under Part XIII.  If this were to happen, it
\nwould be wholly unnecessary to decide whether taxation\tlaws
\nare  within  the  reach\t of Art. 19  and  also\twhether\t the
\nimpugned provisions have to pass the independent scrutiny of
\nArt. 19 before they can be sustained.\n<\/p>\n
This  brings  us to the consideration of the last  point  on
\nwhich  arguments  occupied the Court for several  days.\t  It
\nwould  be necessary (if not, impossible) to try\t to  discuss
\nthe  arguments which, though proceeding from the same  side,
\nwere  often conflicting.  The use of language borrowed\tfrom
\na. 92 of the Australian Constitution in Art. 301 of our Con-
\nstitution  led to the citation of many\tAustralian  rulings.
\nThose  rulings are so numerous that they provoked  a  former
\nChief Justice of the High Court of that Country to say\tthat
\nwhen  he  died, s. 92 would be found to be  written  on\t his
\nheart\t But  it  is reasonable to  suppose  that  those  who
\nborrowed the language in India were fully aware of the\tcon-
\nflict  of opinion in Australia.\t It is reasonable to  assume
\nthat  the  framers of our Constitution must have  sought  to
\navoid  there dangers.  It must not also be  overlooked\tthat
\nthe  decisions\tof  the Privy  Council\tin  Commonwealth  of
\nAustralia v. Bank of New South Wales(1) and Hughes and\tVale
\nPty.  Ld. v. State of N.S.W. (2), which to some extent\thave
\nnarrowed  down\tthe  controversy  in  Australia,  were\t not
\nrendered  when\tthe  draft Constitution was  framed  or\t the
\nConstitution was adopted.  A note has, however, to be  taken
\nof  the\t fact  that  the history  of  the  establishment  of
\nfederation in the two Countries is so vastly different\tthat
\nin spite of
\n(1) [1950] A.C. 235.\n<\/p>\n
(2) [1955] A.C. 241.\n<\/p>\n
575<\/span><\/p>\n
certain\t  resemblance  in  the\tlanguage  employed  in\t the
\ncomparable provisions of the two Constitutions, they  cannot
\nmean  the  same\t thing.\t  Indeed, they\tdiffer\tin  so\tmany
\nrespects that nothing is more dangerous than to suppose that
\nthe  Indian Constitution wished to secure freedom of  trade,
\ncommerce and intercourse in the same way as did the  Austra-
\nlian  Commonwealth.  These differences are not to  be  found
\nsolely\tin the language of the corresponding provisions\t but
\nin  the\t evolution of the two Countries and the\t checks\t and
\nbalances  provided in our Constitution which are not  to  be
\nfound  in  the Australian Constitution.\t We shall  refer  to
\nthese  differences briefly before examining what checks\t and
\nbalances have been provided in our Constitution.
\nThe Commonwealth of Australia was formed out of a number  of
\nColonies  which\t were  separated by high  tariff  walls\t and
\nnumerous differential inter-Colonial duties.  The idea of  a
\nfederation was born out of a desire to secure free trade  on
\na  reciprocal  basis between the Colonies.   The  Federation
\nwas,  however, delayed by the failure to reach agreement  on
\nthe   financial\t aspects  of  the  Constitution.    Numerous
\nconventions  took place which tried unsuccessfully to  solve
\nthe  problem which was aptly described “,as the lion in\t the
\npath of unity”.\t It was after surmounting many\tdifficulties
\nthat the financial clauses were settled by agreement.  It is
\nin  the\t background  of\t these\thistorical  facts  that\t the
\nprovisions  relating  to  freedom  of  trade,  commerce\t and
\nintercourse  have  been\t interpreted by the  High  Court  of
\nAustralia.   The provisions of the  Australian\tConstitution
\nthemselves  enact the underlying agreements.   Sections\t 51,
\n88,  89,  90,  100 and 102 insist upon\tuniformity  and\t the
\nabsence\t of discrimination in matters of trade and  commerce
\nafter the imposition of uniform duties of customs which\t was
\nto be achieved in two years.\n<\/p>\n
576<\/span><\/p>\n
Section\t 92 then epitomizes the whole concept of this  unity
\nand freedom from preferential treatment by enacting :\n<\/p>\n
\t      “On  the\timposition  of\tuniform\t duties\t  of
\n\t      customs, trade, commerce and intercourse among
\n\t      the  States,  whether  by\t means\tof  internal
\n\t      carriage\t or  ocean  navigation,\t  shall\t  be
\n\t      absolutely free.”<\/p><\/blockquote>\n
\t      It   may\t be  pointed  out  here\t  that\t the
\n\t      alternative     phrase\t “throughout\t the
\n\t      Commonwealth” was not accepted, though it\t was
\n\t      suggested as an amendment more than once.
\n\t      The provisions of the Australian\tConstitution
\n\t      such  as\tbear on trade and commerce,  are  no
\n\t      more  than  covenants  entered  into  at\t the
\n\t      Conventions, which have been introduced bodily
\n\t      into the Australian Constitution, the fate  of
\n\t      which  depended  for  a long time\t on  how  to
\n\t      secure  an  agreement  about  uniform  tariffs
\n\t      customs,\t  excises   and\t   bounties.\t The
\n\t      declaration of freedom of trade, commerce\t and
\n\t      intercourse was the logical culmination of the
\n\t      negotiations  for\t the  establishment  of\t the
\n\t      Federation.   The language of s. 92  was\tthus
\n\t      made  emphatic, even though its  full  purport
\n\t      remained\tvague.\t As  observed  by   Viscount
\n\t      Haldane,\tL. C., in Attorney-General  for\t the
\n\t      Commonwealth  of Australia v.  Colonial  Sugar
\n\t      Refining Company Limited (1) :\n<\/p><\/blockquote>\n
\t      “It  is a matter of historical knowledge\tthat
\n\t      Australia\t the work of fashioning\t the  future
\n\t      Constitution  was one which occupied years  of
\n\t      preparation through the medium of\t conventions
\n\t      and   conferences\t in  which  the\t most\tdis-
\n\t      tinguished  statesmen of Australia took  part.
\n\t      Alternative systems were discussed and weighed
\n\t      against  other with minute care.\tThe  Act  of
\n\t      1900  must  accordingly  be  regarded  as\t  an
\n\t      instrument which was fashioned with great
\n\t      (1)   [1914] A.C. 237.\n<\/p><\/blockquote>\n
\t\t\t\t   577<\/span><\/p>\n
\t      deliberation,  and if there is as points\tobs-
\n\t      curity  in its language, this may be taken  to
\n\t      be  due not to any uncertainty as to the\tado-
\n\t      ption   of  the  stricter\t from\tof   federal
\n\t      principle, but to that difficulty in obtaining
\n\t      ready  agreement about phrases  which  attends
\n\t      the drafting of legislative measures by larger
\n\t      assemblages.”\n<\/p><\/blockquote>\n
But declarations in a Constitution, however worded, must  be
\ngiven  effect to, and they always loom large on the  horizon
\nof law-making, if they curtail legislative power, and it  is
\nnot surprising that the Australian High Court was faced with
\nthe problem of deciding which laws rendered trade,  commerce
\nand intercourse unfree and which did not.  In the course  of
\nthese  decisions, a wide cleavage in opinion soon  appeared.
\none  view  holding  that any burden on\ttrade,\tcommerce  or
\nintercourse  between the States was bad, and the other\tview
\nattempting  justification to save laws which were  impugned.
\nVarious\t grounds for such justification were evolved.\tSome
\nlaws  were  upheld  on\tthe ground  that  they\twere  merely
\nregulatory  but\t some others were declared  void  as  having
\ncrossed\t the  line of legitimate  regulatory  action.\tSome
\ntaxation  laws\twere upheld on the ground that\tthough\tthey
\nburdened  trade\t or  commerce,\tthey  were  compensatory  in
\ncharacter.  Even there, differences arose about the tests to
\nbe applied to discover when such laws could be said to\thave
\nexceeded  the limits.  The number of such cases\t is  legion,
\nand almost any view can be supported by citations from\tsome
\njudgment  or  other from the Australian law  Reports.\tLord
\nPorter\tin  Commonwealth of Australia v. Bank of  New  South
\nWales  (1) aptly summed up : “In this labyrinth there is  no
\ngolden\tthread” (p. 310).  The maze of law round s. 92\twas,
\nof   course,   something  of  which  the  framers   of\t our
\nConstitution  were not unaware.\t They knew (1) [1950] A.  C.\n<\/p>\n
235.
\n578<\/span>
\nthat  in spite of the force of the words “absolutely  free”,
\nit  was well-settled that the freedom so contemplated was  a
\nqualified  freedom.   In Duncan v. State of  Queensland\t (1)
\nGriffith, C. J., had observed, what was generally  accepted,
\nthat  “the  word free’ does not mean extra legem,  any\tmore
\nthan freedom means anarchy”.  The task of the Bench as\talso
\nthe  Bar  was  to ascertain the limits of  freedom  or\tmore
\nappropriately,\tthe limits to which restrictions  could\t go.
\nIn this, the Australian High Court was the actor in the main
\n;  but the Privy Council also delivered four judgments.\t  Of
\nthese,\ttwo  were  before our draft  Constitution  and\ttwo,
\nthereafter.   It is, therefore necessary to investigate,  to
\nfind out what was the accepted position in about 1948 to  be
\nable  to  see  if any of the principles so  laid  down\twere
\naccepted  and to what extent they were modified to suit\t our
\nConstitution  in  the light of our own\thistory.   We  shall
\nfirst  notice  those  cases which were\tdecided\t before\t our
\nConstitution was drafted in 1948.\n<\/p>\n
This first point on which difference arose in Australia\t was
\nwhether s. 92 of the Commonwealth of\tAustralia  Act\t was
\naddressed only to the States, or   whether   it\t bound\t the
\nCommonwealth as well.  In W.  & A. McArthur Ltd v. State  of
\nQueensland  (2) the majority held that the Commonwealth\t was
\nnot bound.’ Gavan Duffy, J., alone held that the language of
\nthe section clearly controlled both the powers conferred  on
\nthe   Federal  Parliament  and\tthose  reserved\t  to   State
\nParliament.   The view of the majority was negatived by\t the
\nPrivy  Council\tin James v. Commonwealth of  Australia\t(3).
\nIndeed, the High Court of Australia had already doubted\t the
\ncorrectness  of\t the view, but it felt itself bound  by\t it.
\nThe  Privy Council traced the development of that  view\t and
\npointed\t out  that  though in The King v.  Vizzard  (4)\t the
\nCommonwealth agreed to be
\n(1) (1916) 22 C. L. R. 536, 573
\n(2) (920) 20 C. L. R. 530.\n<\/p>\n
(3) [1936] A. C. 578.\n<\/p>\n
(4) (1933) 50 C.L.R. 30.\n<\/p>\n
\t\t\t    579<\/span><\/p>\n
bound  within certain limits, the ruling in McArthur’s\tcase
\n(1)  was  not  departed from and that though  the  view\t was
\nreaffirmed  in\tAustralia  from time to\t time,\tit  was\t not
\napplied\t in practice.  The Board, however, did not  “shelter
\nunder the decision in McArthur’s case (1), and decided\tthat
\nthe  Commonwealth  was\talso bound.  Thus,  the\t opinion  of
\nIssacs, J., in Foggitt Jones & Co. Ltd. v. The State of\t New
\nSouth Wales (2) that s. 92
\n\t      “makes  Australia one indivisible Country\t for
\n\t      the   purpose  of\t commerce  and\t intercourse
\n\t      between  Australians” and that it was  “beyond
\n\t      the power of any State Parliament, or even  of
\n\t      the Commonwealth Parliament, by any regulation
\n\t      of   trade  and  commerce,  to   impair\tthat
\n\t      fundamental provision”\n<\/p>\n
\t       was accepted at least in its first part.\n<\/p>\n
\t      The  second  point  was  what  was  meant\t  by
\n\t      $(absolutely free”.  The Attorney-General\t for
\n\t      Australia\t in the course of his  arguments  in
\n\t      James   v.  Commonwealth\tof   Australia\t (3)
\n\t      summarised  the propositions which were  urged
\n\t      and supported by authorities in the  arguments
\n\t      before  the  Privy Council in that  case,\t and
\n\t      they were six, as follows :\n<\/p>\n
\t      “(1)  The first meaning of ‘free’ is  free  of
\n\t      all law of every description ;\n<\/p>\n
\t      (2)Free  of any restrictions  imposed  upon
\n\t      trade and commerce by reason of its interState
\n\t      character.   That\t is, free of  any  discrimi-\n<\/p>\n
\t      nating trade law ;\n<\/p>\n
\t      (3)Free  as  trade  and  commerce\t of   all
\n\t      interference whether specially directed to  it
\n\t      or not ;\n<\/p>\n
\t      (4)   Free of all laws the pith and substance
\n\t      (1)  (1920)  28  C.L.R. 530.   (2)  (1916)  21
\n\t      C.L.R. 557.\n<\/p>\n
\t      (3) [1936] A.C. 578.\n<\/p>\n
\t      580<\/span><\/p>\n
\t      of  which is a regulation of interstate  trade
\n\t      or commerce;\n<\/p>\n
\t      (5)Freedom  attaches to trade and\t commerce
\n\t      regarded\tas a whole and\tnot  distributively.
\n\t      Individuals  are\tnot  guaranteed\t freedom  in
\n\t      relation\tto their trade and commerce so\tlong
\n\t      as  trade\t and  commerce as a  whole  are\t not
\n\t      impaired.\n<\/p>\n
\t      (6)Free  from  pecuniary imposts-that  is\t the
\n\t      narrowest meaning of s. 92.”\n<\/p>\n
\t      These  six propositions fairly  represent\t the
\n\t      view   in\t  the  various\tjudgments   of\t the
\n\t      Australian High Court.  Isaacs, J., in Rex  v.
\n\t      Smithers (1) had observed :\n<\/p>\n
\t      “In  my opinion, the guarantee of\t inter-State
\n\t      freedom of transit and access for persons\t and
\n\t      property\tunder a. 92 is absolute-that is,  it
\n\t      is an absolute prohibition on the Commonwealth
\n\t      and States alike to regard State borders as in
\n\t      themselves  possible barriers  to\t intercourse
\n\t      between Australians.”\n<\/p>\n
\t      In  McArthur’a  Case (2), the claim  was\tmade
\n\t      against  all  Governmental  control  and\t the
\n\t      majority\talso  held that to be  its  meaning.\n<\/p>\n
\t      The  Privy Council examined the scheme of\t the
\n\t      Constitution  of Australia and drew  the\tline
\n\t      thus :\n<\/p>\n
\t      “The  true criterion seems to be that what  is
\n\t      meant is freedom as at the frontier or, to use
\n\t      the  words  of s. 112, in\t respect  of  ‘goods
\n\t      passing  into or out of the State’.   What  is
\n\t      meant  by\t that needs  explanation,  The\tidea
\n\t      starts with the admitted fact that  federation
\n\t      in  Australia  was intended  (inter  alia)  to
\n\t      abolish  the frontiers between  the  different
\n\t      States   and  create  one\t  Australia.\tThat
\n\t      conception   involved  freedom  from   customs
\n\t      duties,\timports,  border  prohibitions\t and
\n\t      restrictions of every
\n\t       (1) [1912] 16 C. L. R.99.\n<\/p>\n
\t       (2) [1920] 28 C. L. R. 533
\n\t       581<\/span>
\n\t      kind:the\tpeople of Australia were to be\tfree
\n\t      to  trade with each other, and to pass to\t and
\n\t      fro  among  the States,  without\tany  burden,
\n\t      hindrances or restrictions based merely on the
\n\t      fact  that  they were no members of  the\tsame
\n\t      State.”\n<\/p>\n
\t      After  referring\tto some cases in  which\t the
\n\t      burdens and hindrances took diverse forms\t and
\n\t      appeared\tunder various disguises,  the  Board
\n\t      observed that it must be a question of fact in
\n\t      every  case whether there was an\tinterference
\n\t      with  the\t freedom  of  passage,\tand  finally
\n\t      observed :\n<\/p>\n
\t      “As a matter of actual language, freedom in s.
\n\t      92  must\tbe  somehow limited,  and  the\tonly
\n\t      limitation which emerges from the context, and
\n\t      which  can  logically  and  realistically\t  be
\n\t      applied,\tis  freedom at what is\tthe  crucial
\n\t      point in inter-State trade, that it is at\t the
\n\t      State barrier.”\n<\/p>\n
The  language  of  s. 92, particularly\t“among\tthe  States,
\nwhether\t by means of internal carriage or ocean\t navigation,
\nshall  be absolutely free”, taken with the history to  which
\nwe have already referred apparently decided the controversy.
\nThis was departed from later in Commonwealth of Australia v.
\nBank of New South Wales (1), but after our Constitution\t was
\ndrafted.\n<\/p>\n
The next question decided was: what was meant by “trade\t and
\ncommerce”.  Again, in McArthur’s Case (2), the meaning given
\nwas  a very wide one.  It was not confined to the “mere\t act
\nof transportation of merchandise over the frontier.” It\t was
\nsaid   that  “all  the\tcommercial  arrangements  of   which
\ntransportation is the direct and necessary result from\tpart
\nof “trade and commerce”.  In
\n(1) [1950] A. C. 235.\n<\/p>\n
(2) [1920] 82 C. L. R. 530
\n582<\/span>
\nthe concept of “trade and commerce” were thus included-\n<\/p>\n
\t      “the   mutual  communing,\t the   negotiations,
\n\t      verbal and by correspondence, the bargain, the
\n\t      transport\t and the delivery are all,  but\t not
\n\t      exclusively, parts of that class of  relations
\n\t      between  mankind which the world\tcalls  trade
\n\t      and commerce’.”\n<\/p><\/blockquote>\n
\t      In  reaching  this  conclusion,  Knox,   C.J.,
\n\t      referred\tto Bank of India V. Wilson  (1)\t and
\n\t      Commissioners  of Taxation v.  Kirk(2),  where
\n\t      Lord Davey observed:\n<\/p><\/blockquote>\n
\t      “The  word  trade’ no  doubt  primarily  means
\n\t      traffic\tby  way\t of  sale  or  exchange\t  or
\n\t      commercial  dealing,” but also added that\t “it
\n\t      may have a large meaning.”\n<\/p><\/blockquote>\n
The view of Knox, C.J., was expressly disapproved by a Privy
\nCouncil in James v. Commonwealth of Australia (3) involving,
\nas  it did, a conception of inter-State trade, commerce\t and
\nintercourse  commencing\t at whatever stage in the  State  of
\norigin,\t and continuing until the moment in the other  State
\nwhen  the  operation of inter-State trade could be  said  to
\nend, the freedom attaching to every stop in the\t transaction
\nfrom  beginning to end.\t It was said that such a view  would
\nlead  to  an immunity from law of a whole body\tof  acts  or
\ndealings by the mere fact “that they are parts of an  inter-
\nState  transaction.” The concept of trade and  commerce\t was
\nthus  limited  to  that movement to which  crosses  a  State
\nbarrier.\n<\/p>\n
As regards “intercourse” also, the earlier meaning was wide.
\nThe  question  was  whether  such  ,,intercourse”  must\t  be
\n“commercial”.\tIt  was\t held in  earlier  cases  that\tthis
\nconferred a personal right on an Australian and “independent
\nof  any commercial attributes he may possess, to  pass\tover
\nthe
\n(1) (1877) 3 Ex.  D FOR.  (2) [1900] A.C. 588 592.\n<\/p>\n
\t\t    (3) [1936] A.C 578.\n<\/p>\n
 583<\/span><\/p>\n
Continent  irrespective of any State border as a  reason  in
\nitself for interference” (per Isaacs, J., in R. v.  Smithers
\nEx  Parte Benson (1).  This view was affirmed in  Duncan  v.
\nState  of  Queensland (2) and also in McArthur’s  case\t(3).
\nLater, it was held that the concept of “‘trade, commerce and
\nintercourse  ”\tmeant what was held to be  included  in\t the
\nconcept\t of “commerce” as understood in the  United  States:
\n(per  Dixon,  J.,  in the Bank case) (4).   With  the  exact
\nmeaning of the word, we are not presently concerned.
\nWe shall next see how the doctrine of the freedom of  trade,
\ncommerce  and intercourse was applied in practice.  In\tthis
\nconnection,  three cases filed by one James to question\t the
\nmarketing legislation of the States and the Commonwealth did
\nmuch  to  settle some of the controversies.  The  two  cases
\ndecided\t by the Privy Council before our draft\tConstitution
\nwere  due to his efforts.  His first case did not reach\t the
\nPrivy  Council, and is reported in James v. South  Australia
\n(5),  but it was approved by the Privy Council in  James  v.
\nCowan (6).  These cases may be noticed briefly.
\nIn James v. South Australia (5), State legislation  creating
\na  Dried  Fruits  Board and empowering it  to  five  maximum
\nprices (s. 19) and to determine where and in what quantities
\ndried  fruits should be marketed (s. 20), and to acquire  on
\nbehalf of the Minister dried fruits from dealers (s.   28),
\nwas challenged under s. 92.  Section 28 was  expressly\tmade
\nsubject to s. 92.  Section 20 was  declared  invalid by\t the
\nHigh  Court of Australia, but ss. 28 and 29 were hold to  be
\nvalid.\n<\/p>\n
   In  James  v.  Cowan(6), the question was  the  compulsory
\nacquisition  of\t dried\tfruits in  South  Australia  by\t the
\nMinister of Agriculture through a Board, after
\n(1) (1912) 16 C. L. R. 99.\n<\/p>\n
(2) (1916) 22 C. L. R. 556 573.\n<\/p>\n
(3) (1925) 28 C.L.R. 530.\n<\/p>\n
(4) (1948) 76 C.L. R. 1, 380, 381.\n<\/p>\n
(5) (1927) 40 C.L.R. 1.(6) [1932] A.C. 542.\n<\/p>\n
584<\/span><\/p>\n
determination  by the Board in its absolute discretion\twhat
\nquantities should be marketed locally and fixing quotas\t for
\nthe  other States.  The question was whether  this  affected
\nfreedom\t of  commerce among the States.\t The  Privy  Council
\nemphatically  answered\tthat it did.  But  it  made  remarks
\nwhich  showed that if the primary object of the\t legislation
\nwas  not directed to trade or commerce but such\t matters  as
\ndefence.,  famine,  disease and the  like.,  the  incidental
\neffect on the trade and commerce was immaterial.  The action
\nof the Minister was declared ultra vires, and James was held
\nentitled to succeed in his claim for damages.
\nThe  legislation by the State having been declared  invalid,
\nthe Commonwealth made the Dried Fruits Act (1928-35).  Under
\nthat law, no person could send dried fruit from one State to
\nanother\t unless\t he exported his  quota\t outside  Australia.
\nThis  was  challenged by James.\t When the case\treached\t the
\nPrivy  Council,\t three points were Considered by  the  Privy
\nCouncil and decided.  The first was that. 92 bound also\t the
\nCommonwealth,  the second was that it created a ban  against
\nprohibitions or burdens at the frontier, and lastly, that it
\nprotected  commerce in motion and passing the  frontiers  of
\nthe  States.  A large number of cases were noticed in  which
\nit was decided that trade and commerce was validly  burdened
\nin  the\t exercise of power to make  laws  without  impairing
\nmovement  of  trade at the borders.  These laws\t dealt\twith
\nvarious\t subjects  like monopolies, price  fixation,  health
\nregulations,  licensing systems, entry of goods\t or  persons
\nand transport.\n<\/p>\n
The  last  group consisted of cases  in\t which\trestrictions
\napplying to motor vehicles as integers of trade and commerce
\nor their owners were considered.  Willard v. Raw-ion (1) was
\nconcerned
\n(1)  (1933) 48 C.L.R. 31 S.\n<\/p>\n
 585<\/span><\/p>\n
with a law which required registration of all motor vehicles
\non payment of a fee.  The King v. Vizzard (1) was  concerned
\nwith  the  licensing  of motor\tvehicles  acting  as  common
\ncarriers.  O’ Gilpin’s case (2) was concerned with owners of
\nvehicles carrying their own goods, and Bessell v. Dayman (3)
\nwas  concerned\twith law affecting inter.   State  journeys.
\nThese  laws  were  declared valid by  the  High\t Court,\t and
\nspecial\t leave\tto  appeal  having  been  refused,  it\t was
\nunderstood that the Privy Council had approved them.  In all
\nthese  cases, the decisions were by majority, but Dixon\t and
\nStarke,\t  JJ.  dissented.   In\tJames  v.  Commonwealth\t  of
\nAustralia (4) the Privy Council selected The King v. Vizzard
\nas the best example.  In that case, the question was whether
\nthe  State  Transport  (Co-ordination)\tAct,  1931  (N.S.W.)
\ncontravened s. 92.  Under that Act, no public motor  vehicle
\ncould  operate\tin the State unless the\t motor\tvehicle\t was
\nlicensed.   Licensing  was  by a Board\twhich  had  complete
\ndiscretion,  and  a fee had to be paid.\t The  lorry  of\t the
\nappellant  in  that case plying between\t Melbourne  and\t Now
\nSouth Wales was unlicensed, and the driver was convicted for
\nbreach\tof  the\t Act.  The Australian  High  Court  held  by
\nmajority  that the Act did not contravene s. 62.  The  Privy
\nCouncil\t described  the judgment of Evatt, J., as  of  great
\nimportance and quoted the following passage from it:\n<\/p>\n
\t      “Section\t92 does not guarantee that, in\teach
\n\t      and every part of a transaction which includes
\n\t      the  inter-State carriage of commodities,\t the
\n\t      owner  of the commodities, together  with\t his
\n\t      servant\tand   agent  and  each\t and   every
\n\t      independent  contractor  co operating  in\t the
\n\t      delivery and marketing of the commodities, and
\n\t      each of his servants and
\n\t      (1)   (1933) 50 C L. R. 30.\n<\/p><\/blockquote>\n
\t      (2)   (1935) 52 C.L.R. 189.\n<\/p><\/blockquote>\n
\t      (3)   (1935) 52C.L.R.215.\n<\/p><\/blockquote>\n
\t      (4)   [1936] A.C. 5 78.\n<\/p><\/blockquote>\n
\t      586<\/span><\/p>\n
\t      agents, possesses, until delivery and  market-
\n\t      ing  are\tcompleted, a right to  ignore  State
\n\t      transport\t or  marketing regulations,  and  to
\n\t      choose  how, when and where each of them\twill
\n\t      transport and market the commodities.”
\n\t      This  was\t before\t the  decision\tof  Riverina
\n\t      Transport Pty.  Ltd v. Victoria (1), which was
\n\t      decided  on the basis of Rex. v.\tVizzard\t (2)
\n\t      though not without some doubts.
\n\t      In  1945,\t the Australian High  Court  decided
\n\t      Australian National Airways Pty.\tLtd. v.\t The
\n\t      Commonwealth  (3).   Under the  Airlines\tAct,
\n\t      1945, authority was given to establish  State-
\n\t      managed services to the exclusion of  existing
\n\t      commercial   lines  whose\t business   was\t  to
\n\t      terminate,  whenever a line,  was\t effectively
\n\t      started by the Government Airlines Commission.
\n\t      The validity of the entire Act was  challenged
\n\t      by  private operators who stood excluded\tfrom
\n\t      field, on the ground of an infringement of  s.
\n\t      92 of the Commonwealth of Australia Act.\t The
\n\t      establishment  of the Airlines Commission\t was
\n\t      upheld, but the creation of monopoly was\theld
\n\t      to be invalid.  Latham, C.J observed:
\n\t      “I venture to repeat what I said in the former
\n\t      case  (Milk Board case) (4): ‘One\t proposition
\n\t      which  I regard as established is\t hat  simple
\n\t      legislative prohibition (Federal or State), as
\n\t      distinct from regulation, of inter State trade
\n\t      and commerce is invalid.\tFurther a law  which
\n\t      is  directed  against’ inter-State  trade\t and
\n\t      commerce\tis  invalid.  Such a  law  does\t not
\n\t      regulate\tsuch trade, it merely  prevents\t it.
\n\t      But a law prescribing rules &is to
\n\t      (1)   (1937) 57 C. L. R. 327.\n<\/p><\/blockquote>\n
\t      (2)   (1933) 50 C. L. R. 30.\n<\/p><\/blockquote>\n
\t      (3)   (1945) 71 C. L. R. 29.\n<\/p><\/blockquote>\n
\t      (4)   (1939) 62 C. L. R. 116, 127.\n<\/p><\/blockquote>\n
\t\t\t\t   587<\/span><\/p>\n
\t      the  manner in which trade  (including  trans-
\n\t      port) is to be conducted is not a mere  prohi-
\n\t      bition and may be valid in its application  to
\n\t      inter-State, notwithstanding s. 92.”\n<\/p><\/blockquote>\n
One  other important case was decided by the High  Court  of
\nAustralia before our draft Constitution was prepared, and to
\nthat we next turn.  That case is Bank of New South Wales  v.
\nThe   Commonwealth   (1).   The\t question  was\t about\t the
\nconstitutionality   of\t the   Banking\t Act,\t1947,\t and
\nalternatively of some of its sections.\tThe Act provided for
\nthe  acquisition of shares in certain private banks  by\t the
\nCommonwealth  Bank by agreement or compulsion and  generally
\nfor  their closure and management by the Commonwealth  Bank.
\nFive  grounds  were taken in attacking the  Act.   One\tsuch
\nground\twas that the acquisition provisions, the  management
\nprovisions  and the prohibition provisions were contrary  to
\ns. 92 of the Australian Constitution.  Latham, C. J.,  after
\nholding\t that banking was not trade or commerce,  held\tthat
\nbanking\t was  an instrument which was  used  in\t inter-State
\ntrade  and  commerce.\tHe held, therefore  that  since\t the
\noverthrow  of McArthur’s case (2) by the Privy Council,\t the
\nlegislative control by the Act did not offend s. 92, because
\nit  was\t a general control and not a control of\t any  inter-
\nState  element.\t McTiernan, J., agreed in  this\t conclusion.
\nThe  majority, however held otherwise.\tRich  and  Williams,
\nJJ.,  in their judgement laid down that the freedom in\ts.92
\nwas  a\tpersonal right attaching to the individual,  that  a
\nbanker\twho carried on business in more than one  State\t was
\nengaged in trade, commerce and intercourse among the States,
\nthat  James v. Commonwealth (3) could not be  understood  to
\nhave laid down that s. 92 protected only the actual  passage
\nof  goods or persons from one State to another and  the\t Act
\nprohibiting such trade, commerce or inter-
\n(1) (1948) 76 C. L. R. 1, 180, 38
\n(2) (1920) 28 C. L. R. 530.\n<\/p>\n
(3)  (1936) A. C. 578.\n<\/p>\n
588<\/span><\/p>\n
course\toffended s. 92.\t Starke, J., began his\tjudgment  on
\nthis  part by saying Is. 92 of the  Constitution  prescribes
\nbut  judicial decisions have much weakened” the\t freedom  of
\ntrade,\tcommerce  and intercourse.  He then  summarised\t the
\nposition as at that date as follows:\n<\/p>\n
\t      (1)   The\t prohibition of a. 92 was  addressed
\n\t      to  the  States  as well\tas  to\tCommonwealth
\n\t      Parliament.\n<\/p><\/blockquote>\n
\t      (2)   The\t freedom was from  both\t legislative
\n\t      and executive control.\n<\/p><\/blockquote>\n
\t      (3)   The\t  freedom  was\tavailable   to\t the
\n\t      individual  as  also  to\ttrade  and  commerce
\n\t      viewed as a whole.\n<\/p><\/blockquote>\n
\t      (4)   The\t individuals were to  conduct  their
\n\t      commercial  dealings  independently  of  State
\n\t      boundaries.\n<\/p><\/blockquote>\n
\t      (5)   The\t freedom  was assured  not  only  to
\n\t      tangibles\t but  also to intangibles,  and\t the
\n\t      words  of\t the section by\t means\tof  internal
\n\t      carriage\t or ocean navigation” in s. 92 could
\n\t      not  be hold to mean only tangibles.   Starke,
\n\t      J.,  himself  said that these  words  “‘trade,
\n\t      commerce and intercourse” were wide enough  to
\n\t      include  intangibles and took the aid of\tsome
\n\t      American\t decisions  which  had\t held\tthat
\n\t      insurance was within the Commerce power.
\n\t      (6)   Though the freedom was at the  frontiers
\n\t      of  the  States  but any\trestraint  put\tupon
\n\t      trade,  commerce and intercourse\teven  before
\n\t      some  tangible  property leaves the  State  of
\n\t      origin was also contemplated.\n<\/p><\/blockquote>\n
\t      (7)   Dixon, J’s dictum in O’ Gilpin’s case(1)
\n\t      where he observed “It is not, therefore  every
\n\t      regulation of commerce or of movement
\n\t      (1) (1935) 52 C. L. R. 189.\n<\/p><\/blockquote>\n
\t       589<\/span><\/p>\n
\t      that involves a restriction or burden constit-
\n\t      uting  an\t impairment  of\t freedom.    Traffic
\n\t      regulations  affecting the lighting and  speed
\n\t      of  vehicles, tolls for the use of  a  bridge,
\n\t      prohibition of fraudulent descriptions upon  s
\n\t      goods, and provisions for the safe carriage of
\n\t      dangerous\t things,  supply  examples  of\treg-
\n\t      ulatory  provisions not strictly\trestrictions
\n\t      within s. 92.\n<\/p><\/blockquote>\n
According to State, J., all Transport cases precept  Willard
\nv.  Rawson (1) were wrongly decided. Willard v. Rawson\t(2),
\naccording  to the learned judge was a pure case\t of  traffic
\nregulation,  but  in  a\t other\tcases  the  burdens  imposed
\ndirectly and immediately upon the transport and movement  of
\npassengers and goods whether engaged in domestic inter-State
\nor  other  trade or commerce, were wrong held to  be  merely
\nregulatory of the freedom had not its restriction.
\nDixon,\tJ., in dealing with the words “trade,  commerce\t and
\nintercourse”  stated that the compensations  expression\t was
\nevidently  used\t to “include I forms and variety  of  inter-
\nState  transactions whether byway of commercial\t dealing  or
\nall  personal converse or passage”.  He also held  that\t in-
\ntangibles  like insurance, banking, etc. were included\tthat
\nconcept, and agreed with the view that though regulation  of
\ntrade, commerce and interCoarse was compatible with  freedom
\nof   inter-State   passage  or\tconverse,   anything   which
\nrestricted  the freedom of such an intercourse was  excluded
\nby  1992.   The analysis of the Banks’ case(1) in  the\tHigh
\nCourt  in the judgment of Starke, J., represents  adequately
\nthe  views entertained on the subject of freedom  of  trade,
\ncommerce  and  intercourse  in\taction\tto  s.\t92  of\t the
\nCommonwealth  of  Australia it before our  Constitution\t was
\nframed.\n<\/p>\n
(1) (1933) 48 C.L.R. 316.\n<\/p>\n
(2) (1948) 76 C.L.R. 1, 380, 381
\n590<\/span>
\nWe shall now leave the Australian scene for the time  being,
\nbut  will  revert  to it to show  how  further\tdifficulties
\narising\t in Australia from these settled views were  solved,
\nto begin with by the Privy Council and subsequently thereto,
\nby  the High Court of Australia, We shall also refer to\t the
\nlate  cases that were decided in reference to s. 92  of\t the
\nAustralian Commonwealth Act, but which were not available to
\nthe Constituent Assembly in India when our Constitution\t was
\nframed.\t  We  shall  then be in a position  to\tsee  how  in
\nAustralia the difficulties were surmounted and how in  India
\nthose  difficulties  were envisaged and tried to be  met  by
\nproper legislative enactments:\n<\/p>\n
Before we proceed to an examination of the provisions in the
\nIndian\tConstitution and their evolution, we will  refer  to
\nthe  provisions\t on  the subject of  freedom  of  trade\t and
\ncommerce  in  the  Constitutions of Canada  and\t the  United
\nStates\tof America because they were also  precedents  which
\nwere  available.  In the British North America Act, 1867  s.
\n91(2)  places “The Regulation of Trade and Commerce” in\t the
\nexclusive power of Parliament.\tSection 121 then provides:\n<\/p>\n
\t      “All   Article  of  the  Growth,\tProduce\t  or
\n\t      Manufacture of any one of the Provinces shall,
\n\t      from  and\t after the Union, be  admitted\tfree
\n\t      into each of the other Provinces.”\n<\/p><\/blockquote>\n
Several\t important  decisions  were rendered  by  the  Privy
\nCouncil and to some of theme we find it necessary to  refer.
\nIn Citizens Insurance Co. v. Parssons (1) and. again in Bank
\nof  Toronto v. Lamb(3) the Privy Council found it  necessary
\nto  limit  the general words of No. 2 of s.  91\t ‘to  afford
\nscope  for powers given exclusively to the  Provincial\tLeg-
\nislatures’.  In City of Montreal v. Montreal Street  Railway
\n(3), the same was observed again.  Lord
\n(1) (1881) 7 App.  Cas. 96.\n<\/p>\n
(2) (1887) 12 App.  Cas. 575.\n<\/p>\n
(3) (1912) A. C. 333, 344.\n<\/p>\n
 591<\/span><\/p>\n
Halsbury, L. C., in Attorney-General for Onterio v. Attorney
\nGeneral\t for  the Dominion (1) said that the words  must  be
\ngiven ‘a statutory meaning’.  There is, however no  definite
\nstatement  of  the  limits to be placed\t but  generally\t the
\nexercise  of  regulation of trade and  commerce\t within\t the
\nProvinces  is upheld under No. 16 of s. 92, which gives\t the
\nfollowing power to the Provinces:\n<\/p>\n
“Generally  all matters of a merely local or private  nature
\nin the Province.”\n<\/p>\n
And  this is even where some prohibitions  and\trestrictions
\naffect\tthe importation, exportation,  manufacture,  keeping
\nsale,  purchase and use of commodities and must in some\t way
\ninterfere with business operations beyond the Province.\t  In
\nBank  of Toronto v. Lambe (2) at p. 586, the  Privy  Council
\nsaid  that  if\tthe general power  of  regulation  given  to
\nParliament could be said to prohibit provincial taxation  on
\nthe  persons  or  things  regulated, it\t could\tonly  be  by
\nstraining  those general words to their widest\textent.\t  In
\nthe  Liquor Prohibition Appeal 1895 (2), Lord  Watson  asked
\nthe  question which we may well ask: “Do you regulate a\t man
\nwhen you tax him?” and Lord Herschel said thereupon:\n<\/p>\n
\t      “May  it\tnot be necessary to regard  it\tfrom
\n\t      this  point  of view, to find what  is  within
\n\t      regulation of trade and commerce, what is\t the
\n\t      object  and scope of the legislation.?  Is  it
\n\t      some public object which incidentally involves
\n\t      some fetter on trade or commerce or is it\t the
\n\t      dealing  with  trade  and\t commerce  for\t the
\n\t      purpose of regulating it ? May it not be that,
\n\t      in the former ease, it is not a regulation  of
\n\t      trade and commerce, while in the latter it is,
\n\t      though  in each case trade and commerce  in  a
\n\t      sense may be affected ?”\n<\/p><\/blockquote>\n
\t      (1)  [1896]  A. C. 348\t(2) (1817)  12\tApp.
\n\t      Cas. 575.\n<\/p><\/blockquote>\n
\t      592<\/span><\/p>\n
\t      Lord Watson then said:\n<\/p><\/blockquote>\n
\t      “It  would  be difficult to imply\t from  these
\n\t      words  the regulation of trade  and  commerce’
\n\t      whilst  the power of direct taxation is  given
\n\t      the  province the clauses must  be  reasonable
\n\t      read together it would be difficult to suppose
\n\t      that regulating commerce meant the passing  of
\n\t      an  Act by the Dominion  legislator  exempting
\n\t      banks    from   provincial    taxation,\t for
\n\t      practically that is what the argument in\tthat
\n\t      case” [Bank of Toronto v. Lambe (1)] had\tcome
\n\t      to;  that under the words regulating  commerce
\n\t      was  implied a power of exempting a bank\tfrom
\n\t      provincial  taxation, or the liability  to  by
\n\t      taxed  by the provincial parliament.”  (Lefroy
\n\t      Canada’s Federal System (1913) p. 391).
\n\t      We  do not consider it necessary to  refer  to
\n\t      more cases but would refer later to the  words
\n\t      of  Lord, Watson and Lord Herschell, which  we
\n\t      have quote, here.\n<\/p><\/blockquote>\n
\t      The  law in United States of America need\t not
\n\t      detain  us  long.\t Article 1. s. 8  gives\t the
\n\t      commerce power in the following terse words :
\n\t      “The  Congress  shall  have  power………  T
\n\t      regulate\tCommerce with foreign  Nations,\t an,
\n\t      among  the several States, and with the  India
\n\t      Tribes.”\n<\/p><\/blockquote>\n
\t      In  1824,\t in the well-known case\t of  Gibbone
\n\t      Ogden   (2),  this  clause   was\t considered.
\n\t      Marshall, C.J gave the definition of  commerce
\n\t      :\n<\/p><\/blockquote>\n
\t      “Commerce, undoubtedly, is traffic, but it  is
\n\t      something\t  more;\t  it  is   intercourse.\t   I
\n\t      describes\t the commercial intercourse  between
\n\t      nations  and  parts  of  nations,\t in  all  it
\n\t      branches, and is regulated by prescribing rule
\n\t      for carrying on that intercourse.”
\n\t      (1) [1837] 12 App, Cas. 575.\n<\/p><\/blockquote>\n
\t       (2) (1824) 9 Wheat 16 L. ed. 23.\n<\/p><\/blockquote>\n
\t      593<\/span><\/p>\n
\t      The  principle of federation as understood  in
\n\t      the  United  States is that  sovereign  States
\n\t      have surrendered a part of their power to\t the
\n\t      United  states  and  barring  what  has\tbeen
\n\t      surrendered  and\twhat is\t prohibited  by\t the
\n\t      constitution   of\t the  States,  the   residue
\n\t      belongs\tto  the\t United\t States.   This\t  is
\n\t      brought, out in the Tenth Amendment:
\n\t      “The powers not delegated to the United States
\n\t      by  the Constitution nor prohibited by  it  to
\n\t      the   States,  are  reserved  to\tthe   States
\n\t      respectively, or to the people.”
\n\t      Most of the cases in the American Reports\t are
\n\t      concerned\t with  what  rights  belong  to\t the
\n\t      States  and how far the Congress can  regulate
\n\t      commerce.\t That is not a subject with which we
\n\t      are concerned in the present enquiry.
\n\t      We now come to the Indian scene.\tIn M. P.  V.
\n\t      Sundararamier  &\tCo. v. The State  of
\n\t      Andhra Pradesh Venkatarama Aiyar, J.,<\/a>  rightly
\n\t      pointed out that
\n\t       “Our Constitution was not written on a tabula
\n\t      rasa,  that  a Federal Constitution  bad\tbeen
\n\t      established under the Government of India Act,
\n\t      1935,   and  though  that\t has   under.\tgone
\n\t      considerable   change   by  way\tof   repeal,
\n\t      modification  and addition, it  still  remains
\n\t      the    framework\t on   which   the    present
\n\t      Constitution is built, and that the provisions
\n\t      of  the Constitution must accordingly be\tread
\n\t      in   the\tlight  of  the\tprovisions  of\t the
\n\t      Government of India Act (1935)”\n<\/p><\/blockquote>\n
The  history of India during the last hundred years was\t one
\nof   continual\ttransition.   From  the\t fully\t centralised
\nGovernment  at\tthe Centre and in the  administrative  units
\nthen  called  provinces\t to partial  responsibility  in\t the
\nprovinces called Dyarchy, from
\n(1)  [1958] S. C. R. 1422, 1478.\n<\/p>\n
594<\/span><\/p>\n
Dyarchy\t to  provincial\t Autonomy in a\tfederation  of\tmere
\nadministrative\tunits  in  which  the  Indian  States\twere
\nexpected  to join, and from thence to a Dominion  under\t the
\nCrown  and  lastly to a Republic of a Union  of\t States\t are
\ntransitions  within one’s memory.  Earlier still, there\t was
\nthe  rule of East India Company under the Crown through\t the
\nSecretary of State for India and the Governor-General.
\nThe  transition\t in India was thus in  the  converse  order.
\nWhereas\t  several  independent\tunits  joined  together\t  in
\nAustralia   to\tform  a\t federation  to\t evolve\t a   Central
\nGovernment,  in\t India\tthe transition\twas  from  a  highly
\ncentralised Government to a federation of States which\twere
\nmade  autonomous  units.  The history of  the  last  hundred
\nyears  or  more\t thus saw the emergence\t of  self  governing
\nStates with separate legislatures, executives and  financial
\nresources,  albeit controlled by the Centre.  The  union  of
\nthese  States makes them members of a  Sovereign  Democratic
\nRepublic.   We\tshall  briefly\tnotice\tthe  steps  in\tthis
\ntransformation.\t Our survey must begin somewhat earlier than
\nthe Government of India Act, 1935, but it need only  embrace
\nthe degree of independence in the legislative and  financial
\nfields.\n<\/p>\n
Under  the  East  India Company, the  notion  of  a  Central
\nGovernment  did not emerge till the Charter of\tthe  Company
\nwas  renewed  in  1833, and  the  Governor-General  and\t his
\nCouncil\t in  Bengal  began  to\texercise  control  over\t the
\npresidential  of Madras and Bombay.  There was thus  a\tmove
\ntowards\t a  unitary  form of government.  In,  view  of\t the
\nbitter\tlessons learnt in the days of Warren  Hastings,\t the
\nGovernor-General  was also authorised by the Charter Act  of
\n1833 to overrule his Council, a power which he continued  to
\nexercise  down\tto  1935.   There was  thus,  in  truth\t and
\nreality,  only one Government and the so-called\t Governments
\nof
\n\t\t\t    595<\/span>
\nthe  Presidencies and Provinces were agents of\tthe  Central
\nGovernment.   After 1858, the Government of the country\t was
\ncarried on in the name of the Queen through her Secretary of
\nState  for  India.  The general pattern\t was,  however,\t the
\nsame,  though  as time passed,\tdemocratic  institutions  in
\nGovernment slowly emerged.\n<\/p>\n
When  the  Reforms came in 1919 and introduced a  system  of
\nlocal governments, the process was not decentralisation\t but
\nreconcentration,  as  is known in France.   By\tstages,\t the
\nCouncils  at  the Centre and in the Provinces  were  greatly
\nexpanded,  a large number of nominated members being  added.
\nWhen  elections\t came, they included the  representation  of
\nsome special interests.\t Legislation was even then from\t the
\nCentre\tin  the shape of Regulations or\t under\tinstructions
\nfrom the Centre, unless it was of a wholly local character.
\nWe shall. pass over the details of the preparatory  periods.
\nWhen  Parliament  began to modify all this, the aim  was  to
\ngive  to the Provinces a separate existence, though under  a
\nstrong\tCentre. When the Government of India Act,  1915\t was
\namended,  there was a definite break up of  the\t legislative
\nmachinery  into\t two.  There emerged  then  the\t Legislative
\nAssembly  and  local Legislatures.  In the  field  of  local
\nLegislatures, the first experiments in Democracy were tried.
\nTo  invest  separate powers, there was a  classification  of
\nsubjects  between  the\tCentre and the\tProvinces,  and\t the
\ntopics\tof  legislation, taxation  and\tadministration\twere
\nseparated  to  distinguish  the\t different  spheres.\tSuch
\nprovision  was\tto be made under S. 45A and the\t rules\tthat
\nwere  framed, go under the name of the Devolution Rules\t and
\nits  Schedules\twere the precursors of the Lists  under\t the
\nGovernment of India Act, 1935 and the present  Constitution.
\nThe only difference was that there
\n596<\/span>
\nwas  no\t third\tList, which was\t hardly\t necessary,  ax\t the
\nresidual  power was in the Centre.  The powers of the  local
\nLegislatures  were, however, not unlimited.  Apart from\t the
\nlimitations arising from the allotment of subjects under the
\nDevolution  Rules, there was a control of the  Centre.\t Any
\nAct  passed by the local Legislature could be disallowed  by
\nthe    Governor-General\t  or   the   Crown.    In    certain
\ncircumstances,\t it   could  be\t repealed  by\tthe   Indian
\nLegislature.  Thus, though the seed of federation was sowed,
\nthere was no semblance of a federation.\n<\/p>\n
We  shall now analyse the financial arrangements,  including
\ntaxation,  during  the period covered by  us  already.\t The
\nfinances  of  India  during  the  early\t stages\t were\talso
\ncentralised.   The Provinces were given what was  considered
\nto  be\ttheir  `needs’ and provincial taxation\tas  well  as
\nProvincial  expenditure\t were  centrally  controlled.\t The
\nprocess of decentralisation in finance, however, may be said
\nto  have  commenced earlier.  The Act of 1858 by  which\t the
\nrule  of the East India Company was terminated\talso  vested
\nthe  revenues  of  India in the\t Crown\twith  the  necessary
\ncontrol in the Secretary of State.  Mr. Wilson, the  founder
\nof  the\t ‘Economist’  and  the\tfirst  Member  for  Finance,
\nadvocated that the Provinces should not depend on  “,grants”
\nbut should have independent resources.\tHis suggestions bore
\nfruit  in  Lord\t Mayo’s regime, when in\t addition  to  fixed
\ngrants\tsome sources of revenue were  “provincialised”.\t  By
\n1882  there came to exist a bifurcation which was  described
\nin  the phrase “divided heads of revenue”-a phrase used\t for
\nyears  afterwards.   The Montagu-Chelmsford Report  was\t the
\nnext  important\t landmark  and\tled  to\t proper\t  provincial
\nenfranchisement.  The Report said:\n<\/p>\n
\t      “The existing financial relations between\t the
\n\t      Central and Provincial Governments must
\n\t      597<\/span>
\n\t      be changed if the popular principle in Govern-
\n\t      ment  is to have fair play in  the  Provinces.
\n\t      Our first aim has therefore been to find\tsome
\n\t      means of entirely separating the resources  of
\n\t      the Central and Provincial Governments.”
\n\t      Under   the  Government  of  India  Act,\t the
\n\t      Devolution  Rules\t (Rules 2 and 14)  made\t the
\n\t      separation of the resources.  From this, it is
\n\t      not  to be gathered that the Provinces  had  a
\n\t      separate fisc.  By R. 16, it was provided that
\n\t      all moneys were to be paid into an account  in
\n\t      the  custody  of the Governor-General  and  he
\n\t      made rules with the sanction of the  Secretary
\n\t      of  State and issued orders, both general\t and
\n\t      special,\t for   payments,   withdrawals\t  or
\n\t      disbursements  from that account.\t By far\t the
\n\t      greater  part  of the Devolution\tRules  dealt
\n\t      with  these  matters and, in  addition,  there
\n\t      were congeries of rules and instructions.
\n\t      Taxation\tin the Provinces was under Entry  48
\n\t      in  Part\tII  of the  First  Schedule  of\t the
\n\t      Devolution Rules, which read:\n<\/p><\/blockquote>\n
\t      “48.    Sources  of  Provincial  Revenue\t not
\n\t      included under previous heads, whether-\n<\/p><\/blockquote>\n
\t      (a)   taxes  included in the Schedule  to\t the
\n\t      Scheduled Tax Rules
\n\t      or\n<\/p><\/blockquote>\n
\t      (b)   taxes, not included in those  schedules,
\n\t      which  are  imposed  by  or  under  provincial
\n\t      legislation  which  has received\tthe  general
\n\t      previous sanction of the Governor-General”\n<\/p><\/blockquote>\n
The  Scheduled\tTax Rules made by  the\tGovernor-General  in
\nCouncil\t under s. 80A (3)(a) of the Government of India\t Act
\ndivided\t the heads of taxes into two parts.  The first\tpart
\ndealt with taxes
\n598<\/span>
\nwhich  the  Legislative Councils could\timpose\twithout\t the
\nprevious  sanction of the Governor General for the  purposes
\nof Local Government.  The second part dealt with taxes which
\nthe local Legislatures could impose or authorise the imposi-
\ntion  of,  without the previous sanction  of  the  Governor-
\nGeneral\t  for  purposes\t of  local  authority.\t The   first
\ncontained  eight heads: six taxes, one registration fee\t and
\none  stamp duty.  The six taxes were (a) tax on land put  to
\nnon-agricultural  uses,\t (b) tax on succession, (c)  tax  on
\nbetting and gambling, (d) tax on advertisements, (e) tax  on
\namusements and (f) tax on specified luxuries.  In the second
\npart  were  (a) tolls, (b) taxes on vehicles or\t boats,\t (c)
\noctroi, (d) terminal taxes if octroi was not levied in\tthat
\narea  before  a\t particular  date,  (e)\t taxes\ton   trades,
\nprofessions  or\t callings, and (f) tax on  private  markets.
\nThere were also taxes and fees on certain services which the
\nlocal authorities render.  The six taxes in the second\tpart
\nwere  taxes on trade and commerce in motion.  They  were  of
\ncourse\t taxes\tfor  local  authorities,  but\tthe   Indian
\nLegislature,  the  Governor-General and\t finally  the  Crown
\ncould  annul  any law if not acceptable to them.   We  shall
\npass  over the Report of the Committee of  Inquiry  presided
\nover  by Lord Mestan, which recommended the amounts  payable
\nto  Local  Governments from income-tax etc.  We\t shall\talso
\npass over the Reforms Inquiry Committee presided over by Sir
\nAlexander Muddiman and that presided over by Lord  Incheape.
\nUnder  the recommendations of the first and as a  result  of
\nthe  retrenchment  made by the second, in 1927-28  the\tcon-
\ntributions  by the Provinces ceased.  Thus, just before\t the
\nestablishment  of  the Indian Statutory Commission  in\t1927
\nthere  was  not\t only Dyarchy working  but  the\t sources  of
\nrevenue were divided between the Centre and the Provinces.
\nIt was at this stage that the Indian Statutory
\n599<\/span>
\nCommission  (popularly\tknown as the Simon  Commission)\t was
\nappointed.   The  Commission recommended  that\tthe  Organic
\nInstrument  to be framed should have provisions for its\t own
\ndevelopment;  in  other words, that India  should  have\t act
\nflexible  and  not  a  rigid  Constitution,  and  that\t any
\ndevelopment  should have regard to India as a whole and\t not
\nmerely\tBritish India.\tIn this, there was the echo of\twhat
\nthe Montagu-Chelmsford Report said:\n<\/p>\n
\t      “Our  conception\tof the\teventual  future  of
\n\t      India   is  a  sisterhood\t of  States,   self-
\n\t      governing\t in all matters of purely  local  or
\n\t      provincial interest In this picture there is a
\n\t      place for the Native States.”\n<\/p><\/blockquote>\n
\t      The  Commission emphasised one fact more\tthan
\n\t      any other.  They observed:\n<\/p><\/blockquote>\n
\t      “Economic forces are such that the States\t and
\n\t      British India must stand or fall together. The
\n\t      increasing   importance  of  industry   brings
\n\t      problems\tthat must be faced by both  together
\n\t      The  States themselves have their\t own  tariff
\n\t      policies,\t and there is a serious\t possibility
\n\t      that,  unless  provision can be made  for\t the
\n\t      reconciliation of divergent interests, numbers
\n\t      of tariff walls will be perpetuated in an area
\n\t      where fiscal unity is most desirable.”
\n\t      The Commission also suggested that-
\n\t      “the  now Constitution should provide an\topen
\n\t      door whereby, when it seems good to them,\t the
\n\t      Ruling   Princes\t may  enter  on\t  just\t and
\n\t      reasonable terms.”\n<\/p><\/blockquote>\n
\t      The   Commission,\t therefore,  recommended   a
\n\t      federal Constitution composed of British India
\n\t      and the Indian States.  They said:
\n\t      “We  are inclined ourselves to think that\t the
\n\t      easier and more speedy approach to the
\n\t      600<\/span>
\n\t      desired  end can be obtained  by\treorganising
\n\t      the  Constitution of India on a federal  basis
\n\t      in such a way that individual States or groups
\n\t      of States may have the opportunity of entering
\n\t      as soon as they wish to do so. ”\n<\/p><\/blockquote>\n
When the Government of India Act, 1935, was being fashioned,
\nthe  Committee\twas assisted by a Financial Adviser  in\t Mr.
\n(later,\t Sir) Walter Leyton, whose task was to\tevolve\tsome
\nscheme\t under\twhich  the  Provinces  could  get   adequate
\nrevenues.   The Indian States, if they were to join  in\t the
\nFederation,   also   insisted\tthat   their   position\t  be
\nsafeguarded.   Mr. Leyton then pointed out that\t before\t the
\nIndian\tStates\tCommittee, 1928-29 (commonly  known  as\t the
\nButler Committee) the Indian States had urged that they must
\nreceive a share of the customs which bad by then risen to as
\nmuch  as  Rs. 50 crores, and the Butler Committee  had\talso
\nsuggested  that this claim should be examined by a panel  of
\nexperts.  When the Round Table Conference met, the  question
\nof the shares of the Indian States in the customs and excise
\nrevenues was again raised.  The Federal Structure  Committee
\nwas  commissioned  among  other matters, to  report  on\t the
\npowers\t of   Federal\tLegislature   and   the\t  Provincial
\nConstitution  Committee,  to report in the same way  on\t the
\npowers of the Provincial Legislatures.\tIn the report of the
\nFederal Structure Committee, the subject of trade and  taxes
\non it was dealt with only from the angle of  discrimination,
\nbut  emphasis  appears to have been placed only\t on  British
\ntrade  and  the fiscal conventions.  Thus,  the\t discussions
\nbefore the Conference also centered round two questions: (a)
\nthe protection of British interests and (b)  no\t  commercial
\ndiscrimination on the ground of race\tetc.\n<\/p>\n
When  the  Joint  Parliamentary\t Committee  on\tthe   Indian
\nConstitutional\tReforms\t went  into  these  questions,\t and
\nrecommended the abolition of
\n\t\t\t    601<\/span>
\nDyarchy\t in  the federating units and the  establishment  of
\nProvincial  Autonomy,  the Committee sensed the\t dangers  of
\nbreaking up the unity of India and said:\n<\/p>\n
\t      “…in  transferring so many of the powers  of
\n\t      Government  to  the Provinces, and  in  encou-
\n\t      raging  them to develop a vigorous  and  inde-
\n\t      pendent  political life of their own, we\thave
\n\t      been running the inevitable risk of  weakening
\n\t      or  even\tdestroying that\t unity.\t  Provincial
\n\t      Autonomy is, in fact, an inconceivable  policy
\n\t      unless it is accompanied by such an adaptation
\n\t      of the structure of the Central Legislature as
\n\t      will bind these autonomous units together”.
\n\t      They also pointed out that the unity of  India
\n\t      on  which they had laid so much  emphasis\t was
\n\t      dangerously  imperfect so long as\t the  Indian
\n\t      States had no constitutional relationship with
\n\t      British  India.  The Committee recognised\t the
\n\t      difficulties  of\teconomic  ties\tbetween\t the
\n\t      Provinces inter se and also British India as a
\n\t      whole  on the one hand, and the Indian  States
\n\t      on the other, and observed :\n<\/p><\/blockquote>\n
\t      “On the one band, with certain exceptions, the
\n\t      States are free themselves to impose  internal
\n\t      customs  policies, which Cannot  but  obstruct
\n\t      the flow of trade.  Even at the maritime ports
\n\t      situated in the States, the administration  of
\n\t      the  tariffs is imperfectly  coordinated\twith
\n\t      that  of the British Indian ports,  while\t the
\n\t      separate\t rights\t of  the  States  in   these
\n\t      respects\tare  safeguarded  by  long  standing
\n\t      treaties\tor usage acknowledged by the  Crown.
\n\t      On  the other hand, tariff policies, in  which
\n\t      every  part of India is interested,  are\tlaid
\n\t      down  by\ta Government of\t India\tand  British
\n\t      India Legislature in which no Indian State has
\n\t      a voice, though the States constitute
\n\t      602<\/span>
\n\t      only  slightly  less than half the  area,\t and
\n\t      one-fourth  of the population of India.\tEven
\n\t      where  the  Government of India  has  adequate
\n\t      powers to impose internal indirect taxation or
\n\t      to  control  economic development, as  in\t the
\n\t      case  of\tsalt  and opium, the  use  of  these
\n\t      powers has caused much friction and has  often
\n\t      left behind it, in the States, a sense of\t in-
\n\t      justice.\t”\n<\/p><\/blockquote>\n
\t      They  suggested  the means by  which  internal
\n\t      trade  and  commerce  could  be  secured\tsome
\n\t      measure  of freedom and their  recommendations
\n\t      must be quoted in extenso.  In para 264 of the
\n\t      Report, they observed :\n<\/p><\/blockquote>\n
\t      “It  is  greatly\tto be  desired\tthat  States
\n\t      adhering\tto the Federation should,  like\t the
\n\t      Provinces,  accept the principle\tof  internal
\n\t      freedom  for  trade  in  India  and  that\t the
\n\t      Federal Government alone should have the power
\n\t      to  impose tariffs and other  restrictions  on
\n\t      trade.\t Many\tStates,\t  however,    derive
\n\t      substantial   revenues  from  customs   duties
\n\t      levied at the frontiers on goods entering\t the
\n\t      State from other parts of India.\tThese duties
\n\t      are  usually referred to as  internal  customs
\n\t      duties, but in many of the smaller States\t are
\n\t      often  more akin to octroi and terminal  taxes
\n\t      than to customs.\tIn some of the larger States
\n\t      the  right  to  impose  them  is\tspecifically
\n\t      limited  by treaty.  We recognise that  it  is
\n\t      impossible  to deprive States of revenue\tUpon
\n\t      which they depend for balancing their  budgets
\n\t      and  that they must be free to alter  existing
\n\t      rates of duty to suit varying conditions.\t But
\n\t      internal\tcustoms\t barriers are  in  principle
\n\t      inconsistent  with the freedom of\t interchange
\n\t      of  a fully developed Federation, and  we\t are
\n\t      strongly\tof  the opinion\t that  every  effort
\n\t      should  be made to substitute other  forms  of
\n\t      taxation for these internal-\n<\/p><\/blockquote>\n
\t\t\t\t   603<\/span><\/p>\n
\t      customs the accession of a State to the  Fede-
\n\t      ration  should  imply its\t acceptance  of\t the
\n\t      principle that it will not set up a barrier to
\n\t      free   interchange   so\tformidable   as\t  to
\n\t      constitute   a   threat  to  the\t future\t  of
\n\t      Federation…”\n<\/p><\/blockquote>\n
\t      However,\t  in   dealing\t  with\t  commercial
\n\t      discrimination,\tthe   Joint    Parliamentary
\n\t      Committee\t was  more  concerned  with  British
\n\t      Imports and the Fiscal Convention which it was
\n\t      anticipated,   would   lapse   on\t  the\t new
\n\t      Constitution    coming   into   force.\t The
\n\t      Committee,   therefore,  suggested  that\t the
\n\t      Governor-General\tand the Governors should  be
\n\t      empowered\t to withhold their assent  to  Bills
\n\t      which were discriminatory in fact or bad\tthat
\n\t      tendency.\t  They\talso  recommended  statutory
\n\t      prohibition against certain specified kinds of
\n\t      discrimination, and added :\n<\/p><\/blockquote>\n
\t      “We  need\t hardly add that the effect  of\t our
\n\t      recommendation  for the statutory\t prohibition
\n\t      of  certain specified forms of  discrimination
\n\t      would  lay open to challenge in the Courts  as
\n\t      being  ultra vires any  legislative  enactment
\n\t      which is inconsistent with these prohibitions,
\n\t      even  if the Governor-General or Governor\t has
\n\t      assented to it.”\n<\/p><\/blockquote>\n
With  these suggestions in respect of the freedom  of  Grade
\nand  commerce, a Federal Constitution was  recommended.\t  It
\nwas  also  recognised that it would be the  Provinces  which
\nwould  carry on the ,national building activities’  and\t the
\nneed  for  more\t finances  ‘or\tthe  Provinces\twas  acutely
\nrecognised.   The establishment of self-governing units\t and
\nself-governing\t constitutions,\t the  creation\tof   deficit
\nProvinces,  the\t corporation  of  Burma\t and  the  cost\t  of
\nestablishment of a Federation, were matters which were\tgone
\ninto   by  the\tFederal\t Finance  Committee.   The   Federal
\nStructure   Committee,\tSir  Walter  Leyton,  the   Davidson
\nCommittee  and experts like Sir Malcolm Hailey and Sir\tOtto
\nNiemeyer.  The Report
\n604<\/span>
\nof  the\t First Taxation Inquiry Committee  (1926)  was\talso
\navailable  from\t which guidance was taken, and just  as\t the
\ntopics of legislation were demarcated between the Centre and
\nthe Provinces, so also the sources of revenue were allocated
\nbetween the Centre and the Provinces.  The intention was  to
\ncreate\tfinancially  stable governments\t with  well  defined
\npowers\tof  taxation.\tThis  was,  of\tcourse,\t  absolutely
\nnecessary if the autonomous Provinces were to exist  without
\nsubventions,  which  were necessary to support\tthe  deficit
\nProvinces.    The   legislative\t  heads\t  were,\t  therefore,
\ncompletely divided between the Centre and the Provinces one
\nList  being exclusive to each and a third List was added  by
\nwhich  certain subjects were to be within  their  concurrent
\njurisdiction.  The intention was to avoid the assignment  of
\nresidual  powers to a minimum, and as observed by Gwyer,  C.
\nJ., in In re The Central Provinces and Berar Act No. XIV  of
\n1938  (1),  this “,made the Indian Constitution\t Act  unique
\namong federal Constitutions in the length and detail of\t its
\nLegislative  Lists.”  The  Government of  India\t Act,  1935,
\nprovided  by  s.  5  that His  Majesty\twas  to\t declare  by
\nproclamation  that  as from a date to  be  appointed  “there
\nshall be united in a Federation under the Crown, by name  of
\nthe Federation of India,-\n<\/p>\n
(a)  Provinces……\n<\/p>\n
(b)  The  Indian States which have or may thereafter  accede
\nto the Federation……..\n<\/p>\n
The proclamation never issued.\n<\/p>\n
The  freedom of trade and commerce which was the subject  of
\nsuch  anxious  thought\treceived  short\t treatment  in\t the
\nGovernment  of\tIndia  Act, 1935.  Chapter  III\t in  Part  V
\n(Legislative Powers)
\n(1)  [1939] F.C.R. 18, 38.\n<\/p>\n
\t\t\t    605<\/span><\/p>\n
dealt with discrimination in a series of sections which\t Dr.
\nKeith described as “liable to be regarded as oppressive\t and
\nunfair.” Though lip service was paid to caste, creed, colour
\netc. the provisions were really designed to protect  British
\ninterests.   The freedom of internal trade  simpliciter\t was
\ndealt  with in Part XII (Miscellaneous and General), and  s.
\n297 provided :\n<\/p>\n
\t      “297   (1).   No\tProvincial  Legislature\t  or
\n\t      Government shall-\n<\/p><\/blockquote>\n
\t      (a)   by virtue of the entry in the Provincial
\n\t      Legislative   List  relating  to\t trade\t and
\n\t      commerce within the Province, or the entry  in
\n\t      that list relating to the production,  supply,
\n\t      and distribution of commodities have power  to
\n\t      pass  any\t law or take  any  executive  action
\n\t      prohibiting  or restricting the entry into  or
\n\t      export  from,  the Province of  goods  of\t any
\n\t      class or description :\n<\/p><\/blockquote>\n
\t      (b)   by\tvirtue of anything in this Act\thave
\n\t      power  to impose any tax, cess, toll,  or\t due
\n\t      which,   as  between  goods  manufactured\t  or
\n\t      produced\tin the Provinces and  similar  goods
\n\t      not so manufactured or produced, discriminates
\n\t      in  favour  of the former, or, which,  in\t the
\n\t      case of goods manufactured or produced outside
\n\t      the  Provinces,  discriminates  between  goods
\n\t      manufactured  or produced in one locality\t and
\n\t      similar  goods  manufactured  or\tproduced  in
\n\t      another locality.\n<\/p><\/blockquote>\n
\t      (2)   Any law passed in contravention of\tthis
\n\t      section  shall, to the extent of\tthe  contra-
\n\t      vention, be invalid”<\/p><\/blockquote>\n
\t      By  this\tsection,  power was  denied  to\t the
\n\t      Provincial  Legislatures under two Entries  in
\n\t      the
\n606<\/span>
\nProvincial List to impair free entry and export of goods  in
\nthe Provinces.\tThe two Entries were referred to  separately
\nand expressly by their content and were
\n“27.  Trade and Commerce within the Province” and\n<\/p>\n
29.  Production, supply and distribution of goods.”
\nThe  word ,’commodities” was used instead of “goods” in\t the
\nWhite Paper, and the change to “goods” appears to have\tbeen
\nlost sight of in s. 297(1).   However,\tthe  definition\t  of
\n“goods” took in\t    commodities, and the words “goods of any
\nclass or  description”\twere  wide enough to show  what\t was
\nmeant.\t The subject of taxation was not dealt with  in\t cl.\n<\/p>\n
(a)  but  cl. (b), and that provided that  taxation  in\t the
\nProvinces  was\tnot to have a differential basis.   In\tthis
\nconnection,  reference may also be made to Entries  19,\t 20,
\n21,  22,  23, 24 and 26 of List I and Entries 20 and  32  in
\nList  III,  which ‘in some measure)  involve  regulation  of
\ntrade, commerce and intercourse.\n<\/p>\n
The detailed examination of the history lying at the back of
\nthe   Government  of  India  Act,  1935,  lays\t bare\tsome
\nfundamental  facts and premises.  It shows that the  process
\nthrough\t a  whole  century  was\t the  breakup  of  a  highly
\ncentralised  Government\t and  the  creation  of\t  autonomous
\nProvinces with distinct and separate political existence, to
\nbe combined inter se and with the Indian States, at a  later
\nperiod,\t in  a federation.  To achieve this,  not  only\t was
\nthere  a  division  of\tthe heads  of  legislation  but\t the
\nfinancial resources were also divided and separate fiscs for
\nthe  federation\t and the Provinces  were  established.\t The
\nfields\tof  taxation  were demarcated,\tand  those  for\t the
\nProvinces were chosen with special care to make these  units
\nself supporting as far as possible with enough to spare
\n\t\t\t    607<\/span>
\nfor  “nation-building activities.” In this arrangement,\t the
\ndoor  was  open for the Indian States to join  on  the\tsame
\nbasis and on terms of equality.\t The most important fact was
\nthat unlike the American and the Canadian Constitutions\t the
\ncommerce  power\t was  divided between  the  Centre  and\t the
\nProvinces  as  the Entries quoted by us clearly\t show.\t The
\ncommerce  power of the Provinces was exercisable within\t the
\nProvinces.   The  fetter  on the  commercial  power  of\t the
\nProvinces was Placed by s. 297.\t This was in two directions.
\nClause (a) of sub-s. (1) banned restrictions at the barriers
\nof  the Provinces on the entry and export of goods, and\t cl.\n<\/p>\n
(b) prohibited discrimination in taxing goods between  goods
\nmanufactured  and produced in the Province as against  goods
\nnot so manufactured or produced and local discriminations.
\nWhen  drafting\tthe Constitution of India,  the\t Constituent
\nAssembly  being aware of the problems in  various  countries
\nwhere  freedom of trade, commerce and intercourse  has\tbeen
\nprovided  differently and also the way the Courts  of  those
\ncountries  have\t viewed the relative provisions,  must\thave
\nattempted  to evolve a pattern of such freedom\tsuitable  to
\nIndian\tconditions.  The Constituent Assembly realised\tthat
\nthe provisions of s. 297 and the Chapter on  Discriminations
\nin  the Government of India Act, 1935, hardly met the  case,
\nand  were  inadequate.\t They had to  decide  the  following
\nquestions  :  (a) whether to give the  commerce\t power\tonly
\nParliament or to divide it between Parliament and the  State
\nLegislatures  ;\t (b)  whether to ensure\t freedom  of  trade,
\ncommerce and intercourse interState, that is to say, at\t the
\nborders\t of the States or to ensure it even  intra-States  ;\n<\/p>\n
(c)  whether  to make the prohibition  against\trestrictions
\nabsolute  or qualified, and if so, in what manner ;  (d)  if
\nqualified by whom was the restriction to be imposed and to
\n608<\/span>
\nwhat  extent;  (e)  whether the freedom\t should\t be  to\t the
\nindividual  or also to trade and commerce as a whole  ;\t (f)
\nwhat to do with the existing laws in British India and\tmore
\nso, in the acceding Indian States ; (g) whether any  special
\nprovisions  were needed for emergencies; (h) what should  be
\nthe special provisions to enable the States to levy taxes on
\nsale  of  goods, which taxes were to be the main  source  of
\nincome\tfor the States according to the experts.   All-these
\nmatters\t have, in fact, been covered in Part XIII,  and\t the
\npitfalls  which\t were disclosed in the Law  Reports  of\t the
\nCountries  which had accepted freedom of trade and  commerce
\nhave  been  attempted  to be avoided  by  choosing  language
\nappropriate for the purpose.  In addition to this, the broad
\npattern\t of  the political set-up, namely, a  federation  of
\nautonomous  States was not lost sight of.  These  autonomous
\nconditions had strengthened during the operation of the 1935
\nConstitution  and led to what Prof.  Coupland  described  as
\n“Provincial patriotism”, for which the reason, according  to
\nthe learned Professor was :\n<\/p>\n
\t      “In the course of the last few years the sense
\n\t      of    Provincial\t  patriotism\thas    been,
\n\t      strengthened  by\tthe advent of  a  full\tPro-<\/p><\/blockquote>\n
\t      vincial  self-government.\t The peoples took  a
\n\t      now  pride in Governments that were now  in  a
\n\t      sense theirs.” (The Constitutional problem  in
\n\t      India, part III. p. 40)
\nWith  this  historical\tbackground of our  country  and\t the
\nhistorical  setting  in which other Federations\t have  dealt
\nwith  the problems of trade and commerce, we now proceed  to
\nexamine\t the  Constitution to discover the  meaning  of\t the
\nvarious\t Articles  in Part XIII.  We begin by  reading\tPart
\nXIII  here indicating in each Article the changes  made\t and
\nthe relevant dates on which they were made
\n609<\/span>
\n\t\t\t “Part XIII
\nTrade,\tCommerce  and Intercourse within  the  Territory  of
\nIndia.\n<\/p>\n
301.\t  Subject  to  the other provisions  of\t this  Part,
\ntrade, commerce and intercourse throughout the territory  of
\nIndia shall be free.\n<\/p>\n
302.  Parliament may by law impose such restrictions on\t the
\nfreedom of trade, commerce or intercourse between one  State
\nand another or within any part of the territory of India  as
\nmay be required in the public interest.\n<\/p>\n
303. (1)  Notwithstanding anything in article 302,   neither
\nParliament  nor the Legislature of a State shall have  power
\nto  make any law giving, or authorising the giving  of,\t any
\npreference   to\t one  State  over  another,  or\t making\t  or
\nauthorising  the making of, any discrimination\tbetween\t one
\nState and another, by virtue of any entry relating to  trade
\nand commerce in any of the Lists in the Seventh Schedule.
\n(2)  Nothing  in  clause (1) shall prevent  Parliament\tfrom
\nmaking\tany  law giving, or authorising the giving  of,\t any
\npreference  or\tmaking, of authorising the  making  of,\t any
\ndiscrimination\tof  it is declared by such law\tthat  it  is
\nnecessary  to  do  so  for the purpose\tof  dealing  with  a
\nsituation arising from scarcity of goods in any part of\t the
\nterritory of India.\n<\/p>\n
(In  its application to the State of Jammu and\tKashmir,  in
\ncl.  (1)  of  art. 303, the words “by virtue  of  any  entry
\nrelating  to trade and commerce in any of the Lists  in\t the
\nSeventh Schedule” shall be omitted).\n<\/p>\n
610<\/span><\/p>\n
304.\t  Notwithstanding anything in Art. 301, or     Art.
\n303, the Legislature of a State may by\tlaw-\n<\/p>\n
(a)  impose on goods imported from\tother States (or the
\nUnion\tterritories)   any  tax\t to  which   similar   goods
\nmanufactured or produced in that State are subject, so, how-
\never  as not to discriminate between goods so  imported\t and
\ngood so manufactured or produced, and\n<\/p>\n
(b)  impose  such reasonable restrictions on the freedom  of
\ntrade, commerce or intercourse with or within that State  as
\nmay be required in the public interest ;\n<\/p>\n
Provided  that\tno  Bill or amendment for  the\tpurposes  of
\nclause\t(b) shall be introduced or moved in the\t Legislature
\nof a State without the previous sanction of the President.
\nIns. by the Constitution (Seventh Amendment) Act,  1956,  s.
\n29 and Sch.)\n<\/p>\n
305.\t  Nothing  in articles 301 and 303 shall affect\t the
\nprovisions  of\tany  existing law except in so\tfar  an\t the
\nPresident  may\tby order otherwise direct,  and\t nothing  in
\narticle\t 301  shall  affect the operation of  any  law\tmade
\nbefore\t the  commencement  of\tthe   Constitution   (Fourth
\nAmendment) Act, 1955, in so far as it relates to, or prevent
\nParliament or the Legislature of a State from making any law
\nrelating to any such matter as is referred to in  sub-clause\n<\/p>\n
(ii) of clause (6) of article 19.\n<\/p>\n
(This Article was substituted for original Article which was
\nas follows:\n<\/p>\n
Nothing in Articles. 301 and 303 shall affect the provisions
\nof any existing law ex-\n<\/p>\n
611<\/span><\/p>\n
\t      cept  in so far as the President may by  order
\n\t      otherwise provide.’)\n<\/p><\/blockquote>\n
\t\t\t      306.  Deleted.\n<\/p><\/blockquote>\n
\t      (The original Article before its deletion
\n\t      read :\n<\/p><\/blockquote>\n
\t       ‘Notwithstanding\t anything in  the  foregoing
\n\t      provisions  of  this  Part  or  in  any  other
\n\t      provisions  of  this Constitution,  any  State
\n\t      specified\t in  Part B of\tthe  First  Schedule
\n\t      which  before  the commencement of  this\tCon-
\n\t      stitution\t was levying any tax or duty on\t the
\n\t      import  of  goods into the  State\t from  other
\n\t      States  or  on the export of  goods  from\t the
\n\t      State to other States may, if an agreement  in
\n\t      that behalf has been entered into between\t the
\n\t      Government of India and the Government of that
\n\t      State,  continue to levy and collect such\t tax
\n\t      or duty subject to the terms of such agreement
\n\t      and for such period not exceeding ten years as
\n\t      may be specified in the agreement :
\n\t      Provided\tthat the President may at  any\ttime
\n\t      after the expiration of five year,% from\tsuch
\n\t      commencement  terminate  or  modify  any\tsuch
\n\t      agreement\t if,  after  consideration  of\tthem
\n\t      report  of the Finance Commission\t constituted
\n\t      under  Article 280, he thinks it necessary  to
\n\t      do so’).\n<\/p><\/blockquote>\n
\t      307.  Parliament\tmay  by\t law  appoint\tsuch
\n\t      authority\t as  it\t considers  appropriate\t for
\n\t      carrying\tout  the purposes of  Articles\t301,
\n\t      ‘302, 303 and 304, and confer on the authority
\n\t      so appointed such powers and such duties as it
\n\t      thinks necessary.\n<\/p><\/blockquote>\n
Part  XIIL  unlike some of the Constitutions which  we\thave
\nconsidered, contains within itself
\n612<\/span>
\nand  in\t one place the provisions regarding the\t freedom  of
\ntrade,\tcommerce and intercourse.  The commerce power  as  a
\nhead  of  legislation is divided in  the  Constitution,\t and
\nfigures\t in all the three Lists.  Apart from  other  Entries
\nunder which trade and commerce can be affected and which are
\nto be found in all the three Lists, there are two Entries in
\nthe  Union  List,  two\tin the State List  and\tone  in\t the
\nConcurrent   List,  which  bear\t directly  upon\t trade\t and
\ncommerce.\n<\/p>\n
\t      Union List\n<\/p>\n
\t      41.   Trade   and\t  commerce   with   foreign,
\n\t\t\t    countries,\timport\tand export  across  custom
\ns
\n\t      frontiers;\n<\/p>\n
\t      42. Inter-State trade and commerce.\n<\/p>\n
\t      State List :\n<\/p>\n
\t      26.   Trade  and\tCommerce  within  the  State
\n\t      subject to the provisions of entry 33 of\tList
\n\t      III.\n<\/p>\n
\t      27.   Production,\t supply and distribution  of
\n\t      goods subject to the provisions of entry 33 of
\n\t      List III.\n<\/p>\n
\t      Concurrenl List\n<\/p>\n
\t      33.   (Trade   and   Commerce  in,   and\t the
\n\t      production,  supply and distribution of :\t (a)
\n\t      the products of any industry where the control
\n\t      of  such industry by the Union is declared  by
\n\t      Parliamentary  law  to  be  expedient  in\t the
\n\t      public  interest)\t and imported goods  of\t the
\n\t      same kind as such products ;\n<\/p>\n
\t      (b)   food-stuffs,  including edible  oilseeds
\n\t      and oils;\n<\/p>\n
\t      (c) cattle fodder, including oilcakes
\n\t      and other concentrates;\n<\/p>\n
\t      613<\/span><\/p>\n
\t      (d)   raw\t cotton, whether ginned or  unpinned
\n\t      and cotton seed or\n<\/p>\n
\t\t\t      (e) raw jute.\n<\/p>\n
\t      The words in brackets show the entry as it was
\n\t      prior  to\t its amendment by  the\tConstitution
\n\t      (Third   Amendment)  Act,\t 1954.\t  The\tword
\n\t      industries’  occurred  in place  of  the\tword
\n\t      industry’ there.\n<\/p>\n
By   dividing  the  commerce  power  and  by  enacting\t the
\nprovisions  of\tPart XIII, the problems which arose  in\t the
\nUnited\tStates of America and Canada have been avoided.\t  In
\nCanada,\t as we have shown already, the question was  whether
\nin  passing  a law the Provinces were encroaching  upon\t the
\ncommerce  power of the Dominion given by No. 2 of s. 91\t and
\nconversely, whether- the regulation of trade by the Dominion
\nmeant  an encroachment of the powers of the  Provinces.\t  In
\nour  Constitution,  questions of conflict  under  two  rival
\nLists  may arise, but on the plane of exercise\tof  commerce
\npower,\tsuch  questions\t can hardly arise.   In\t the  United
\nStates,\t the  controversy  is  between\tthe  powers  of\t the
\nCongress  and  the  powers  of\tthe  States.   American\t and
\nCanadian  precedents  were  thus  avoided  by  dividing\t the
\ncommerce power.\n<\/p>\n
The  constitution deliberately chose the Australian  pattern
\nin Art. 301, but made certain other provisions, and this was
\ndone to avoid the controversy as it had raged in  Australia.
\nArticle\t 301  states  in general words (like s.\t 92  of\t the
\nAustralian  Constitution)  that trade, commerce\t and  inter-
\ncourse\tshall’ be free.\t But the opening words\t“Subject  to
\nthe other provisions of this Part” serve to direct attention
\nto  the provisions next following.  These words achieve\t two
\npurposes.  They indicate\n<\/p>\n
\t      (a)   freedom  is not absolute but subject  to
\n\t      what is next provided ; and
\n\t      614<\/span>\n<\/p>\n
\t      (b)   that  the curbs on freedom of trade\t and
\n\t      commerce\tare  primarily to be found  in\tPart
\n\t      XIII.\n<\/p>\n
Next,  the words “throughout the territory of  India”  avoid
\ndisputes  which took place in Australia till the Banks\tcase
\n(1) was decided by the Privy Council namely whether, freedom
\nis  secured  only  at the frontiers of the  States  or\talso
\nwithin the States.  The form of words adopted by our Consti-
\ntution\t (,”throughout\tthe  territory\t“)   was   suggested
\nAustralia  as  an amendment but was not\t accepted,  and\t the
\nPrivy Council in James v. Commonwealth (2) was understood to
\nhave endorsed the view that freedom only at the barriers  of
\nthe States was meant.  Our Constitution chose the form which
\nwas rejected do Australia thereby anticipating the  decision
\nof  the\t Privy\tCouncil\t in the Banks’s\t case.\tIt  must  be
\nremembered that the Banks’ case\t   was\tnot decided  by\t the
\nPrivy Cousteau when our\t Constitution\twas  drafted.\t The
\nfreedom in India is inter-State as well as intrastate.\tThis
\nfreedom\t is addressed to Parliament as well as to the  State
\nLegislatures, as the next Article clearly show.
\nArticle\t 302 then makes the first exception to the  freedom.
\nThat, Article gives power to Parliament to put\trestrictions
\non  this  freedom.  This shows clearly\tthat  Parliament  is
\nbound  by  Art. 301.  Disputes similar to those\t which\ttook
\nplace in Australia in which it was hotly debated whether the
\nCommonwealth  was bound or not have thus been  avoided.\t  By
\nproviding separate releases from Art. 301 for Parliament and
\nthe  State Legislatures, that controversy can  never  arise.
\nParliament which is authorised by Art. 302 can impose  rest-
\nrictions on trade, commerce and intercourse in two  aspects.
\nThey are :\n<\/p>\n
\t      (a)   between one State and another; or
\n\t      (1) [1948] 76 C. L. R. I. 38, 381.\n<\/p><\/blockquote>\n
\t      (2) (1936) A. C. 578.\n<\/p><\/blockquote>\n
\t      615<\/span><\/p>\n
\t      (b)   within  any\t part of  the  territory  of
\n\t      India.\n<\/p><\/blockquote>\n
By  the first is meant trade and commerce in  motion  across
\nthe frontiers of States.  It means the inter-State character
\nof  trade, commerce and\t  intercourse.\tBy the\tsecond,\t the
\npower is made more general.  Parliament may put\t restriction
\nin ” any part’ of the territory of India.  The territory  of
\nIndia is defined by Art. 1(3), which says :\n<\/p>\n
\t      “(3) The territory of India shall comprise-\n<\/p><\/blockquote>\n
\t      (a)   the territories of States;\n<\/p><\/blockquote>\n
\t      (b)   the Union territories specified in the
\n\t      First Schedule ;\n<\/p><\/blockquote>\n
\t      (Before  the Constitution (Seventh  Amendment)
\n\t      Act,  1956  the clause  read  the\t territories
\n\t      specified in Part D of the First Schedule’)
\n\t      and  (c)\tsuch  other territories\t as  may  be
\n\t      acquired.”\n<\/p><\/blockquote>\n
The words “,within any part of the territory of India”\tgive
\npower  to  Parliament to legislate for ‘any part’  not\tonly
\ngenerally  but also locally.  This power is subject  to\t two
\nrestrictions.  The first is that this must be done by  law’,
\nwhich  means  that without a valid law the power  cannot  be
\nexercised.   The  second  is that the law  must\t be  in\t the
\n‘public\t interest.’  Since law is made the  prerequisite  of
\naction, mere executive action is out of the question.\tThis
\nobviates  the  argument emphatically rejected by  the  Privy
\nCouncil\t in  James v. Cowan (1) that the executive  was\t not
\nunder  the  fetter of a. 92 of the  Australian\tCommonwealth
\nAct.   The  word ‘required’ limits the restrictions  to\t the
\nnecessities of the situation so that the Article may not  be
\nliberally construed as a free charter.\tThe word
\n(1)  (1932) A. C. 542.\n<\/p>\n
616<\/span><\/p>\n
“reasonable’ is not included as qualifying restrictions’  as
\nit does in Art. 304 ; but it is impossible that the  freedom
\ngranted\t in  Art.  301\twas to\tbe  ,mocked  at’  by  making
\n“unreasonable’\trestrictions  permissible at  the  hands  of
\nParliament.  Normally Parliament is the best judge of public
\ninterests, and a question of policy can hardly arise  before
\nthe Courts.  But if a question arises whether Parliament has
\nunder color of Art. 302 encroached upon Art. 301, the matter
\nmay in exceptionable circumstances be justifiable.  It\twill
\nbe  useless  in\t this  connection to  invoke  the  voice  of
\nParliament.\n<\/p>\n
Next  comes  Art. 303.\tIt begins  with\t the  nonobstructive
\nclause “Dotwithetanding anything in Article 302.” The effect
\nof  these  words  is  to take  away  the  power\t granted  to
\nParliament  to fetter freedom in this preceding\t Article  in
\nthe   circumstances   stated   in   this   Article.\tThis
\nnonobstructive\tClause\thas  been criticised  as  not  being
\nwholly\trelated\t to  what follows.  We do  not\tagree.\t The
\nanswer\tto the objection will appear from what we say  next.
\nThe  Article  says  that  neither  (a)\tParliament  nor\t (b)
\nLegislature of a State shall have power (i) to make any\t law
\ngiving or (ii) to make a law authorising the giving of-\n<\/p>\n
\t      (A) any preference to one State over an; other
\n\t      (B) any discrimination between one State and another,
\nby virtue of any Entry relating to trade and commerce in any
\nof  the\t Lists\tin  the Seventh\t Schedule.   The  main\tidea
\nunderlying   this   Article  is\t to   ban   preference\t and
\ndiscrimination\tbetween one State and another in matters  of
\ntrade,\t commerce  and\tintercourse.   This   principle\t  of
\nuniformity  is is high that by the non-obstante\t clause\t the
\npowers of Parliament under Art. 302 are completely nullified
\nand along with the powers of Parliament, all
\n617<\/span>
\nderivative powers of the State Legislatures where Parliament
\ndeclares by law that a restriction is in the public interest
\nand  the State Legislature (legislates under the shelter  of
\nsuch  a\t declaration, are also nullified, see  Entry  33(a).
\nEntry 35 of the Concurrent List or Entry 57 of List If\tread
\nwith  Entry  35\t of List 111, to  confine  the\tcitation  to
\nEntries, with which we are primarily concerned here.  In the
\nSeventh Schedule to the Constitution in addition to  Entries
\n41  and 42 (List 1), 26 and 27 (List II) and 33\t (List\tIII)
\nthere are many other Entries regulating special trades.\t  In
\nsome  of  them, the formula by law made\t by  Parliament’  is
\nagain  repeated\t out of abundant caution.  By the  words  of
\nArt.  303  ‘by\tvirtue of any entry relating  to  trade\t and
\ncommerce’ is meant not the five Entries last named by us but
\nothers also, e.g., Entry 8 of List II, Entries 29, 30, 81 of
\nList 1 Entry 29, 15 of List III (to mention only a few\tfrom
\neach List), Thus is achieved one purpose which is  paramount
\nviz.,  that  the  exercise of the  commerce  power,  however
\nderived,  is not to be exercised to create  preferences\t and
\ndiscrimination\tbetween\t one  State and\t other\twhether\t the
\naction\tproceeds from Parliament or a State  Legislature  or
\nboth  acting  in union.\t No question of the content  of\t the
\npower  or its source can arise in this context, because\t the
\nprohibition is absolute., The article makes a great  advance
\nupon  a. 297 of the Government of India Act, 1935.   In\t the
\nsection,  the  inhibition  was only  againstt  I  Provincial
\nLegislature  or Government.  Here the  inhibitions  embraces
\nnot  only  these  but is also  against\tParliament  and\t the
\nCentral\t executive.   The  executive  limb  bag\t been\tmade
\npowerless, because the source of restrictions must be  law,’
\nand  if a law cannot be made, executive action per se  would
\nbe  ineffective without more.  Future, S. 297 was  concerned
\nonly  with  goods and their  taxation  differentially.\t The
\nArticle takes in its stride not only the passage of goods or
\ntheir taxation but all
\n618<\/span>
\nother\tmatters\t inherent  in  free  trade,   commerce\t and
\nintercourse.   The  Article  has its echo in a.\t 99  of\t the
\nAustralian Constitution, which reads;\n<\/p>\n
\t      “99.  Commonwealth not to give preference. The
\n\t      Commonwealth   shall  not,  by  any   law\t  or
\n\t      regulation of trade, commerce or revenue, give
\n\t      preference  to one State or any  part  thereof
\n\t      over another State or any part thereof.”\n<\/p><\/blockquote>\n
It  is\tto be read with s. 102, under which  Parliament\t can
\nforbid\tpreferences  by State.\tArticle 303,  however,\tgoes
\nmuch further.  It emasculates the total legislative power in
\nthe   country\tfrom  achieving\t a  single   preference\t  or
\ndiscrimination\tin  trade,  commerce and  intercourse  by  a
\nunited\t or  concerted\taction\tby  Parliament\t and   State
\nLegislature  thus insuring equality to all peoples of  India
\nfrom  whatever part they may be drawn and wherever they\t may
\nbe living.\n<\/p>\n
There  is,  however,  one exception to it, and\tthat  it  is
\ncontained  in cl. (2).\tPreference or discrimination may  be
\nmade  in  one instance by Parliament by law.  The  ambit  of
\nthat  exception plainly appears from the words of  cl.\t(2),
\nwhich are explicit in themselves.  Let us quote them again :\n<\/p>\n
\t      “Nothing\t in   clause   (1)   shall   prevent
\n\t      Parliament  from\tmaking any  law\t giving,  or
\n\t      authorising  the giving of, any preference  or
\n\t      making,  or  authorising the  making  of,\t any
\n\t      discrimination  if it is declared by such\t law
\n\t      that it is necessary to do so for the  purpose
\n\t      of  dealing  with\t a  situation  arising\tfrom
\n\t      scarcity of goods in any part of the territory
\n\t      of India.”\n<\/p><\/blockquote>\n
The question of famine is primarily in mind. and secondarily
\nthe  readjustment or even distribution of goods due to\tsome
\neconomic imbalance.  Clause (2)\t   is self-explanatory,\t and
\nquestions such as fixing
\n 619<\/span>
\nof quotas of dried fruits or their even distribution in home
\nand  outside  markets  which agitated  the  Australians\t can
\nhardly &rise, and similar questions can adequately be  dealt
\nwith by Parliament under this power.\n<\/p>\n
Next comes Art. 304.  It beings with the non-obstante clause
\n“Notwithstanding anything in article 301 or article 303.” It
\nis contended that one can understand the mention of Art. 301
\nbut  not  of Art. 303, and the Article is thus\tsaid  to  be
\ninaccurately drafted.  We have already shown why in Art. 303
\nthe State Legislatures found a mention, and unless Art.\t 303
\nwas also put aside in Art. 304, there would arise a question
\nof balancing it against Art. 304.  To avoid this, both Arts.
\n301 and 303 have been excluded from consideration.
\nArticle\t 304  is  divided into two parts.   It\tenables\t the
\nLegislatures  of  States to pass laws  which  affect  trade,
\ncommerce and intercourse.  Clause (a) of the Article enables
\ntaxation  of good from other States pari passu\ttaxation  of
\nsimilar\t goods\tin the State but so as not  to\tdiscriminate
\nbetween\t them. The ban of Art. 301 is lifted but  uniformity
\nis  imposed.   Compared\t with s. 297(1)(b)  the\t Article  is
\nnarrower in its enabling portion and shorter in it  reaches.
\nSection\t 297 inhibited ‘tax, cess, tolls or due’  taking  in
\nits reach all kinds of imposts on movement, but the  Article
\ngives  per.  mission  to  impose  only\ttaxes  on  goods  on
\nnondifferentiation  basis  between State and  State,  saying
\nnothing about other imposts.  Further, unlike the  ,section,
\nlocal  areas are Dot mentioned in the Article  treating\t the
\npurely intera-State matters on a different footing.   Trade,
\ncommerce  and intercourse generally are next enabled by\t cl.\n<\/p>\n
(b) to be restricted.  They can be restricted on two places-
\nthe  first in their inter-State aspect denoted by the  words
\n“with……  that State” and second, in\t their\tintera-State
\naspect denoted by the words ,within
\n620<\/span>
\nthat  State.”  Both these aspects are open  to\trestrictions
\nprovided  that\tthe restrictions are  “reasonable”  and\t are
\n“required  in  the  public interest.” The use  of  the\tword
\n‘reasonable” brings in the justicability of the law.  It  is
\nuseless in this context to invoke the voice of the  legisla-
\nture.\tThe opinion of the legislature as expressed  in\t the
\nlaw  may of course raise a strong presumption, and create  a
\nheavy burden for one challenging the law, but the extent  of
\nthe  restriction  and whether it is  commensurate  with\t the
\nrequirements of the public interest (though a matter for the
\nlegislature to decide in the first instance) may have to  be
\ndecided\t ultimately by the Courts.  Of course, laws  can  be
\nmade  without  affecting  trade,  commerce  and\t intercourse
\ndirectly  without  having  to be  considered  by  Courts  or
\nprocessed  under  the  proviso.\t  It is\t only  a  law  which
\ndirectly   and\timmediately  affects  trade,  commerce\t and
\nintercourse which will need to be submitted to the President
\nfor his sanction, though the sanction of the President\twill
\nnot  save it from being questioned.  The Joint Committee  on
\nIndian\tConstitutional\tReform\tin  its\t Report\t (para\t367)
\ncorrectly pointed out:\n<\/p>\n
\t      “We  need\t hardly add that the effect  of\t our
\n\t      recommendations for the statutory\t prohibition
\n\t      of  certain specified forms of  discrimination
\n\t      would  lay open to challenge in the Courts  as
\n\t      being  ultra vires any  legislative  enactment
\n\t      which is inconsistent with these prohibitions,
\n\t      even  if the Governor-General or the  Governor
\n\t      has assented to it.”\n<\/p><\/blockquote>\n
The  same  will\t operate even if  the  President  gives\t his
\nsanction.\n<\/p>\n
Article\t 305 saved existing laws to start with, and  at\t the
\ntime  of the passing of the Constitution (Fourth  Amendment)
\nAct, 1955, room was made for the operation of laws by  which
\na  State or a corporation owned or controlled by  the  State
\ncarries
\n621<\/span>
\non  any\t trade, business, industry or service whether  as  a
\nmonopoly  or otherwise.\t Article 305 does not apply  to\t the
\nstatute here impugned as it was not an ,existing law’.
\nArticle 306 was a transitory provision which enabled certain
\nPart  B\t States\t to Continue levy of existing  taxes  or  to
\nrestrict  trade,  commerce  and intercourse  for  a  period,
\nnotwithstanding the provisions of Part XIII.  With that,  we
\nare not concerned after 1955 due to the repeal of that Arti-
\ncle.   Article\t307  also is immaterial in  this  case.\t  It
\nprovides  for the appointment of an authority  for  carrying
\nout  the purposes of Arts. 301-304, and is a counterpart  of
\ns.  101 of the Australian Constitution. We shall now  notice
\nsome cases which were decided by the High Court of Australia
\nand the Privy Council, because it is these cases which\thave
\nbeen cited to us in support by the rival parties.  After the
\nConstitution  of India came into force on January  26  1950,
\ncame  the decision of the Privy Council in  Commonwealth  of
\nAustralia v. Bank of New South Wales(1).  In that case,\t the
\nPrivy  Council departed from what had been understood to  be
\nsome  of  its former opinions.\tWhile adhering to  its\tview
\nthat  the test was whether an impugned law not ‘remotely  or
\nincidentally’  but directly and immediately  restricted\t the
\ninter-State  business  of  banking at the  barriers  of\t the
\nStates,\t the  Privy Council observed that  such\t phrases  as
\n“freedom  at the frontier…… in respect of goods  passing
\ninto  or  out  of the State,” and “freedom of  what  is\t the
\ncrucial\t point\tin inter-State trade, that is at  the  State
\nharrier” which it had used in James v. The Commonwealth\t (2)
\nwere  to  be read secundum subjectam materiam,\tand  in\t the
\ncontext in which they occurred, and observed:
\n(1) (1950 A.C. 23S.\n<\/p>\n
(2) (1936) A.C. 578.\n<\/p>\n
\t  622<\/span><\/p>\n
\t\t\t       “They  cannot be\t interpreted
\n\t      as  a  decision  either that it  is  only\t the
\n\t      passage of goods\t\twhich  is  protected
\n\t      by s. 92 or that it is only\t  at\t the
\n\t      frontier\tthat the stipulated freedom  may  be
\n\t      impaired. It is not to be doubted\t       that
\n\t      a restriction, applied not at the border\t      but
\n\t      at a prior or subsequent stage of inter\t    State
\n\t      trade, commerce or intercourse, may offend
\n\t      against s. 92. Nor, as their Lord\t       ships
\n\t      hold, in accordance with the view long\t    entertained
\n\t      in Australia, is it in respect of\t       the
\n\t      passage of goods only that such trade\t    commerce
\n\t      and intercourse is protected.”\n<\/p><\/blockquote>\n
The  Privy  Council also corrected the view  entertained  in
\nAustralia that a full and unqualified\t     approval\t was
\ngiven to the opinion of Evatt,J., in\t     The   King\t  v.
\nVizzard\t (1), by Lord Wright in Jaimes\tv. The\tcommonwealth
\nThe Privy Council observed:\n<\/p>\n
\t      “But  it does not appear to  their  Lord,ships
\n\t      that   the  whole\t of  the   learned   Judge’s
\n\t      reasoning received the considered approval  of
\n\t      the Board.”\n<\/p><\/blockquote>\n
\t      The   Privy  Council  next  approved  of\t the
\n\t      following passage from the Australian National
\n\t      Airways case (3) which has already been quoted
\n\t      by us:\n<\/p><\/blockquote>\n
\t      “I venture to repeat what I said in the former
\n\t      case  (the  Milk case) (4):  ‘One\t proposition
\n\t      which  I regard as established is that  simple
\n\t      legislative prohibition (Federal or State), as
\n\t      distinct from regulation, of interState  trade
\n\t      and commerce is invalid.\tFurther law which is
\n\t      “directed\t  against”  inter-State\t trade\t and
\n\t      commerce\tis  invalid.  Such a  law  does\t not
\n\t      regulate\tsuch trade, it merely  prevents\t it.
\n\t      But  a law prescribing rules at to the  manner
\n\t      in which trade (including transport) is to  be
\n\t      conducted is not a
\n\t      (1)   (1933) 50 C.T.R. 30.\n<\/p><\/blockquote>\n
\t      (3)   (1945) 71 C.L.R. 29.\n<\/p><\/blockquote>\n
\t      (2)   (1936) A, C. 578.\n<\/p><\/blockquote>\n
\t      (4) (1939) 62.  C.L.R. 116, 127.<\/p><\/blockquote>\n
\t       623<\/span><\/p>\n
\t      mere  prohibition\t and  may be  valid  in\t its
\n\t      application     to     inter-State      trade,
\n\t      notwithstanding s. 92′.”,
\n\t      observing:\n<\/p><\/blockquote>\n
\t      “With  this statement, which both repeats\t the
\n\t      general proposition and precisely states\tthat
\n\t      simple  prohibition is not  regulation,  their
\n\t      Lordships agree.”\n<\/p><\/blockquote>\n
The  Privy  Council also made it clear that  in\t some  cases
\n“‘regulation”  may  take  the  form  of\t prohibition,\tthus
\nendorsing the statement of Harrison Moore that the power  of
\nlegislation,  is not merely a power to regulate;  it  ranges
\nfrom  creation to destruction, it may establish as  well  as
\nprohibit: The Commonwealth of Australia, 2nd Edn., p. 280.
\nThe Advocates-General of Bombay and the Punjab and Mr. G. S.
\nPathak\trelied\tupon many decisions of the  Australian\tHigh
\nCourt  after the Banks’ case. (1) Strictly  speaking,  these
\ndecisions could not have influenced the framing of our Cons-
\ntitution,  because  by\tthe time  they\twere  rendered,\t our
\nConstitution  had already been framed.\tThe Banks case,\t (1)
\nhaving\tdrawn the distinction between regulation and  simple
\nprohibition,  the  later Australian cases began to  allow  a
\nplay  for regulation of trade and commerce.  There being  no
\nmachinery  for achieving restrictions, reasonable  in  them.
\nselves, restrictions to be valid had to be within the limits
\nof regulation.\tIndeed, this way of justifying\tlegislation,
\notherwise restrictive, as regulatory was being adopted\teven
\nbefore\tthe Bank8′ case., (1) and the Transport\t cases\twere
\nall  examples of justification of many laws  as\t regulatory.
\nIn  some  Transport cases, taxes which\tburdened  trade\t and
\ncommerce were justified as compensatory being, it was  said,
\na recompense for the wear and tear of roads.  We
\n(1)  (1948) 76 C.L.R. 1, 380, 381.\n<\/p>\n
624<\/span><\/p>\n
shall  notice these cases briefly, since  justification\t for
\nthe sections impugned here was attempted on the ground\tthat
\nthe  provisions were merely regulatory or compensatory.\t  We
\nshall  examine\tthese cases as\trepresenting  two  different
\nphases:\n<\/p>\n
In  McCarter v. Brodie (1), which was a transport case,\t the
\nHigh  Court  of\t Australia  was\t invited  to  overrule\t the
\nTransport  cases and to declare that the minority  judgments
\nthroughout had been right.  The Chief Justice basing himself
\non  the\t Banks’ case (2) opined that the Privy\tCouncil\t had
\nfinally\t decided that laws directly operating  upon  persons
\nengaging   in  inter-State  trade  and\tcommerce  were\t not
\ninfringements  of  a. 92 if they were what could  fairly  be
\ndescribed as regulation’.  If, however, they were laws which
\ndirectly dealt with the subject-matter of trade and commerce
\nand  exceeded regulation and passed into  prohibition,\tthey
\nwere  invalid.\t The  law was thus  upheld,  but  Dixon\t and
\nFullagar, JJ., dissented.\n<\/p>\n
Then  came the decision of the Privy Council in\t Hughes\t and
\nVale  Pty.  Ltd. v. State of N. S.W.( 3) By  that  decision,
\nRex  v. Vizzard (4) and all Transport cases  following\tthat
\ndecision and the majority judgment in McCarter v. Brodie (1)
\nwere overruled and the opinions of Dixon and Fullagar,\tJJ.,
\nin the last mentioned case were upheld.\t The decision of the
\nPrivy  Council in Hughes and Vale Pty.\tLtd. v. State of  N.
\nS.  W.\t(3)  must be examined a\t little\t closely.   All\t the
\nearliest Transport cases were decided after the decision  of
\nthe  Privy Council in James v. Cowan(5) but before James  v.
\nThe Commonwealth(6) was decided.  The Riverina case (7)\t and
\nthe Austrailan National Airways case (8) preceded the Banks’
\nease (2) and McCarter v. Brodie (1) followed
\n     (1)  (1950) 80 C.L.R. 432.(2) (1948) 76 C.L.R. 1,\t380,
\n38 1.\n<\/p>\n
     (3) (1955) A.C. 241.(4) (1933) 50 C.L.R. 30.
\n     (5) (1932) A.C. 542.(6) (1936) A.C. 579.\n<\/p>\n
     (7) (1937) 57 C.L.R. 327.(8) (1945) 71 C.L.R. 29.\n<\/p>\n
 625<\/span><\/p>\n
it,  and  then came Hughes and Vale Pty.  Ltd. v.  State  of
\nN.S.W. (1) from which the appeal went to the Privy  Council.
\nLeave to appeal in McCarter v. Brodie (2) was refused.
\nBefore we examine the decision of the Privy Council, lot  us
\nrecall\tand re-state the main events in brief.\tIn James  v.
\nSouth Australia (3), what was struck down by the High  Court
\nas. a contravention of s. 92 was the executive determination
\nof  where  and\tin what quantities dried fruit\twere  to  be
\nmarketed.  In James v. Cowan (4), the action of the Minister
\nexpropriating the surplus dried fruits was also held to be a
\ncontravention.\t In  James v. The Commonwealth (5),  it\t was
\nheld  that  s.\t92 bound not only the States  but  also\t the
\nCommonwealth.\tThe last case was also generally  understood
\nas  laying  down  that by “free” was meant  freedom  at\t the
\nfrontiers.   An extract from the judgment of Evatt,  J.,  in
\nThe King v. Vizzard (6) was quoted to ,show that freedom did
\nnot attach itself to each and every part of transaction, and
\nthe  other parts were not free from regulation\tor  control.
\nThen  came  the\t Bank’s\t case,\t(7)  which  laid  down\tthat
\nregulation  of\ttrade, commerce and  intercourse  among\t the
\nStates was not incompatible with their absolute freedom; and
\nthat  there was a breach of s. 92 only when the\t legislature
\nor  the executive acted to restrict such trade, commerce  or
\nintercourse  directly  and  immediately\t as  distinct\tfrom
\ncreating  some indirect or consequential  impediment,  which
\ncould  only  be regarded as remote.   Thus,  regulation\t was
\nconsidered as the antithesis of ‘,simple prohibition’.\n<\/p>\n
\t      The Transport cases involved almost always:\n<\/p>\n
\t      (i)   a  licensing system of  motor  transport
\n\t      vehicles by a Board;\n<\/p>\n
\t      (1)   (1955) A. C. 241.\n<\/p>\n
\t      (3)   (1927) 40 C.L.R. 1.\n<\/p>\n
\t      (5)   (1936) A. C. 578.\n<\/p>\n
\t      (2)   [1950] 8 0C.L.R.432.\n<\/p>\n
\t      (4)   (1932) A. C 542.\n<\/p>\n
\t      (6)   (1933) 50 C.L.R. 30.\n<\/p>\n
\t      (7) (1948) 76 C. L.R. 1, 380, 381.\n<\/p>\n
\t      626<\/span><\/p>\n
\t      (ii)  a  discretion  to the Board to  grant  a
\n\t      licence or not;\n<\/p>\n
\t      (iii) a  payment of a licence fee which had  a
\n\t      maximum limit;\n<\/p>\n
\t\t\t\t   and\n<\/p>\n
\t      (iv)  sometimes  a  mileage charge  as  in  O’
\n\t      Gilpin’s case (1).\n<\/p>\n
How  were these cases affected by the pronouncement  of\t the
\nPrivy  Council ? The earlier view that The King\t v.  Vizzard
\n(2)  was  approved  by the Privy Council  in  James  v.\t The
\nCommonwealth  (3) fell to the ground when the Privy  Council
\nin  the\t Bank’s case (4) abjured this.\tThere was  also\t the
\napproval given to the Australian National Airways case\t(5),
\nto  which  we  have  referred.\t The  implications  of\tthis
\napproval  had also to be considered.  These Questions  arose
\nbefore\tthe High Court in McCarter v. Brodie (6).   In\tthat
\ncase,  the Transport Regulatiou Acts, 1933-47  provided\t for
\nlicensing  of  commercial  goods vehicles by  a\t Board\twith
\ndiscretionary  powers and for payment of a fee.\t The  effect
\nof  the Bank’s case upon the Transport cases was urged,\t and
\nit  was\t contended  that they must  be\toverruled,  but\t the
\nmajority  applying Rex v.Vizzard (2) and the  Riverina\tcase
\nheld the law to be valid.  Dixon and Fullagar, JJ.,  however
\ndissented.   In\t describing what was hold by  these  learned
\nJudges, we shall borrow their language, as was also done  by
\nthe Privy Council.\n<\/p>\n
According to Dixon, J., the Banks’ case (4) had proved wrong
\nthree propositions, and they were :\n<\/p>\n
\t      (1)   that s. 92 did not guarantee freedom  of
\n\t      the individual;\n<\/p><\/blockquote>\n
\t      (2)   “that’ if the same volume of trade
\n\t      (1)   (1935) 52 C.L.R. 189.\n<\/p><\/blockquote>\n
\t      (3)   (1936) A.C. 578.\n<\/p><\/blockquote>\n
\t      (5)   (1945) 71 C.L.R. 29.\n<\/p><\/blockquote>\n
\t      (2)   (1933) 50 C.L.R. 30.\n<\/p><\/blockquote>\n
\t      (4)   (1948) 76 C.L.R. 1, 380, 38 1.
\n\t      (6)   (1990) 80 C.L.R. 432.\n<\/p><\/blockquote>\n
\t\t\t(7) (1937) 501 C.L.R. 327.\n<\/p><\/blockquote>\n
\t      627<\/span><\/p>\n
\t      flowed from State to State before as after the
\n\t      interference  with individual trader then\t the
\n\t      freedom  of  trade among the  States  remained
\n\t      unimpaired.’
\n\t      (3)   that  because  a law  applied  alike  to
\n\t      inter-State commerce and to domestic  commerce
\n\t      of  a  State, it might escape  objection\tnot-
\n\t      withstanding that it prohibited, restricted or
\n\t      burdened inter-State commerce.
\n\t      Next, according to him two further points were
\n\t      settled by the Bank’s case: (1).
\n\t      (1)   That  the object or purpose of  an\tAct,
\n\t      challenged  as  contrary to s. 92\t was  to  be
\n\t      ascertained  from\t what was enacted  and\tcon-
\n\t      sisted  in the necessary legal effect  of\t the
\n\t      law  itself  and not in  its  ulterior  effect
\n\t      socially or economically and
\n\t      (2)   that  the  doctrine\t of  ‘pith  and\t sub
\n\t      stance  though of help to find out whether  it
\n\t      Wag  nothing  but a regulation of a  class  of
\n\t      transactions forming part of a trade and\tcom-
\n\t      merce  was  beside  the  point  when  the\t law
\n\t      amounted\tto a prohibition or the question  of
\n\t      regulation could not fairly arise.\n<\/p><\/blockquote>\n
According  to  Dixon, J.,, the Transport  cases\t involved  a
\npragmatical   solution.\t  The  main  reason  of\t the   error
\naccording to him was that trade and commerce Was treated ‘as
\na   sum\t of  activities’  and  “the  interState\t  commercial
\nactivities  of\tthe individual, and his right to  engage  in
\nthem  were  ignored”, and much importance  was\tattached  to
\nabsence\t  of   discrimination  against\t inter-State   trade
\nconsidered  as a whole.\t Dixon, J., then added to  the\tfive
\npoints a sixth, viz., “the distinction taken between, on the
\none hand, motor vehicles as integers of traffic, and, on the
\nother hand, the trade of carrying by motor vehicle
\n(1)  [1948] 76 C.L.R. 1. 380,381.\n<\/p>\n
628<\/span><\/p>\n
as  part of commerce.” This distinction, according  to\thim,
\nwas not valid.\n<\/p>\n
Fullagar,  J., in a concurring judgment drew a good  picture
\nof  how\t a  regulation\tby  its\t severity  could  become   a
\nprohibition.   He observed that though\ttraffic\t regulations
\nand  even licensing of motor vehicles  including  commercial
\nvehicles  could be said not to cross the line of  regulation
\nbut both had to be reasonable so as not to impair the  free-
\ndom.   And the same could be said also about  licence  fees,
\netc. which had to be reasonable and nondiscriminatory,\tlest
\nthey  passed  from regulation into what\t the  Privy  Council
\ncalled simple prohibition.  The majority opinion, of course,
\nprevailed but not for long.\n<\/p>\n
The case of Hughes and Vale Pty.  Ltd. v. State of N. S.  W.
\n(1)  came  after  McCarter v. Brodie (1).   The\t High  Court
\nfollowed the earlier decision,, but Dixon, C.J., observed :\n<\/p>\n
\t      “……  to  my mind the\tdistinction  appears
\n\t      both clear and wide between, on the one  hand,
\n\t      such  levies and such  provisions\t prohibiting
\n\t      transportation   without\t licence   as\t the
\n\t      foregoing\t and on the other hand\tthe  regula-
\n\t      tions and registrations of motor traffic using
\n\t      the  roads and the imposition of\tregistration
\n\t      fees.  In the same way the distinction is wide
\n\t      between  such  provisions\t and the  use  of  a
\n\t      system  of  licensing  to\t ensure\t that  motor
\n\t      vehicles used for the conveyance of passengers
\n\t      or  goods\t for reward conform  with  specified
\n\t      conditions affecting the safety and efficiency
\n\t      of  the service offered and do not injure\t the
\n\t      highways by excessive weight or immoderate use
\n\t      or  interfere with the use of the highways  by
\n\t      other traffic.  The validity of such laws must
\n\t      depend upon the question whether they
\n\t      (1) [1955] A.C. 241.\n<\/p><\/blockquote>\n
\t\t\t (2) [1950]80 C.L.R. 432.\n<\/p><\/blockquote>\n
\t      629<\/span><\/p>\n
\t      impose  a\t real  burden  or  restriction\tupon
\n\t      inter-State traffic”.\n<\/p><\/blockquote>\n
When  the case reached the Privy Council, it  was  contended
\nthat where the tax was on the movement itself, the tax could
\nnot  be\t regarded  as  regulatory and  the  reasons  in\t the
\njudgments  of  Dixon, C.J., and Fullagar,  J.,\twere  urged.
\nThis was accepted by the Privy Council.\t On the other  side,
\nit  was contended that the provisions which were  State-wide
\nwere  regulatory and were imposed on all vehicles,  and\t the
\neffect\ton  inter-State trade or commerce  was\tindirect  or
\nconsequential.\tThis was not accepted.\tEven the other\tside
\nconceded that :\n<\/p>\n
\t      “the  imposition\tof  charges  in\t respect  of
\n\t      vehicles\tused on inter-State  journeys  would
\n\t      infringe\t section  92  if  the  charges\t (a)
\n\t      discriminated    against\t inter-State\troad
\n\t      transport\t or  vehicles engaged  therein;\t (b)
\n\t      were   imposed  at  such\ta  rate\t as  to\t  be
\n\t      prohibitive  of  inter-State  road  transport,
\n\t      whether  alone  or  in common  with  all\troad
\n\t      transport”.\n<\/p><\/blockquote>\n
The  Privy Council pointed out that in the Transport  cases,
\n(1) sufficient weight was not given to James v. Cowan (2  ),
\nwhere  determinations  of executive in its  discretion\twere
\nsaid  to  be invalid.  It accepted the six  propositions  of
\nDixon,\tJ., and followed the unusual practice of quoting  in
\nextenso the opinions of Dixon and Fullagar, JJ., in McCarter
\nv.  Brodie (3 ) and expressed them as their own.  The  Board
\noverruled the Transport, cases, and observed :\n<\/p>\n
\t      “In  their  opinion  it follows  that  if\t the
\n\t      validity\tof  the\t Transport  Act\t is  to\t  be
\n\t      established  in the present case, it can\tonly
\n\t      be  upon\tthe  ground  that  the\trestrictions
\n\t      contained therein are regulatory’ in the sense
\n\t      in which that word is used in the Bank case.”\n<\/p><\/blockquote>\n
(1) [1938] 57 C.L.R. 327.  (2) [1932]A.C. 542.
\n(3) [1950] 80 C.L.R. 432.\n<\/p>\n
630<\/span><\/p>\n
We now come to the last phase.\tThe distinction between laws
\nwhich  merely regulate and those that restrict\tor  prohibit
\nhaving\tthus  been  established\t at  the  cost\tof  all\t the
\nTransport  cases except Willard v. Rawson (1), a new  method
\nwas  adopted  by  the  Australian  Legislatures.   Wynes  in
\n“Legislative  Executive\t and Judicial Powers  in  Australia”
\n(1956), tells us that the transport legislation was  amended
\nby four of the States and the amended law was challenged  in
\nseveral\t cases\tWe shall not trouble ourselves with them  or
\nwith those in which laws in bar of claims arising out of the
\ndecision of the Privy Council were considered, but must draw
\nattention   to\tthe  difference\t between  “regulation”\t and
\n“restriction” made in Hughes and Vale Pty Ltd. v. The  State
\nof  New South Wales [No. 2] (2).  For the  present  purpose,
\nhowever, we borrow the following summary, inadequate  though
\nit is, form Wynes:\n<\/p>\n
\t      “Speaking of ‘regulation’, their Honours\tsaid
\n\t      that  see.  92  of  course  assumed  that\t the
\n\t      transactions protected would be carried out in
\n\t\t\t    accordance\twith  the  general  law\t ;   merel
\ny
\n\t      because a transaction was apart of inter-State
\n\t      trade,  commerce or intercourse,\tthe  persons
\n\t      engaging\tin  it were not\t excluded  from\t the
\n\t      operation\t of that law.  ‘What  was  precluded
\n\t      were restrictions of a real character prevent-
\n\t      ing or obstructing the dealing across the bor-
\n\t      der or the inter-State passage or interchange.
\n\t      There  was a clear distinction  in  conception
\n\t      between laws interfering with freedom to carry
\n\t      out the very activity constituting  interState
\n\t      trade  and  laws\timposing  on  those  engaged
\n\t      therein  rules  of  proper  conduct  or  other
\n\t      restraints  directed  to the due\tand  orderly
\n\t      manner  of carrying it out.  This\t distinction
\n\t      was  naturally  described as  ‘regulation’,  a
\n\t      word
\n\t      (1) [1933]48 C.L.R. 316. (2) [1955] 93  C.L.R.
\n\t      125 1S9-162.\n<\/p><\/blockquote>\n
\t      631<\/span><\/p>\n
\t      of  anything  but\t fixed\tlegal  import  which
\n\t      differed according to the nature of the  thing
\n\t      to   which  it  applied.\t Perhaps  the\ttrue
\n\t      solution\tin any given case could be found  by
\n\t      distinguishing  between  the features  of\t the
\n\t      activity in virtue of which it fell within the
\n\t      category\tof trade, commerce  and\t intercourse
\n\t      among  the  States and those  features  which,
\n\t      though invariably found to occur in some\tform
\n\t      or another in the activity, were not essential
\n\t      to the conception.”\n<\/p><\/blockquote>\n
It  was\t pointed out also that under the guise of  what\t may
\nlegitimately  be regulation, real burdens  and\trestrictions
\ncould be placed.\n<\/p>\n
There was a divergence of opinion again over the question of
\nlicence\t charges  and registration fees.  The  majority\t was
\nprepared to sustain charges if imposed “as a real attempt to
\nfix  a reasonable recompense or compensation for the use  of
\nthe  highway  and for a contribution to the  wear  and\ttear
\nwhich  the  vehicle may be expected to make.”  The  minority
\nthought\t that (except for a fee for a specific\tservice)  no
\ncharges\t could be levied.  In two cases viz., Nilson v.\t The
\nState  of  South Australia (1) and Pioneer  Tourist  Coaches
\nPty.  Ltd. v. The State of South Australia (2), it was\theld
\nthat a State could not require commercial motor vehicles  to
\nregister  and pay a fee exceeding mere administrative  char-
\nges.\n<\/p>\n
There  is  yet another line of cases recently  decicided  in
\nAustralia.   The taxing of commercial vehicles\temployed  in
\ninter-State  or intrastate transport has been  justified  in
\nsome  cases on the ground that such taxes are  compensatory,
\nand the tax is a recompense for the wear and tear of  roads.
\nIn Armstrong v.\t    The State of Victoria [No. 2] (3),\tPart
\nII of the
\n(1)[1955]93C.L.R 292.  (2) (1955] 93 C.L.R. 307.
\n(3)  [1957] 99 C.L.R. 28.\n<\/p>\n
632<\/span><\/p>\n
Commercial   Goods   Vehicles  Act,  1955   (Victoria)\t was
\nchallenged.  That Act required the owner of every commercial
\nvehicle\t of  load  capacity  exceeding\tfour  tons  to\t pay
\ncompensation  for  the wear and tear caused  to\t the  roads.
\nThere was a schedule under which the payment was determined.
\nEvery  vehicle paid one-third of a penny per ton of the\t sum
\nof-(a) the tare weight of the vehicle and (b) forty per cent
\nof  the\t load capacity of the vehicle- per  mile  of  public
\nhighway\t along which the vehicle traveled in Victoria.\t The
\nreceipts  were paid to the credit of a special\taccount\t and
\napplied solely for the maintenance of the highway.  This law
\nwas upheld under s. 92 by a narrow majority of 4 to 3 in its
\napplication to inter-State trade. in the same, case. s. 3 of
\nthe  Motor  Car Act, 1951 (Viet.), which levied\t fees  on  a
\nmotor car used for carrying goods for hire or in the  course
\nof trade according to the powerweight and varying  according
\nto the number of wheels and types of types etc., was  upheld
\nby  a  majority of 6 to 1. The main reason  given  was\twhat
\nthese  payments\t served to maintain roads at a\tstandard  by
\nwhich\tinter-State  operations\t of  trade,   commerce\t and
\nintercourse  were improved.  It was, however, said that\t the
\ncharge\tmust  not  be more than a fair\trecompense  for\t the
\nactual use of the roads.  McTierman, J., relied on a passage
\nin  Adam  Smith’s “The Wealth of  Nationals”,  where  public
\n‘works\tas roads, bridges, etc. are discussed as  facilities
\nof commerce.\n<\/p>\n
The   question\t was  again  considered\t  in   (commonwealth
\nFreighters Pty.\t Ltd. v. Sneddon where the Road\t Maintenance
\n(Contribution)\tAct,  1958  (N. S. W.)\twhich  imposed\tupon
\nowners of commercial goods vehicles a, road charge at a rate
\nper  mile  was\tupheld.\t  It  will  thus  appear  that\t tax
\nlegislation  in Australia has now to resort to the  creation
\nof a separate fund to which State collections have to go
\n(1)  [1959] 102 C.L.R. 280.\n<\/p>\n
633<\/span><\/p>\n
ear-marked  for\t the  maintenance of roads  and\t to  provide
\nelaborate  criteria for determining the amount payable.\t  On
\nthis  subject  as well as on the subject of  regulations  as
\ndescribed  by Fullagar, J., in McCarter v. Brodie  (1),\t the
\nlaw for the time being seems settled.\n<\/p>\n
Having\t dealt\twith  the  historical  background   of\t the
\nConstitution,  the possible models which were considered  in
\nthe  drafting of Part XIIL we proceed to consider the  three
\nviews expressed in the Atiabari Tea Company case (1).  These
\nviews  are  not sharply divided.  The majority\taccepts\t the
\nview expressed by the learned Chief Justice, but goes beyond
\nit,  while Shah, J., accepts the views of the  majority\t but
\ngoes  still further.  The main question that arose then,  as
\nit  has arisen here, is : Do taxation laws come\t within\t the
\nreach of Art. 301 ? Now, it cannot be laid down as a general
\nproposition that all taxes are hit by that Article.  We have
\nshown  above that the financial independence of\t the  States
\nwas  secured by an elaborate division of heads of  taxation,
\nwhich were. well-thought out to provide the States with\t the
\nmeans  of  independent\texistence  and\tthe  wherewithal  of
\nnation-building\t activities.  There is hardly any tax  which
\nthe States are authorised to collect which could not be said
\nto  fall  on traders.  Property tax,  sales  tax,  municipal
\ntaxes, electricity taxes (to mention only a few) are paid by
\ntraders\t as well as by non-traders.  To say that  all  these
\ntaxes  are so many restrictions upon the freedom  of  trade,
\ncommerce   and.\t  intercourse\tis  to\t make\tthe   entire
\nConstitutional\tdocument subordinate to trade and  commerce.
\nSince it is axiomatic that all taxes which a tradesman\tpays
\nmust burden him, any tax which touches him must fall  within
\nArt.  304,  if the word “restriction” is given such  a\twide
\nmeaning.   Every  such legislation will then be\t within\t the
\npleasure of the President, and this could
\n(1) [1950] 80 C. L.R. 432.  (2) [1961] 1. S.C.R. 309.\n<\/p>\n
634<\/span><\/p>\n
not have been intended.\t Restriction” must, there fore, mean
\nsomething  more than a mere tax burden In our  opinion,\t the
\nissue of taxation cannot made justifiable with reference  to
\nArt. 301 in those cases where the tax is a general tat which
\na  trade  pays in common with others,  We  would,  therefore
\nrespectfully  disagree\twith the view of Shah,\tJ.  when  he
\nholds :\n<\/p>\n
\t      “Not merely discriminative tariffs restricting
\n\t      movement\t of  goods  are\t included   in\t the
\n\t      restrictions which are bit by Article 301, but
\n\t      all  taxation on commercial  intercourse\teven
\n\t      imposed as a measure for collection of revenue
\n\t      is so hit.  Between discriminatory tariffs and
\n\t      trade  barriers on the one hand  and  taxation
\n\t      for raising revenue on commercial intercourse,
\n\t      the  difference is one of purpose and  not  of
\n\t      quality.\t Both  these  forms  of\t burdens  on
\n\t      commercial intercourse trench upon the freedom
\n\t      guaranteed by Article 301.”\n<\/p><\/blockquote>\n
That  a tax is a restriction when it is placed upon a  trade
\ndirectly  and  immediately may be admitted.   But  there  is
\ndifference  between  a tax which burdens a  trader  in\tthis
\nmanner and a tax, which being general, is paid by  tradesmen
\nin  common with others.\t The first is a levy from the  trade
\nby reason of its being trade, the other is levied from\tall,
\nand tradesmen pay it because every one has to pay it.  There
\nis a vital difference between the two, viewed from the angle
\nof freedom of trade and commerce.  The first is an impost on
\ntrade  as such, and may be said to restrict it; the  ,second
\nmay  burden the trader, but it is not a restriction’ of\t the
\ntrade.\tTo refuse to draw such a distinction would mean that
\nthere  is  no taxing entry in Lists 1 and 11  which  is\t not
\nsubject\t to Arts. 301 and 304, however general the  tax\t and
\nhowever\t non. discriminatory its imposition.  To  bring\t all
\nthe  taxes  within the reach of Art. 301 and thus  to  bring
\nthem
\n635<\/span>
\nalso within the reach of Art. 304 is to overlook the concept
\nof  a  Federation,  which allows freedom of  action  to\t the
\nStates,\t subject,  however,  to the needs of  the  unity  of
\nIndia.\tJust as unity cannot be allowed to be frittered away
\nby  insular action, the existence of separate States is\t not
\nto  be sacrificed by a fusion beyond what  the\tConstitution
\nenvisages.   No doubt, Part XIII ensures economic  unity  to
\nIndia  and  combines the federating States into\t the  larger
\nState\tcalled\t India.\t  The  Constitution   also   permits
\nindependent powers of taxation.\t What the Constitution\tdoes
\nnot permit is that trade, commerce and intercourse should be
\nrendered ‘unfree’.  Trade and commerce remain free even when
\ngeneral\t taxes\tare paid by tradesmen in  common  with\tnon-
\ntradesmen.  The Question whether a tax offends Part XIII can
\nonly  arise when it seeks to tax trade, commerce and  inter-
\ncourse.\t  Support for the contrary proposition is not to  be
\nfound  in  James v. The Commonwealth The  Privy\t Council  in
\nJames v. The Commonwealth did not lay down:\n<\/p>\n
\t      “Every step in the series of operations  which
\n\t      constitutes  the particular transaction is  an
\n\t      act of trade, and control under the State\t law
\n\t      of any of these steps must be an\tinterference
\n\t      with its freedom as trade.” (p. 629)
\nThe passage represents the view hold in McArthur’s case (2).\n<\/p><\/blockquote>\n
That case was disapproved at p. 631.  We have already  dealt
\nwith this view at some length.\n<\/p>\n
Thus,  taxation\t laws  and taxes must be  divided  into\t two
\nkinds.\t Taxes\twhich are general and for  revenue  purposes
\nwhich\tfall  on  those\t engaged  in  trade,  commerce\t and
\nintercourse  in the same way as they fall on others  not  so
\nengaged cannot
\n(1) (1936) A.C. 578.\n<\/p>\n
(2) (1920) 28 C.L.R. 530.\n<\/p>\n
636<\/span><\/p>\n
normally  be  within  the  reach  of  Part  XIII.   A  motor
\ntransport  owner cannot claim that be will not pay  property
\ntax  in respect of his garage buildings or  electricity\t tax
\nfor the electricity he consumes in lighting them, or income-
\ntax  on his profits.  Part XIII has nothing to do with\tsuch
\ntaxes even though they fall upon tradesmen.
\nBut  this  is not to say that we accept the  view  that\t all
\ntaxes or taxing laws are outside the reach of Part XIII.  We
\nfind ourselves unable to accept the argument that there must
\nbe a discernible point in the operations of trade,  commerce
\nand  intercourse at which the tax becomes a barrier  to\t the
\nfreedom\t of the movement of trade before it will offend\t the
\nfreedom guaranteed.  This argument considers the subject  of
\nfreedom\t in  terms of barriers, tariff\twalls  and  imposts,
\nerected\t in the way of the free flow of trade, commerce\t and
\nintercourse.   Of course, if the tax does  create  barriers,
\ntariff\twalls  and imposts at some  discernible\t point,\t the
\nrestriction  is\t easy to detect.  But  restrictions  may  be
\ndiverse, subtle and disguised, and a tax may be a direct and
\nimmediate  restriction\twithout\t appearing to  be  so  at  a
\nparticular  point  in the movement of trade.   A  law  which
\nprohibits trade, commerce and intercourse and releases\tthem
\non the fulfillment of some unreasonable condition  including
\nthe  payment of an unreasonable or discriminatory  tax\twill
\njust  as  much be a restriction offending the freedom  as  a
\ntariff\twall or any other barrier.  No question of pith\t and
\nsubstance in this context arises, as was pointed out by\t the
\nPrivy Council in the Banks’ case.  The nature of the tax and
\nits  relation  to trade, commerce and  intercourse  are\t the
\nmatters to consider.\n<\/p>\n
In  trying to establish that taxation entries  are  entirely
\nout  side the reach of Part XIII, it is contended that\tPart
\nXII, which deals with taxa-\n<\/p>\n
637<\/span><\/p>\n
tion,  is  a code by itself and taken with  the\t Legislative
\nLists, lays down the power of taxation which cannot be taken
\naway by the provisions of Part XIII.  The power of  taxation
\nis, therefore, said to be not subject to the declaration  of
\nfreedom in Art. 301.  The imposition of a tax is conditioned
\non  the existence of a law.  Article 265 lays down that\t “no
\ntax  shall  be levied or collected except  by  authority  of
\nlaw”.\tArticle\t 301  is a curb\t on  the  law-making  power,
\nbecause by the unambiguous declaration contained in it,\t the
\nfreedom of trade, commerce and intercourse is secured.\t The
\nprohibition is addressed not only to the EXecutive but\talso
\nto  the Legislature, because Arts. 302 and 304 lift the\t ban
\nwhich  has been imposed in favour of action by law  made  by
\nParliament and the State Legislatures respectively.  Article
\n304 expressly mentions the power to impose taxes which\tmust
\ninclude at least excise duties and sales tax, and from this,
\nalso,  it  is  quite  clear  that  taxation  is\t within\t the
\nprohibition  contained in Part XII. This argument  was\talso
\nrejected  by the majority in Atiabari Tea Company case\t(1),
\nand we respectfully agree.\n<\/p>\n
Before, however, a tax can be struck down, the incidence  of
\nthe  tax and the method of its collection must be  examined.
\nIf  the\t tax falls upon trade, commerce and  intercourse  as
\nsuch, irrespective of whether it falls on trade viewed as  a
\nwhole or upon individual traders, and restricts the  freedom
\nguaranteed,  a\tquestion will immediately  arise  about\t the
\nlegality of the tax.  In this connection, even trade not  in
\nmotion and more so trade in motion will be protected  unless
\nthe  law, if made by Parliament is in the  public  interest,
\nand if made by the State Legislature it is reasonably in the
\npublic\tinterest and the previous sanction of the  President
\nhas  been  obtained.  What we have said about  taxation\t and
\ntaxes is also
\n(1)  (1961) 1. S.C.R. PC(1).\n<\/p>\n
638<\/span><\/p>\n
true  of  other\t restrictions  though  not  of\ta  pecuniary
\ncharacter.   A\trestriction  from  whatever  source  it\t may
\nproceed, must be backed by law made in the manner  indicated
\nand  the law must comply equally with those conditions.\t  It
\nmay  be stated there that it is not open under Part XIII  to
\ncourts\tto devise their own technique for  exempting  patent
\nand  palpable  interferences with the freedom of  trade\t and
\ncommerce.   In\tthe Australian Constitution,  there  was  no
\nmachinery  for determining what freedom of  trade,  commerce
\nand intercourse meant in given circumstances, and the Courts
\nstepped\t in  with  its own interpretation of s.\t 92  of\t the
\nCommonwealth  of Australia Act.\t In our\t Constitution,\tmany
\nproblems which agitated the Australian High Court have\tbeen
\nobviated,  and\tin so far as restriction of the\t freedom  is
\nconcerned it can only be achieved by law made in the  public
\ninterest  and in the manner indicated.\tIn so far  as  State
\nlegislation is concerned, the law must be reasonably in\t the
\npublic\tinterest, and the sanction of the President must  be
\nobtained.   Thus,  the President in the first  instance\t and
\nfinally the courts will be the judges of the  reasonableness
\nof the restriction and the existence of public interest.
\nPart XIII, which has created the freedom has thus also shown
\nthe  way for restricting the freedom.  The Privy Council  in
\nthe Banks’ case observed:\n<\/p>\n
\t      “If  these  two  tests  are  applied  :  first
\n\t      whether  the effect of the Act is in a  parti-
\n\t      cular respect direct or remote; and  secondly,
\n\t      whether\tin   its  true\t character   it\t  is
\n\t      regulatory,   the\t area  of  dispute  may\t  be
\n\t      considerably narrower.”\n<\/p><\/blockquote>\n
This may be true where the law attempts to regulate  freedom
\nbut not true where the law restricts
\n(1)  [1978] 76.\t C.L.R. 1, 380, 38 1,
\n639<\/span>
\nfreedom.  There is a real difference between regulation\t and
\nrestriction.\t Traffic   rules   are\t regulations,\t not
\nrestrictions.  Trade, commerce and intercourse are regulated
\nso that they may    flow  freely.  The rule of the  road  is
\nnot  a\trestriction  of\t commercial  traffic,  but  is\t one
\ndesigned   to  make  the  flow\tof  traffic   smooth.\t The
\nprescription that cars should have reliable brakes or lights
\nor  a  sound device are not restrictions  of  trade.   These
\nregulations  are needed both for ensuring safety  for  those
\nengaged\t in  traffic  as also for securing  that  every\t one
\nengaged\t in  traffic might equally enjoy  that\tright.\t The
\nclassification of heavy transport vehicles, the tare weight,
\nthe  kinds of tares they must have, the seating capacity  of
\nbuses  and go on and so forth are not normally\trestrictions
\nof  trade,  commerce and intercourse but are meant  for\t the
\nbetter and more effective flow of trade, commerce and inter-
\ncourse.\t Such laws can not be viewed as restrictions at all,
\nand  do\t not  come within the freedom  angle,  nor  do\tthey
\nrequire\t the process under which freedom can  be  curtailed.
\nJust  as  a tax of a general character payable\tby  all\t and
\nsundry and not placed upon a trade directly and\t immediately
\ncannot\tbe considered as a restriction of trade even  though
\nit  burdens a trader, so also regulations of  trade  without
\nhampering it or impairing its freedom cannot be described as
\nrestrictions.\tA  regulation,\twhen  it  ceases  to  be   a
\nregulation   and   becomes   a\t prohibition   may   require
\njustification as a reasonable restriction.  Fullagar, J., in
\nMc  Carter  v. Brodie (1) pointed out that a  regulation  of
\nspeed  on  the\thigh  ways  does  not  offend  the   freedom
\nguaranteed,  but  a  rule that\tcommercial  vehicles  should
\ntravel\tat  one miles per hour ceases to be  regulation\t and
\nbecomes\t a  restriction.  Here, the question is not  one  of
\ndegree but of the essence of the purpose.  The technique  of
\njustifying laws as regulatory was
\n(1)  [1950] 80 C.L.R. 432.\n<\/p>\n
640<\/span><\/p>\n
evolved in Australia in view of the intractable language  of
\ns. 92 without any indication of the\tcircumstances\t  in
\nwhich the absolute freedom    could   be   curtailed.\t The
\ndetailed pro-visions\t contained in Part XIII render\tsuch
\na   construction  of  Art.  301\t at  once  unnecessary\t and
\nimpermeable.\n<\/p>\n
Let  us\t now  see  whether the\tvalidity  of  taxation\tlaws
\ndirectly  impinging on trade and commerce can be  upheld  on
\nthe  ground that they are regulatory.  Here,  a\t distinction
\nmust  be made between fees and taxes.  Fees charged as\tquid
\npro  quo for services rendered or as  representing  adminis-
\ntrative\t charges  are quite different from taxes,  pure\t and
\nsimple.\t  Fees\tmay  partake of\t regulation  when  they\t are
\ndemanded   to  enable  Government  to  meet  the   cost\t  of
\nadministration.\t  But the tax, with which we are  concerned,
\nis  hardly  a  fee in that narrow sense.  It is\t a  tax\t for
\nraising\t revenue.   Of\tsuch a tax, Lord  Watson  asked\t the
\nquestion: “Do you regulate a man when you tax him ?” As\t was
\npointed\t out by Lord Herschell during the arguments  in\t the
\nLiquor\tProhibition  Appeal 1895 (1) in a passage  which  we
\nhave  quoted  earlier, the matter may be looked\t at  in\t two
\nways.  Lord Herschell observed:\n<\/p>\n
\t      “May  it\tnot be necessary to regard  it\tfrom
\n\t      this  point  of view, to find what  is  within
\n\t      regulation of trade and commerce, what is\t the
\n\t      object  and scope of the legislation ?  Is  it
\n\t      some public object which incidentally involves
\n\t      some fetter on trade or commerce or is it\t the
\n\t      dealing  with  trade  and\t commerce  for\t the
\n\t      purpose of regulating it ? May it not be that,
\n\t      in the former case, it is not a regulation  of
\n\t      trade and commerce, while in the
\n\t      (1)   [1896] A.C. 348.\n<\/p><\/blockquote>\n
\t      641<\/span><\/p>\n
\t      latter  it is, though in each case  trade\t and
\n\t      commerce in a sense may be affected ?”\n<\/p><\/blockquote>\n
   In  our judgment, the first test to apply is what is\t the
\nobject and scope of the legislation?  A regulation of  trade
\nand  commerce may achieve some public purpose which  affects
\ntrade  and commerce incidentally but without  impairing\t the
\nfreedom.Sometimes, however, the regulation it self may amount
\nto a restriction, and if such a stage is     reached,\tthen
\nunder our Constitution there striation must be reasonably in
\nthe public interest, and the President’s prior sanction must
\nbe obtained, if the law imposing such restriction is made by
\nthe  State Legislature.\t If, however, it does not reach\t the
\nstage of restriction of trade and remains only a  regulation
\nincidentally touching trade and commerce, the regulation  is
\noutside\t the operation of Arts. 301 and 304.  It is on\tthis
\nground\tthat laws prescribing the rule of the road and\tlike
\nprovisions already referred to as well as a regulation\tthat
\nthe height to which trucks may be loaded must be such as not
\nto endanger the overhead bridges or wires, do not have to go
\nbefore\tthe President, since they do hot affect the  freedom
\nguaranteed.  The object of such laws cannot be regarded as a
\nrestriction of trade and commerce.  Freedom in Art. 301 does
\nnot  mean  anarchy.   Similarly, a demand  for\ta  tax\tfrom
\ntraders in common with others is not a restriction of  their
\nright  to  carry  on  trade  and  commerce.   A\t system\t  of
\n‘licensing  of motor vehicles is a regulation, but does\t not
\nimpair\tthe  freedom  of  trade\t and  commerce\tunless\t the
\nlicensing is made to depend upon arbitrary discretion of the
\nlicensing  authority.  Similarly, a fee\t for  administrative
\npurposes  may also be viewed as a part as regulation.\tSuch
\nlicensing  and\tfees  fall outside Art.\t 301,  because\tthey
\ncannot be viewed as restrictions, and therefore do not\tneed
\nto be processed under Art. 304.\n<\/p>\n
642<\/span><\/p>\n
Such  regulations are designed to give equal opportunity  to
\neveryone, subject to a certain standard.  The object being a
\npublic object, such regulations cannot be questioned  unless
\nthey  amount to res   trictions.  A tax, however,  which  is
\nmade the condition precedent of the right to enter upon\t and
\ncarry on business at all is a very different matter.  It  is
\na  restriction on the right to carry on trade and  commerce,
\nand  the restriction is released on the payment of the\ttax,
\nwhich  is the price of such release.  It is from this  point
\nof  view that the impugned provisions in this case  must  be
\nexamined.\n<\/p>\n
We  have to examine the precise nature of the  tax  imposed,
\nwhich  has  to be gathering from the charging  section\tread
\nwith  the  Schedules, and the plain question is\t whether  so
\nread, there can be said to be anything other than a tax on a
\ntrader and on his activity as a trader.\t The Act consists of
\n24  sections, and 4 Schedules.\tSection 4(1)  which  imposes
\nthe tax is the charging section and has, on its terms, to be
\nread with each of the Schedules to the Act.  Apart from\t the
\nusual sections generally found in every taxing measure\tsuch
\nas  prescribing\t the time the tax has to be paid,  cases  in
\nwhich refund may be had, declarations which have to be made,
\nand provisions for recovery of tax, appeals, etc. there\t are
\nprovisions for penalties and for compounding.  There is\t one
\nother provision, to which attention may be drawn and that is
\ns. 20, which reads:\n<\/p>\n
\t      “20.   Levy  of  toll  on\t certain   bridges.-<\/p>\n
\t      Notwithstanding anything contained in this Act
\n\t      it shall be lawful for the Government to\tlevy
\n\t      tolls on motor vehicles under any law or usage
\n\t\t\t    for\t the time being in force, such rates as\t i
\nt
\n\t      may from time to time fix-\n<\/p>\n
\t      (i)   for the use of any bridges, or
\n\t      643<\/span>\n<\/p>\n
\t      (ii)  on any bridge constructed, reconstructed
\n\t      or  repaired  after the commencement  of\tthis
\n\t      Act.”\n<\/p>\n
The four Schedules, as their headings amply show, deal\twith
\ndifferent subjects.  Schedule 1 is divided into two parts  A
\nand  B.\t They  deal  with  the\tsubjects  indicated  in\t the
\nheadings.\n<\/p>\n
\t      “A.  Vehicles (other than\t Transport  Vehicles
\n\t      plying for hire or required) if fitted  solely
\n\t      with pneumatic tyres.\n<\/p><\/blockquote>\n
\t      B.    If\tthe above motor vehicles are  fitted
\n\t      with  resilient or non-resilient tyres,  extra
\n\t      tax will be levied at 5% of the above rate.”\n<\/p><\/blockquote>\n
Part  A\t is then divided into three  sections  dealing\twith
\ndifferent classes of vehicles and prescribe different  rates
\nfor  each such class.  We are not at present concerned\twith
\nvehicles which are not used as transport vehicles plying for
\nhire.\tSchedule II is also divided into two  parts  dealing
\nrespectively  with vehicles fitted with pneumatic tyres\t and
\nvehicles  not  so  fitted.  The first part  deals  with\t two
\ncategories  marked respectively “A” and “B”.  ,A”  comprises
\nmotor  vehicles\t plying\t for  hire  for\t the  conveyance  of
\npassengers  and light personal luggage of passengers,  while
\n“B” cornprises goods vehicles plying under Public  Carrier’s
\nPermit.\t  There are further sub-divisions in  each  category
\n“A”  and  “B”  according  to the  seating  capacity  of\t the
\nvehicles  on the basis of which different rates of  tax\t are
\nimposed, but it is not necessary to go into their details.
\nSchedule III comprises goods vehicles registered outside the
\nState using roads in Rajasthan, and they are required to pay
\na tax calculated at a specified sum per day.  Schedule IV is
\nheaded:\n<\/p>\n
\t      “Vehicles used for the carriage of goods
\n\t      644<\/span>
\n\t      in connection with a trade or business carried
\n\t      on by the owner of the vehicle under a Private
\n\t      Carrier’s Permit.”\n<\/p><\/blockquote>\n
These vehicles are again classified according to the kind of
\ntyres  with which they are fitted as well as by\t their\tload
\ncapacity  and different amounts of tax are payable  by\teach
\nclass.\t Part II of this Schedule specified the tax  payable
\nby  dealers in or manufacturers of motor vehicle,  which  is
\ndescribed  as  a payment “for a general\t licence”  dependent
\nupon  the number of vehicles which they manufacture or\tdeal
\nin.\n<\/p>\n
From  the  above analysis, it will be seen that the  tax  in
\nSchs.II\t to IV is laid upon trade and commerce directly\t and
\nimmediately.   It  cannot be described as  a  property\ttax.
\nMotor  Vehicles\t employed  by  a  trader  for  transport  of
\npassengers  and\t goods are integers of trade  and  commerce.
\nThe  tax  is  not like the property tax\t which\ta  transport
\noperator pays on buildings employed by him in his  business.
\nThere,\tthe  tax  is payable also but  not  as\ta  condition
\nprecedent  to  the  business.  The tax, with  which  we\t are
\nconcerned, is one directly and immediately laid on trade and
\ncommerce  and  also on trade and commerce in  movement.\t  In
\nthis connection, Sch.  1 and Part 11 of Sch.  IV need not be
\nconsidered  for we are dealing with motor vehicles  used  as
\nintegers of trade and commerce.\t The tax is evidently not  a
\nfee  for  administrative purposes; therefore, it  cannot  be
\njustified as representing payment for services.\t Its  object
\nis the raising of revenue, which distinguishes a tax from  a
\nfee.\n<\/p>\n
We  may\t next consider whether the tax can be  justified  as
\nregulatory  or compensatory.  For this purpose,\t some  facts
\nmust be stated.\t The appellants are three.  They owned buses
\nwhich were registered in the former State of
\n645<\/span>
\nAjmer.\tThey plied on diverse routes.  There was one  route.
\nNasirabad to Deoli, which lay mainly in Ajmer State, but  it
\ncrossed\t narrow\t strips\t of  the  territory  of\t  Rajasthan.
\nAnother route, Ajmer to Kishengarh, was substantially in the
\nAjmer  State,  one-third  of which was\tonly  in  Rajasthan.
\nKishengarh  was, at the material time, a part of  Rajasthan.
\nThe  appellants were required to charge fares prescribed  by
\nthe  Ajmer authorities, and could not change them  to  cover
\nextra  expenditure in the shape of taxes, which they had  to
\nbear in Rajasthan.  Formerly, there was an agreement between
\nthe  Ajmer  State and.\tKishengarh State,  by  which  either
\nState  did not charge any tax or fees on vehicle  registered
\nin  the respective States.  Later, Kishengarh became a\tpart
\nof Rajasthan, and the tax was demanded from these appellants
\nfor  the period, April 1, 1951, to March 31, 1954.  The\t de-
\nmand was made by virtue of s. 4, the charging section, under
\npain  of  the  application  of s. 1  1,\t which\tprovides  of
\npenalties.\n<\/p>\n
The  taxes, which are imposed by Schs.\tII, III\t and  IV(1),
\noperate\t on trade and commerce directly.  It is\t not  denied
\nthat the carriage of passengers and goods amounts to  trade.
\nIt was, in fact, so help in the Transport cases in Australia
\nand  also by the Privy Council.\t Under the Act,\t this  trade
\ncan  only  be  carried on, if the tax  is  paid.   The\tAct,
\ntherefore,  involves  a prohibition against a  trade,  which
\nprohibition  is released on payment of tax.   The  Schedules
\naffect\tmotor vehicles for carriage of passengers and  goods
\non  hire in Rajasthan and also similar vehicles coming\tfrom
\noutside.   In  so far as vehicles coming  from\toutside\t are
\nconcerned,  their entry into the State is barred unless\t the
\ntax is paid.  The tax is thus not incidental to trade but is
\ndirectly  on  it and is on its movement.  This\tis  not\t tax
\nwhich the trader has to bear in common with others, and\t the
\ntax is
\n646<\/span>
\nfor revenue purposes.  This is a case in which if the tax is
\nnot  paid, the trade is destroyed.  The charging  provisions
\ndo not take into account what distance a particular  vehicle
\ntravels\t within\t the State.  A vehicle traveling  a  hundred
\nmiles  and  another traveling only one mile have to  pay  an
\nidentical  sum\tas  tax.  How then can it be  said  that  it
\ninvolves  a fair recompense for the wear and tear of  roads?
\nTo say that such tax is compensatory and is a recompense for
\nthe  wear  and\ttear  of the roads  is\tto  misdescribe\t it.
\nSection 20, which we quoted earlier, may be compensatory for
\nuse  of\t a bridge and may even be  described  as  regulatory
\nwithin\tthe decision of Fullagar, J., in McCarter v.  Brodie
\n(1)  but not the taxing provisions which even  in  Australia
\nwould not be regarded either as compensatory or\t regulatory.
\nIt  is\timpossible,  therefore, to turn\t to  the  Australian
\nprecedents for help.\n<\/p>\n
Further,  the  duty of maintaining roads is a  duty  of\t the
\nState, and it performs it not from any special fund which is
\ncreated from the receipt of these taxes but from its general
\nfunds.\tThe wear and tear of the roads is not caused by\t the
\ntransport  vehicles only but other vehicles not employed  in
\nthe  trade  of transport.  The tax which is  levied  is\t not
\nbased on any theory of recompense, which has been evolved in
\nAustralia.   There, the distance traveled, the load  carried
\nare  taken  into account, and a charge is  payable  by\teach
\noperator according to the distance actually travelled by him
\nin  consonance with the weight carried.\t A further  circums-
\ntance  which  goes  into the  determination  of\t the  amount
\npayable is the kind of tyres and the number of wheels  which
\nthe   vehicle  has.   To  say  that  the  impugned  tax\t  is
\ncompensatory  without  any attempt to apportion\t the  charge
\naccording to the actual wear and tear, is to borrow a theory
\nfor justification which does not apply to the facts here.
\n(1)  [1950] 80 C.L.R.432.\n<\/p>\n
647<\/span><\/p>\n
The  only other question is whether the Act is, in its\ttrue
\ncharacter,  regulatory.\t  There is no provision in  the\t Act
\nwhich  can  be regarded as regulatory of motor\tvehicles  or
\ntheir use.  The Act plainly levies a tax upon the possession
\nor  use\t of motor vehicles.  A tax does not  regulate  trade
\nordinarily; it imposes a charge on trade.  The question thus
\nremains: does the tax burden trade or impair the free,\tflow
\nof trade and commerce as contemplated Art: 301?\t It is clear
\nthat  the tax is on trade.  It is also clear that it  is  on
\nthe movement of trade.\tIt is further clear that it  creates
\na barrier between one State and another, which trade  cannot
\ncross  except  on a heavy payment.  The tax is not  truly  a
\nfair  recompense  for  wear  and tear of  roads\t even  if  a
\njustification  on  the\tdoctrine of  compensatory  taxes  is
\napplied.  It is nothing except a restriction, which Art. 301
\nforbids.   The Bill which became the Act, was not  submitted
\nto  the\t President  for his Previous sanction,\tnor  was  it
\nassented  to subsequently after it passed  the\tLegislature.
\nThe question, therefore, whether the restriction imposed  by
\nthe Act is reasonable or not,, does not arise.
\nWe  are,  therefore, of opinion that s. 4(1)  as  read\twith
\nSchs.\tIT, III and Part 1 of Sch.  IV offends Art.  301  of
\nthe Constitution, and as resort to the procedure  prescribed
\nby  Art.  301(b)  was  not taken,  it  is  ultra  vires\t the
\nConstitution.  We wish to make it clear that we pronounce no
\nopinion about the constitutional validity of s. 4(1) as read
\nwith  Sch.   1 or the second Part of Sch.   TV.\t  The  first
\nraises\ta  question  as to the\tmeaning\t of  the  expression
\n“intercourse”  in  Part\t XIII  and as  that  matter  is\t not
\nrelevant  for  the appeal before us, and thus  no  arguments
\nwere  heard  on that point, we refrain from  expressing\t any
\nopinion\t on it.\t The second involves many  other  questions,
\nwhich are far remote from the controversy with which we\t are
\nnow concerned, and therefore need not be considered here.\n<\/p>\n
648<\/span><\/p>\n
We would, therefore, allow the appeals, and quash the demand
\nmade upon the appellants.\n<\/p>\n
By  COURT: In accordance with the opinion of  the  majority,
\nthese appeals are dismissed with costs, one hearing fee,.
\nAppeal dismissed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India The Automobile … vs The State Of Rajasthan And … on 9 April, 1962 Equivalent citations: 1962 AIR 1406, 1963 SCR (1) 491 Author: M R. Bench: Sinha, Bhuvneshwar P.(Cj), Kapur, J.L., Sarkar, A.K., Subbarao, K., Hidayatullah, M. & Ayyangar, N.R. & Mudholkar, J.R. PETITIONER: THE AUTOMOBILE TRANSPORT(RAJASTHAN) LTD. Vs. RESPONDENT: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-244297","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nThe Automobile ... vs The State Of Rajasthan And ... on 9 April, 1962 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/the-automobile-vs-the-state-of-rajasthan-and-on-9-april-1962\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Automobile ... vs The State Of Rajasthan And ... on 9 April, 1962 - 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