The case concerns how the constitution’s Article 301 should be interpreted. A general norm enacted by article 301 of the indian constitution states that trade, business, and sexual relations shall be unrestricted across India. This article’s goals were to achieve free movement of goods for trade, commerce, and interpersonal relations without internal state borders; and provide a stabilizing force for the political and cultural cohesion of the federal polity, allowing the nation to operate as a single economic entity free from internal barriers. Three terms that are employed in article 301 of the indian constitution “trade, commerce and intercourse,” “free,” and “throughout the territory of India”, determine its content and breadth.
atiabari tea co ltd vs the state of assam Case Facts
- In this case, the appellants were West Bengali and Assamese tea producers.
- Tea that had been manufactured was brought to the Calcutta market and sold to local customers as well as overseas. The majority of the manner that produced tea was transported in Assam was by land and inland waterways.
- Occasionally, only a small portion of Assam’s state area was utilized for cargo transit. The tea act of 1953 served as the primary legislation governing the tea business.
- The Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act 1954 was passed by the Assamese State Legislature and went into effect on June 1st, 1954. The purpose of this act was to tax products that were moved through Assamese inland waterways and roads.
- The second respondent, the Commissioner of Taxes in Assam, sent out a notification requiring the regulations under the aforementioned legislation to be provided by the end of October 30, 1954, for the period of June 1, 1954, to September 30, 1954.
- It also involved giving the third respondent, the Superintendent of Taxes, the quarterly returns. Appellants contested the constitutional legality of the aforementioned legislation in the High Court of Assam under article 226 of the indian constitution, arguing that the statute should be limited by a writ of mandamus.
- There have been doubts raised regarding the Assam state legislature’s legislative authority on specific issues. The High Court of Assam’s Special Bench ruled that the act was constitutional. The matter was argued before India’s esteemed Supreme Court.
atiabari tea co ltd vs the state of assam Issues
- Because the Act violated article 301 of the indian constitution by imposing a tax on the transportation of tea through the State of Assam, which effectively interfered with the freedom of trade, commerce, and intercourse, the Act, its rules, and the notifications issued under it were ultra vires the Constitution.
Contentions by the Parties
Petitioner:
- Because the contested Act placed restrictions on the free flow of trade and commerce for the two commodities it addressed, tea and jute, it violated Article 301 of the Constitution.
Respondent:
- On behalf of the appellants, it has been argued that there should be no restrictions on trade, business, or sexual activity anywhere in India, including taxes. However, the argument put forth by the Union and State governments is that the freedom guaranteed by Article 301 does not include tax immunity.
- Instead, they define freedom as the absence of tariff walls or trade barriers that would keep goods, people from traveling together, or interfere with personal affairs.
atiabari tea co ltd vs the state of assam Judgment
- According to that interpretation, the Assam Taxation (on Goods carried by Roads or Inland Waters) Act, 1954, violates article 301 of the indian constitution’s guarantee of freedom of trade and commerce because the President’s assent was not obtained for the Bill that was moved through the Assembly in accordance with the provisions of Art. 304(b) proviso, and the Act is not endorsed by the President’s signature in accordance with Art. 255(c).
- The appeals and writ petitions are granted with costs, one set of hearing fees, in light of the majority ruling.
The Atiabari ruling heavily relies on the doctrine of pith and substance and the doctrine of colourable legislation. The idea advanced by this ruling negatively impacted the states’ ability to maintain their financial independence. The concept of freedom of trade, commerce, and intercourse as stated in article 301 of the indian constitution is quite broad and was further extended in the subsequent case of Automobile Transport (Rajasthan) Ltd v State of Rajasthan and Ors following the ruling in the Atiabari case.
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