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PETITIONER: ATIABARI TEA CO., LTD.

       Vs.

RESPONDENT: THE  STATE OF ASSAM AND OTHERS. AND CONNECTED  PETITION  AND

DATE OF JUDGMENT: 16/08/1960

BENCH: SINHA, BHUVNESHWAR P.(CJ) BENCH: SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. WANCHOO, K.N. GUPTA, K.C. DAS SHAH, J.C.

CITATION:  1961 AIR  232            1961 SCR  (1) 809  CITATOR INFO :  R          1962 SC 562  (7)  E          1962 SC1406  (1,3,6,7,8,9,13,17,53,124,128)  R          1963 SC 928  (8,9)  R          1963 SC1667  (1,2,69,12,13,14,31,56,57,58)  R          1964 SC1006  (8)  RF         1967 SC   1  (42)  RF         1967 SC1643  (274)  RF         1968 SC 599  (14)  RF         1968 SC1277  (4)  F          1969 SC 147  (8,9,26,33)  E          1970 SC1864  (5)  APL        1970 SC1912  (7)  RF         1972 SC1061  (51)  RF         1972 SC1804  (11)  RF         1974 SC1505  (6)  RF         1975 SC  17  (15)  E          1975 SC 583  (11,13)  D          1975 SC1443  (18,21)  MV         1975 SC2065  (33)  RF         1977 SC1825  (10)  E&R        1978 SC  68  (252,253,254)  RF         1981 SC 463  (24,26)  RF         1981 SC 711  (11)  RF         1981 SC 774  (9)  R          1983 SC 634  (11,12)  F          1983 SC1283  (5)  R          1986 SC  63  (36)  RF         1988 SC 567  (11,12)  RF         1988 SC2038  (4)  RF         1989 SC1119  (12,14)  RF         1989 SC1949  (12)  R          1989 SC2015  (8)  RF         1990 SC 313  (24)  C          1990 SC 772  (1,3)  RF         1990 SC 781  (74)  E&D        1990 SC 820  (10,17,20)  RF         1990 SC2072  (48)

ACT:  Freedom  of Trade--If includes freedom from  taxation--State  Law  imposing  tax  on  goods  carried  by  road  or  inland

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waterways--Constitutionaly of--Constitution of India,  Arts.  301  and 304--Assam Taxation (on goods carried by Roads  and  Inland Waterways) Act, 1954 (Ass.  XIII of 1954).

HEADNOTE:  The  Assam  Taxation (on goods carried by Roads  and  Inland  Waterways)  Act, 1954, was passed under Entry 56 of List  II  of  Seventh  Schedule to the Constitution.   The  appellants  contended  that  the  Act  violated  the  freedom  of  trade  guaranteed by Art. 301 Of the Constitution and as it was not  passed   after  obtaining  the  previous  sanction  of   the  President  as  required by Art. 304(b) it was  ultra  vires.  The  respondent urged that taxing laws were not governed  by  Part  XIII (which contained Arts. 301 and 304) but  only  by  Part XII and in the alternative that the provisions of  Part  XIII applied only to such legislative entries in the Seventh  Schedule  as  dealt specifically with  trade,  commerce  and  intercourse.  Held, (per Gajendragadkar, Wanchoo and Das Gupta, JJ.)  that  the  Act violated Art. 30i and since it did not comply  with  the  provisions of Art. 304(b) it was ultra vires and  void.  The freedom of trade, commerce and intercourse guaranteed by  Art.  301  was wider than that contained in S.  297  Of  the  Government of India Act, 1935, and it included freedom  from  tax laws also.  Article 301 provides that the flow of  trade  shall run smooth and unhampered by any restriction either at  the  boundaries of the States or at any other points  inside  the  States themselves ; and if any Act imposes  any  direct  restrictions  on  the  movement of  goods  it  attracts  the  provisions  of Art. 301, and its validity can  be  sustained  only  if it satisfied the requirements of Art. 302  or  Art.  304.   The  operation of Art. 301 cannot  be  restricted  to  legislation  under  the  Entries  dealing  with  trade   and  commerce.   The  Assam  Act directly  affected  the  freedom  contemplated by Art. 301.  Ramjilal v. Income-tax Officer, Mohindargarh, [1951]  S.C.R.  127,  M.  P. V. Sundararamier & Co. v. The State  of  Andhra  Pradesh,  [1058]  S.C.R.  1422,  James  v.  Commonwealth  of  Australia,  (1936)  A.C.  578, The State of  Bombay  v.  The  United Motors (India) Ltd., [1953] S C.R. 1069, Saghir Ahmed  v. The State of U.P.  810  [1955]  1  S.C.R. 707, James v. State  of  South  Australia,  (1927)  40  C.L.R. 1 and James v. Cowan,  (1932)  A.C.  542,  referred to.  Per  Sinha, C. J.-The Assam Act did not contravene Art.  301  and  was not ultra vires.  Neither the one extreme  position  that  Art.  301 included freedom from all taxation  nor  the  other  that taxation was wholly outside the purview of  Art.  301 was correct.  The freedom conferred by Art. 301 did  not  mean  freedom  from taxation simpliciter but only  from  the  erection  of trade barriers, tariff walls and imposts  which  had a deleterious effect on the free flow of trade, commerce  and  intercourse.   The  Assam  Act  was  a  taxing  statute  simpliciter and did not suffer from any of the vices against  which Part XIII of the Constitution was intended.  Ramjilal v. Income-tax Officer, Mohindargarh, [1951] S.C.R.  127, referred to.  Further,  the impugned Act was within the competence of  the  State Legislature and fell directly within Entry 56 of  List  11 ; it was not in conflict with the Tea Act Of 1953 enacted  by Parliament; it did not contravene Art.  14 and it was not  extra-territorial in operation.

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The Tata Iron & Steel Co. Ltd. v. The State of Bihar, [1958]  S.C.R. 1355, followed.  Per  Shah,  J.-The  Assam Act  infringed  the  guarantee  of  freedom of trade and commerce under Art. 301 and as the Bill  was not moved with the previous sanction of the President as  required  by Art. 304(b) nor was it validated by the  assent  of  the President under Art. 255(c), it was ultra vires  and  void.    Article  301  guarantees  freedom  in  its   widest  amplitude,  freedom  from prohibition,  control,  burden  or  impediment in commercial intercourse.  The freedom  includes  not  only  freedom  from discriminative  tariffs  and  trade  barriers   but   also  from  all  taxation   on   commercial  intercourse.    Part   XIII  of  the   Constitution   places  restrictions  upon  the legislative power granted  by  Arts.  245,  246  and  248 and the  Lists  and  these  restrictions  include burdens in the nature of taxation.  James  v. Commonwealth of Australia, L.R. (1936)  A.C.  578,  referred to.

JUDGMENT:  ORIGINAL  JURISDICTION: Petitions Nos. 246 of 1956 and 2  of  1959  (Under  Article 32 of the Constitution  of  India  for  enforcement of Fundamental Rights) with C. As.  Nos. 126  to  128 of 1958.  1960.   August  16,  17.   N.  C.  Chatterjee,  with  N.  C.  Chakravarti,   Dipti  Bose  and  S.  C.  Mazumdar  for   the  petitioners  in  Petition  No.  246  of  1956  and  with  P.  Chaudhuri,  D.  N.  Mukherji  and  B.  N.  Ghose,  for   the  appellants in C. As.  Nos. 126-128 of 1958.  The Assam  811  Taxation  (on  goods carried by road and  inland  waterways)  Act, contravenes Art. 301 of the Constitution.  Article  301  means  freedom  from all restrictions  including  tax  laws.  Articles  245 and 246 are subject to Art. 301.  It is  wrong  to  say  that  taxation is outside the scope  of  Art.  301.  Article  304(a) itself contemplates’the imposition  of  tax.  Article   304(b)   may  also  refer  to   tax   in   certain  circumstances,  in  cases other than those covered  by  Art.  304(a).   In  enacting  Art. 301  the  Constituent  Assembly  rejected  s. 297 of the Government of India Act,  1935,  and  deliberately  adopted the Australian s. 92.  Movement is  an  essential ingredient of trade and commerce and there must be  no  fetter on it; any taxation would be a fetter.   Taxation  is not outside the ambit of Art. 301 ; I.L.R. 1955 Bom. 680,  683.   What  is  commerce is brought out  in  the  following  decisions  :  6 L. Ed. 1, 68; [1952] S.C.R. 572,  578  ;  93  C.L.R. 127 ; 1936 A.C. 573, 627 A.I.R. 1954 Raj. 217.  B.  Sen  and S. N. Mukherjee, for the petitioners  in  Petn.  No. 2/59.  Article 301 sets out the general freedom and Art.  302  the  restrictions that can be placed on  this  freedom.  Non-discrimination  is one of the aspects of the freedom  in  Art.  301.   Article 306 as it stood  before  its  deletion,  spoke  of  taxation  or duty on import or  export  of  goods  between States.  It postulated ’taxes’ in Art. 301 ; but for  the non-obstante clause it would have been affected by  Art.  301.  The Supreme Court has discussed the scope of Art.  301  in  [1953] S.C.R. 1069, 1079, 1081, 1088.  The  decision  Of  Chagla,  C. J., in I.L.R. 1955 Bom. 680 regarding  scope  of  Art. 301 was not reversed by the Supreme Court.  B.  K.  P. Sinha and A. G. Ratnaparkhi.-With regard  to  the  scope  of Art. 301 reference is invited to the  decision  in  A.I.R. 1954 Hyd. 207, A.I.R. 1958 M.P. 33, A.I.R. 1956  M.B.  214, I.L.R. 1952 Mad. 933, 55 C.L.R. 1, 56 and regarding the

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meaning  of export to the decision in I.L.R. 1955  Tr.   Co.  123.  M.  C.  Setalvad,  Attorney-General of  India,  with  S.  M.  Lahiri, Advocate-General of Assam and Naunit  812  Lal,  for  the respondents in Petition No. 246 of  1956  and  Civil  Appeals  Nos. 126-128 of 1958 and Petition No.  2  of  1959,  and  with T. M. Sen, for  the  Intervener,  Attorney-  General   of  India.   Power  to  tax  is  an  incident   of  sovereignty.  The Power is divided between the Union and the  States.   Part XII of the Constitution deals with  taxation-  several  aspects of it.  All restrictions on the  powers  to  tax are contained in Part XII which is self contained.  Part  XII1 deals with something else.  Art. 301 deals with freedom  of inter-State as well as intra-state trade and is different  from s. 92 of the Australian Constitution.  In  Article  301 freedom of trade only means freedom from  trade  barriers-it  does not mean freedom from taxation.   Taxation  simpliciter was not within the terms of Art. 301.   Taxation  is  not  a  restriction within the  meaning  of  Part  XIII.  Article  302 uses the words " in the public interest  ".  If  the  restrictions  contemplated therein included  tax,  then  every  tax  will have to be justified to be  in  the  public  interest.   Restrictions  do not  include  taxing  measures,  otherwise  there  will  be a power  of  judicial  review  in  respect  of  all  such taxing  measures.   Cooley’s  Consti-  tutional  Limitations,  8th Edition, Vol.  II,  p.  986-988.  Taxation is a peculiarly legislative activity.  It is likely  that  if the Constitution makers wanted to put a bar on  the  taxation  power, it would have been placed ’in Part XII  and  not  left to be inferred from Art. 301 ; [1951] S.C.R.  127,  136-137:  [1955] 1 S.C.R. 765.  The word " restriction "  is  very  inapt to describe taxation.  Apart from Part  III  all  restrictions  must be found in Part XIII so far as  taxation  is  concerned.  Article 301 does not start with the words  "  notwithstanding  anything in this Constitution " because  it  is  concerned only with a small sphere of freedom  of  trade  and  commerce and not with taxation.  Restriction  in  these  Articles  means  restriction  on movement.   The  result  of  holding  otherwise would be that even for  intrastate  taxes  the  States  will  have  to go  to  the  President  and  the  legislation will be subject to judicial review.  If Part III  as  well as Art. 301 apply to taxing measures, the  question  will arise which test would  813  the Court apply-" reasonable in the interest of the  general  public  " as envisaged by Part III or " in the  interest  of  the  public  " envisaged by Art. 302.  This  indicates  that  neither  Part III nor Art. 301 applies to  taxing  measures.  Article 303 deals with preference and discrimination between  one State and another.  It is restricted to legislation with  respect  to the entries regarding trade and commerce  within  the State, like entry 26, list II and the entries 33 and  42  of list 111.  Nothing in Art. 303 indicates that the freedom  there includes freedom from taxation.  Article 304(a)  deals  with  discrimination and not with taxation simpliciter.   It  lays  no  restriction on the State taxing goods in  its  own  territory:  [1958]  S.C.R. 1472.  Article 304(a)  cannot  be  interpreted as throwing any light on the scope of Art.  301.  Section  297 of the Government of India Act, 1935,  was  the  predecessor of Art. 304.  Article 304(a) assumes that  there  is  an  existing  tax on goods which  is  not  levied  under  304(a).  There is an intermediate position also.  Article 301  should  be restricted to legislation which is directly with  respect

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to  trade and commerce and not to legislation, which  is  in  pith  and  substance  not with respect  to  trade  but  only  incidentally or indirectly affects trade and commerce.   The  Assam  Act passed under entry 56 is not a  legislation  with  respect to trade and commerce.  Mahabir Prasad, Advocate-General for the State of Bihar,  B.  K.  Saran  and  K. L. Mehta for  the  Intervener,  State  of  Bihar.-Article   301   merely  concerns  itself   with   the  restrictions  on  the free flow of trade and  commerce.   It  deals   with  policy  of  protection.   Article   302   also  contemplates  movement  and passage of  goods.   Restriction  does  not as a rule imply taxation.  If taxation is  imposed  with  a  view to restrict goods passing from  one  State  to  another,  it  will  become a  restriction  under  Art.  301.  Article  304(a) permits tax on entry of goods equal  to  the  tax on such goods which are in the State.  Octroi may be hit  by Art. 301 if it is not saved by other provisions.  It        104  814  is  a  restriction  within Art. 301 when  it  obstructs  the  movement of trade.  S. M. Sikri, Advocate General for the State of Punjab, N. S.  Bindra  and  T.  M. Sen for the  Intervener,  the  State  of  Punjab.  It is impossible to determine whether a  particular  tax places reasonable restrictions and whether it is in  the  public interest.  Article 301 is concerned with the right of  passage  generally  with respect to trade and  commerce  and  Art.  19(1)(g) with the right of an individual: 1955  P.L.R.  304; I.L.R. 7 Raj. 794; A.I.R. 1960 Andhra 234.  Article 302  assumes legislation of Parliament under the entries relating  to trade and commerce.  R.  Ganapathi Iyer and T. M. Sen, for Intervener No. 3,  the  State  of  Madras  adopted  the  submissions  made  by   the  Attorney-General.  G. C. Kasliwal, Advocate-General for the  State of Rajasthan  and  T.  M. Sen for the Intervener, the State  of  Rajasthan  adopted the submissions made by the Attorney-General.  G.  C. Mathur and C. P. Lal, for the Intervener No.  6,  the  State of Uttar Pradesh, adopted the submissions made by  the  Attorney-General.  N.  C. Chatterjee in reply.  Article 301 is an over.  riding  provision over all other provisions.  It is much wider  than  s.  297 of the Government of India Act.  It applies  to  all  pecuniary burdens and commands that trade shall be free from  all  pecuniary burdens: 22 C.L.R. 566; 1936 A.C.  573,  629-  630.  1960.   September  26.  The Judgment of Sinha,  C.  J.,  was  delivered  by Sinha, C. J. The judgment  of  Gajendragadkar,  Wanchoo and Das Gupta, JJ., was delivered by Gajendragadkar,  J. and Shah, J., delivered his own judgment.  SINHA C. J.-These appeals on certificates granted under Art.  132  of the Constitution by the High Court of Judicature  in  Assam  and Writ Petitions under Art. 32 of the  Constitution  impugn the constitutionality of the Assam Taxation (on Goods  Carried by Roads or Inland Waterways) Act, (Assam Act XIII  815  of 1954), which hereinafter will be referred to as the  Act.  The  appellants moved the High Court under Art. 226  of  the  Constitution challenging the validity of the Act.  The  High  Court  by  its  judgment  and  order  dated  June  6,  1955,  dismissed  the  writ petitions.  Thereupon,  the  appellants  obtained   the   certificates  that   the   cases   involved  substantial questions of law as to the interpretation of the  Constitution.    The   petitions  under  Art.  32   of   the  Constitution  were moved in this Court for the same  purpose

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of challenging the vires of the Act.  The appellants and the  petitioners  will-,  in  the course  of  this  judgment,  be  referred to, for the sake of convenience, as the appellants.  The  State  of Assam, the Commissioner of  Taxes,  appointed  under  s. 6 of the Act, and the Superintendent of Taxes  are  the respondents to the appeals and the writ petitions.  It  appears that the appellants are growers of tea  in  West  Bengal  or  in Assam and carry their tea to  the  market  in  Calcutta  from where the tea is sold for consumption in  the  country  or  is exported for sale out of the  country.   The  sale  of tea inside Assam bears a very small  proportion  to  the  tea produced and manufactured by the appellants.   Thus  the bulk of tea produced and manufactured is carried out  of  Assam,  either  for  internal consumption in  India  or  for  export  abroad.   Besides the tea carried by rail,  a  large  quantity  of tea is carried by road or by  inland  waterways  from  Assam to Bengal and in some of these cases,  from  one  part  of  West  Bengal to another part  of  the  same  State  through  inland  waterways, only a few miles of  which  pass  through  the  territory of the State of  Assam.   The  Assam  Legislature passed the Act which received the assent of  the  Governor  of Assam on April 9, 1954, and came into force  on  and  from June 1, 1954.  The purpose of the Act is  to  levy  taxes  on certain goods carried by road or inland  waterways  in  the  State  of  Assam.  On June  30,  1954,  the  second  respondent, the Commissioner of Taxes, Assam, in exercise of  the  powers conferred upon him by subs. (3) of s. 7  of  the  Act,,  published  a  notification in  the  Assam  Government  Gazette bearing date June 21,  816  1954, by which he notified for general information that  the  return under the aforesaid Act and the rules made thereunder  for  the  period commencing June 1, 1954  to  September  30,  1954,  should  be furnished by October 30, 1954.   The  said  notification  also  demanded  the  furnishing  of  quarterly  returns before January 30, 1955 and April 36, 1955, for  the  quarters  ending  December  31, 1954  and  March  31,  1955,  respectively.   The  appellants  in some of  the  cases,  in  pursuance of demand notices, submitted returns to the  third  respondent,  the Superintendent of Taxes, in the  prescribed  form  in  respect  of  tea  despatched  and  carried  up  to  September  30, 1954, under protest.  They also paid the  tax  demanded under protest.  The appellants moved the High Court  of  Judicature in Assam under Art. 226 of  the  Constitution  challenging the validity of the said Act and praying for the  issue  of  a writ of mandamus directing the  respondents  to  forbear from giving effect to the provisions of the Act  and  the  notification  issued  under the Act and/or  a  writ  of  prohibition  or any other appropriate writ restraining  them  from  taking  steps under the provisions of  the  Act.   The  appellants challenged the validity of the Act mainly on  the  grounds that (1) the Act, rules and the notifications  under  the  Act were ultra vires the Constitution, because the  Act  was  repugnant  to  the  provisions  of  Art.  301  of   the  Constitution as the tax on carriage of tea through the State  of  Assam had the effect of interfering with the freedom  of  trade,  commerce  and  intercourse; (2)  that  tea  being  a  controlled industry under the provisions of the Tea Act XXIX  of  1953,  the  Union  Government alone  had  the  power  to  regulate   the  manufacture,  production,  distribution   or  transport   of  tea  and  the  jurisdiction  of  the   Assam  Legislature  was  thus completely ousted; (3) that  the  tax  under  the  Act  was  nothing  but  a  duty  of  excise,  in  substance, though not in form, and was thus an  encroachment  on the Central legislative field within the meaning of entry

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84 of the Union List.  The impugned Act was also  challenged  on the ground that it was discriminatory and thus void under  Art. 14 of  817  the  Constitution.  The competence of the Assam  Legislature  to legislate on the subject was also questioned.  The  respondents opposed those petitions under Art.  226  of  the  Constitution in the High Court.  It was denied  by  the  State  that  the  Act or the rules made  thereunder  or  the  notifications   issued  thereunder  were  ultra  vires   the  Constitution  or that the Act contravened the provisions  of  Art. 301 of the Constitution or that it was an  encroachment  on the sphere of the Union Legislature or was in any way  in  conflict  with the provisions of the Tea Act XXIX  of  1953.  The case of the respondents was that the Act was in pith and  substance, a legislation to levy tax on certain classes  and  types of goods carried by road or inland waterways, strictly  within entry no. 56 of the State List.  It was also asserted  that  the Act was within the legislative competence  of  the  Assam  Legislature  and  was not within  the  terms  of  the  prohibition contained in Art. 301 of the Constitution.  These  petitions were heard by a Special Bench of the  Assam  High  Court, which, by its judgment and order dated June  6,  1955,   dismissed  them  holding  that  the  Act   was   not  unconstitutional.   Two separate, but concurring  judgments,  were  delivered by Sarjoo Prasad, C. J. and Ram Labbaya,  J.  The  learned Chief Justice, in the course of  his  judgment,  held  that  the  Act contemplated imposition  of  a  tax  on  transport  or carriage of goods within the Meaning of  entry  56  of List II and did not amount to interference  with  the  freedom of trade and commerce within the meaning of Art. 301  of  the  Constitution ; that the pith and substance  of  the  impugned Act was that it was a taxing legislation which  was  not  directly concerned with trade and commerce,  though  it  might indirectly entrench on the field of trade and commerce  and  that  Art. 301 was not directly concerned  with  taxing  laws.   He also held that the impost levied by the  Act  was  not  in the nature of an excise duty and that there  was  no  substance in the contention that it encroached upon entry 84  of the Union List 1. It was also held that the impugned  Act  did  not, in any way, come in conflict with the  control  of  the tea industry  818  introduced  by the Central Legislation, namely, the Tea  Act  XXIX of 1953.  Ram Labhaya, J., examined the provisions of the impugned Act  in great detail and came to the conclusion that the  element  of  carriage was expressly made a condition of liability  to  tax   under  the  impugned  Act  and  it   was,   therefore,  distinguishable  from  a duty of excise  and  came  directly  under entry 56 of List 11.  On the crucial question  arising  in  this case, his conclusion was that taxation per  se  has  not  the  effect  of abridging  or  curtailing  the  freedom  contemplated  by Art. 301 ; that Arts. 302 and 304  restrict  the  powers of Parliament and the State Legislatures in  the  matter of legislation under entries 42 of List 1, 26 of List  11  and  33 of List III and that  restrictions  properly  so  called on the movement of goods and traffic must find  their  justification  from  the  provisions of  Part  XIII  of  the  Constitution  ;  that the impugned Act  made  provision  for  taxation which did not directly impinge upon the freedom  of  trade,  commerce and intercourse within the meaning of  Art.  301.  His view also was that in some cases taxation may have  the effect of placing restrictions on movement of goods  and  traffic,  and  if it has that effect, it  comes  within  the

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mischief  of  Art. 301.  In the result, his  conclusion  was  that the impugned Act in its pith and substance fell  within  the  ambit  of entry 56 of List 11.  He  also  examined  the  terms  of the Union legislation, Tea Act No. XXIX  of  1953,  and  came  to the conclusion that the impugned Act  did  not  trespass  upon the field of the controlled industry of  tea.  His   conclusion   with  reference  to   the   argument   of  discrimination based on Art. 14 was that there was no  proof  forthcoming  of any real discrimination between persons  and  things.   With these conclusions Deka, J., the third  Judge,  entirely  agreed.  From the judgment of the High  Court  the  appellants have come up in appeal on certificates granted by  the  High  Court.  The two petitions under Art.  32  of  the  Constitution were filed on behalf of two other producers  of  tea.    They   raise  the  same  questions  as   arise   for  determination in the three appeals from the decision of  the  Assam High Court.  They have all been  819  heard together And will be dealt with by a common judgment.  Mr. Chatterjee, on behalf of the appellants, contended  that  the  impugned Act imposed fetters on the free flow of  trade  and commerce in respect of tea and jute, the two commodities  dealt  with  by the Act and, A therefore,,  contravened  the  provisions  of  Art.  301  of  the  Constitution;  that  the  legislation  was  beyond the legislative competence  of  the  Assam Legislature and was not authorised by entry 56 in List  II  ;  that the tea industry was a  controlled  industry  as  declared  by Parliament and directly came under entry 52  of  List  1  ;  that it was a colourable  piece  of  legislation  which,  in its true effect, was a levy of a duty  of  excise  which  could  only  be done by the  Union  Legislature,  and  finally, that it contravened Art. 14 of the Constitution.  The learned Attorney General on behalf of the State of Assam  as  also  of the Union contended, on the  other  hand,  that  taxation  simpliciter was not within the terms of Art.  301.  Taxation as such is not a restriction within the meaning  of  Part XIII.  It is an attribute of sovereignty, which is  not  justiciable.   The  power to tax is a  peculiar  legislative  function  with which the courts are not  directly  concerned  and  that, therefore, the freedom contemplated by  Art.  301  does not mean freedom from taxation and that taxation is not  included within the connotation of the term.  "  Restriction  "  in the context of Part XIII meant legislation  which  had  the effect of impeding the free flow of goods and traffic by  erection  of  tariff walls, for example, a tariff  wall,  if  erected  by  a  Legislature, may  be  justiciable,  but  not  legislation  simply imposing a tax for purposes of  revenue.  He further contended that Part XII of the Constitution is  a  self-contained part dealing with finance etc., even as  Part  XIII  is a selfcontained part dealing with  trade,  commerce  and intercourse within the territory of India.  He emphasis-  ed  that the American and Australian decisions are no  guide  to the decision of the points in controversy in the  present  case, as the framework of their respective constitutions was  entirely different from the Indian  820  Constitution.  Particularly, the Australian Constitution did  not  contain anything corresponding to Parts III and XII  of  our  Constitution.  According to his contention " freedom  "  in Part XIII meant freedom from discriminatory taxation  and  freedom  from trade barriers.  The Advocate-General  of  the  several  States  who  appeared in this  case  supported  the  viewpoint stressed by the learned Attorney  General.  The  most important question that falls to be determined  in  this  batch of cases is whether the impugned  Act  infringes

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the  provisions  of  Part XIII  of  the  Constitution,  with  particular  reference’to  Art.  301.  Part  XIII  is  headed  "Trade  Commerce  and Intercourse within  the  Territory  of  India".   Article 301, which is the opening Article in  this  Part is in very general terms, which are as under:-  "  Subject  to  the other provisions of  this  part,  trade,  commerce  and intercourse throughout the territory of  India  shall be free ".  It  is  clear  that this Part is not subject  to  the  other  provisions  of  the Constitution and the generality  of  the  words used in Art. 301 is cut down only by the provisions of  the  other Articles of this Part ending with Art.  307.   It  has  not  been  and  it could  not  be  contended  that  the  generality of the expressions used in Art. 301 admit of  any  Exceptions  or  explanations  not  occurring  in  this  Part  itself,  nor has it been contended that trade, commerce  and  intercourse  are subject to any other fetters.  All  parties  are  agreed that trade, commerce and intercourse  throughout  the  territory of India have been emphatically  declared  by  the Constitution to be free, but there is a wide  divergence  of  views on the answer to the question " free from what  ?"  It  has been contended on behalf of the appellants that  the  answer  to  this question must be that trade,  commerce  and  intercourse throughout India, shall be free from  everything  including  taxation.  On the other hand, the  contention  on  behalf  of the Union Government and the State Government  is  that  the  freedom envisaged by Art. 301  does  not  include  immunity  from  taxation and that freedom means  that  there  shall be no trade barriers or tariff  821  walls  shutting  out commodities,  traffic  and  intercourse  between individuals, and no shutting in.  In  order  fully  to  appreciate  the  implications  of  the  provisions of Part XIII of the Constitution, it is necessary  to  bear  in  mind  the  history  and  background  of  those  provisions.   The  Constitution Act of 1935  (Government  of  India  Act,  26 (’Teo. 5, Ch. 2) which envisaged  a  federal  constitution for the whole of India, including what was then  Indian  India in contradistinction to British  India,  which  could  not  be fully implemented and which  also  introduced  full provincial autonomy enacted s. 297 prohibiting  certain  restrictions on internal trade in these terms:-  " 297.-(1) No Provincial Legislature or Government shall-  (a)  by  virtue of the entry in the  Provincial  Legislative  List relating to trade and commerce within the Province,  or  the  entry in that list relating to the production,  supply,  and distribution of commodities, have  power to pass any law  or take any executive action prohibiting or restricting  the  entry  into,  or export  from the Province of goods  of  any  class or description ; or  (b)  by virtue of anything in this Act have power to  impose  any  tax,  cess,  toll  or  due  which,  as  between   goods  manufactured  or produced in the Province and similar  goods  not so ’manufactured or produced, discriminates in favour of  the  former, or which, in the case of goods manufactured  or  produced  outside the Province, discriminates between  goods  manufactured  or produced in one locality and similar  goods  manufactured or produced in another locality.  (2)  Any law passed in contravention of this section  shall,  to the extent of the contravention, be invalid."  It  will  be noticed that the prohibition contained  in  the  section quoted above applied only to Provincial  Governments  and Provincial Legislatures with reference to entries in the  Provincial  Legislative List relating to trade and  commerce  within   the   Province  and  to  production,   supply   and

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distribution  of  commodities.   That  section  dealt   with  prohibitions or       105  822  restrictions  in  respect of import into or  export  from  a  Province, of goods generally.  It also dealt with the  power  to  impose taxes etc. and prohibited discrimination  against  goods  manufactured or produced outside a Province or  goods  produced   in  different  localities.   Part  XIII  of   the  Constitution has introduced all those prohibitions, not only  in  respect of State Legislatures, but of  Parliament  also.  In  other  words,  Part  XIII  enlarges  the  scope  of  the  inhibitions and lays down the limits within which the  Union  Parliament  or  a  State  Legislature  may  legislate   with  reference  to trade, commerce and  intercourse  inter-State,  intrastate and throughout the territory of India.  In  this connection it has got to be remembered that  before  the  commencement  of the Constitution about  two-thirds  of  India  was  directly  under British rule and  was  called  ’  British  India’ and the remaining about one-third was  being  directly  ruled  by  the Princes and  was  known  as  Native  States.   There  were a large number of  them  with  varying  degrees  of sovereignty vested in them.  Those  rulers  had,  broadly  speaking, the trappings of a Sovereign  State  with  power  to  impose taxes and to regulate the flow  of  trade,  commerce and intercourse.  It is a notorious fact that  many  of  them had erected trade barriers seriously  impeding  the  free  flow  of  trade, commerce and  intercourse,  not  only  shutting out but also shutting in commodities meant for mass  consumption.  Between the years 1947 and 1950 almost all the  Indian  States entered into engagements with the  Government  of  India and ultimately merged their  individualities  into  India  as one political unit, with the result that what  was  called  British India, broadly speaking, became,  under  the  Constitution,   Part  A  States,  and  subject  to   certain  exceptions  not relevant to our purpose, the  Native  States  became Part B States.  We also know that before the  Consti-  tution  introduced the categories of Part A States,  Part  B  States and Part C States (excluding Part D relating to other  territories),  Part B States themselves, before their  being  constituted into so many units, contained many small States,  which formed themselves into  823  Unions  of a number of States, and had such  trade  barriers  and custom posts, even inter se.  But even after the merger,  the  Constitution  had to take notice of  the  existence  of  trade  barriers  and  therefore  had  to  make  transitional  provisions  with the ultimate objective of  abolishing  them  all.   Most of those Native States, big or small, had  their  own taxes, cesses, tolls and other imposts and duties  meant  not only for raising revenue, but also as trade barriers and  tariff  walls.  It was in the background of these facts  and  circumstances that the Constitution by Art. 301 provided for  the abolition of all those trade barriers and tariff  walls.  When  for the first time in the history of India the  entire  territory within the geographical boundaries of India, minus  what  became Pakistan, was knit into one political unit,  it  was necessary to abolish all those trade barriers and custom  posts  in the interest of national solidarity, economic  and  cultural  unity  as also of freedom of trade,  commerce  and  intercourse.  It  is  in the background of these facts  and  circumstances  that  we  have  to  determine  the  ambit  of  the   freedom  contemplated by Art. 301.  That Article envisages freedom of  trade  and  commerce with reference to  different  parts  of

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India as also freedom of movement of individuals in relation  to  their trade and other activities.  Hence, Art.  301  has  reference  not  only to trade and  commerce,  as  ordinarily  understood  in  common  parlance, but also  in  relation  to  individuals   who  have  to  move  with  their   goods   and  commodities  throughout  the  length  and  breadth  of   the  country.   Movement of traffic in goods and  commodities  as  also of persons can be by railway or airways, by road or  by  inland   waterways  etc.,  etc.   Carriage  of   goods   and  passengers  by  railway,  by sea or by air  or  by  national  waterways  is  covered by entry 30 of List 1  and  taxes  on  railway  fares and freights and terminal taxes on  goods  or  passengers  carried  by railway, sea or air come  under  the  purview  of entry 89 in the same List.  On the  other  hand,  taxes  on  goods and passengers carried by  road  or  inland  waterways  come under entry 56 of List II (State List).   It  will thus be seen that the Constitution makers  contemplated  taxes  824  on  goods and passengers to be imposed by the Parliament  on  journeys  covered  by railway or by sea or by  air;  and  by  State Legislatures on journeys by road or inland  waterways.  The power to tax is inherent in sovereignty.  The  sovereign  State,  in some cases the Union, in other cases  the  State,  has  the  inherent power to impose taxes in order  to  raise  revenue  for  purposes  of State.  Such  a  sovereign  power  ordinarily  is not justiciable, simply because the State  in  its  legislative department has to determine the policy  and  incidence  of taxation.  It is the St-ate which  determines,  through  the Legislature, what taxes to impose, on whom  and  to what extent.  The judicial department of the State is not  expected  to deal with such matters, because it is  not  for  the  courts  to  determine  the  policy  and  incidence   of  taxation.   This  power of the State to raise  finances  for  Government  purposes has been dealt with by Part XII of  the  Constitution,  which contains the total prohibition of  levy  or collection of tax, except by authority of law (Art. 265).  This  Part  also  deals with  the  distribution  of  revenue  between  the  Union  and the States.  It  does  not  clearly  demarcate the taxing authority as between the Union and  the  States  and therefore had to indicate in great  detail  what  taxes  shall be levied for the benefit of the Union  or  for  the  benefit of the States and what taxes may be levied  and  collected by the Union for the benefit of the States and the  principle  according  to  which those revenues  have  to  be  distributed amongst the constituent States of the Union.  In  short,  Part  XII is a self-contained series  of  provisions  relating to the finances of the Union and of the States  and  their interrelation and adjustments (ignoring the provisions  in Chapter 2 of that Part relating to borrowing and  Chapter  3 relating to property contracts etc.). Like Part XIII, Part  XII  also  is  not  expressed to be  subject  to  the  other  provisions  of the Constitution.  Hence, both Parts XII  and  XIII  are  meant to be self-contained  in  their  respective  fields.   It  cannot,  therefore, be said that  the  one  is  subject. to the other.  But it has been argued on behalf  of  the  appellants that the pro. visions of Art.  304  indicate  that taxation is within  825  the purview of the overriding provisions, as they have  been  characterised, of Art. 301.  But a close examination of  the  provisions  of Art. 304 would show that it is  divided  into  two   parts,   viz.,   (1)  dealing   with   imposition   of  discriminatory  taxes  by  a  State  Legislature;  and   (2)  relating  to  imposition of  reasonable  restrictions,  thus

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showing   that  imposition  of  taxes,   discriminatory   or  otherwise,  is a class apart from imposition  of  reasonable  restrictions on freedom of trade, commerce and  intercourse.  The  second  part  of Art. 304 dealing  with  imposition  of  reasonable  restrictions on freedom of trade,  commerce  and  intercourse  by  a State Legislature is on a line  with  the  imposition  by Parliament of such restrictions  between  one  State  and  another or within any part of the  territory  of  India  in  public  interest, contained  in  Art.  302.   The  provisions of Art. 303 further make it clear that the giving  Of  preference to one State over another  or  discrimination  between one State and another are clearly within the purview  of Part XIII, that is to say, they are calculated to  impede  the freedom of trade, commerce and intercourse.  There is  a  prohibition   against   Parliament  as  also   against   the  Legislature  of a State making any law giving preference  to  one  State over another or making or authorising the  making  of  any discrimination between one State and  another.   But  the  most  significant  words  in  connection  with   giving  preference or making discrimination as envisaged in Art. 303  are  with  reference to " any entry relating  to  trade  and  commerce in any of the Lists in the Seventh Schedule",  that  is to say, entry 42 in List 1, entry 26 in List II and entry  33  in  List  III  of  the  Seventh  Schedule.   Hence,  any  legislation  under  those entries which has  the  effect  of  directly  interfering with trade, commerce  and  intercourse  being  free  throughout  the territory of India  has  to  be  struck  down as infringing the provisions of Art. 301.   But  in this matter also the Constitution makers had before  them  situations of emergency, say for example, created by drought  or  overflooding resulting in scarcity of  commodities  like  foodgrains  etc.  In such a situation, Parliament  has  been  armed with the power to grant preference to one State over  826  another or to make a discrimination as between two and  more  States  if  the Law dealing with such a  situation  declares  that  it  is  necessary to do so in order to  deal  with  an  emergency   like  the  one  referred  to  above.   In   this  connection  it may not be emphasised that Art. 303  has  not  been  very  accurately worded inasmuch as the  non  obstante  clause, with which the Article opens, has reference only  to  Art.  302,  which  empowers  Parliament  to  impose  by  law  restrictions   on   the  freedom  of  trade,   commerce   or  intercourse, inter-State or intraState, in public  interest.  But  the  non  obstante clause is  immediately  followed  by  reference not only to Parliament but also to the Legislature  of  a  State  which  are armed  with  the  power  of  giving  preference or making discrimination as aforesaid in  respect  of the entries relating to trade and commerce in any of  the  lists  in the Seventh Schedule.  Here, no reference is  made  to  intercourse.   But  as the present  controversy  is  not  concerned with the freedom of intercourse, as  distinguished  from the freedom of trade and commerce, no more need be said  about that omission.  Learned  counsel for the appellants vehemently  argued  that  the  freedom contemplated by Art. 301 Must be  construed  in  its  most comprehensive sense of freedom from all  kinds  of  impediments,   restraints  and  trade  barriers,   including  freedom  from  all  taxation.  In my opinion,  there  is  no  warrant  for  such  an  extreme  position.   It  has  to  be  remembered  that  trade, commerce  and  intercourse  include  individual  freedom  of movement of every citizen  of  India  from  State  to  State, which is  also  guaranteed  by  Art.  19(1)(d) of the Constitution.  The three terms used in  Art.  301  include not only free buying and selling, but also  the

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freedom of bargain and contract and transmission of informa-  tion  relating  to  such  bargains  and  contracts  as  also  transport  of  goods  and commodities for  the  purposes  of  production,  distribution  and  consumption  in  all   their  aspects,  that  is to say, transportation by  land,  air  or  water.   They must also include commerce not only  in  goods  and commodities, but also transportation of men and  animals  by all means of transportation.  Commerce would thus include  dealings over the telegraph,  827  telephone or wireless and every kind of contract relating to  sale, purchase, exchange etc. of goods and commodities.  Viewed  in this all comprehensive sense taxation  on  trade,  commerce  and intercourse would have many ramifications  and  would cover almost the entire field of public taxation, both  in the Union and in the State Lists. It is almost impossible  to  think  that the makers of the Constitution  intended  to  make  trade, commerce and intercourse free from taxation  in  that  comprehensive  sense.  If that were so,  all  laws  of  taxation relating to sale and purchase of goods on  carriage  of goods and commodities, men and animals, from one place to  another, both inter-State and intraState, would come  within  the  purview  of Art. 301 and the proviso to  Art.  304  (b)  would make it necessary that all Bills or Amendments of pre-  existing laws shall have to go through the gamut  prescribed  by that proviso.  That will be putting too great an  impedi-  ment  to  the  power of taxation vested in  the  States  and  reduce   the   States’   limited   sovereignty   under   the  Constitution to a mere fiction.  That extreme position  has,  therefore, to be rejected as unsound.  In  this  connection, it is also pertinent to bear  in  mind  that  all  taxation is not necessarily an  impediment  or  a  restraint in the matter of trade, commerce and  intercourse.  Instead  of being such impediments or restraints, they  may,  on  the  other  hand, provide the  wherewithal;  to  improve  different kinds of means of transport, for example, in  cane  growing  areas,  unless there are good roads,  facility  for  transport of sugarcane from sugarcane fields to sugar  mills  may be wholly lacking or insufficient.  In order to make new  roads  as  also to improve old ones, cess on the  grower  of  cane or others interested in the transport of this commodity  has to be imposed, and has been known in some parts of India  to  have been imposed at a certain rate per maund or ton  of  sugarcane   transported   to  sugar  factories.    Such   an  imposition is a tax on transport of sugarcane from one place  to another, either intrastate or inter-State.  It is the tax  thus  realised that makes it feasible for opening new  means  of  828  communication  or  for  improving  old  ones.   It   cannot,  therefore, be said that taxation in every case must mean  an  impediment  or  restraint  against free flow  of  trade  and  commerce.   Similarly,  for the facility of  passengers  and  goods by motor transport or by railway, a surcharge on usual  fares  or  freights is levied, or may be levied  in  future.  But  for  such  a surcharge, improvement  in  the  means  of  communication  may  not be available at all.  Hence,  in  my  opinion, it is not correct to characterise a tax on movement  of   goods  or  passengers  as  necessarily   connoting   an  impediment,  or  a  restraint, in the matter  of  trade  and  commerce.   That  is another good reason in support  of  the  conclusion  that taxation is not ordinarily included  within  the terms of Art. 301 of the Constitution.  In  my opinion, another very cogent reason for holding  that  taxation simpliciter is not within the terms of Art. 301  of

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the Constitution is that the very connotation of taxation is  the power of the State to raise money for public purposes by  compelling   the  payment  by  persons,  both  natural   and  juristic,  of monies earned or possessed by them, by  virtue  of  the  facilities and protection afforded  by  the  State.  Stich burdens or imposts, either direct or indirect, are  in  the  ultimate  analysis  meant  as  a  contribution  by  the  citizens  or persons residing in the State or  dealing  with  the  citizens of the State, for the support of  the  Govern-  ment,   with  particular  reference  to   their   respective  abilities  to make such contributions.  Thus public  purpose  is  implicit in every taxation, as such.  There. fore,  when  Part  XIII  of  the Constitution  speaks  of  imposition  of  reasonable  restrictions  in public interest, it  could  not  have intended to include taxation within the generic term  "  reasonable  restrictions ". This Court has laid it  down  in  the case of Ramjilal v. Income Tax Officer, Mohindargarh (1)  that imposition and collection of taxes by authority of  law  envisaged by Art. 265 is outside the scope of the expression  "   deprivation  of  property  "  in  Art.  31(1)   of   the  Constitution.   Reasonable restrictions as used in Part  III  or Part XIII of the Constitution would in most cases be less  (1)  [1951] S.C.R. 127,136.  829  than total deprivation of property rights.  Hence, Part  XII  dealing  with  finance etc. as already indicated,  has  been  treated  as a Part dealing with the sovereign power  of  the  State  to  impose  taxes, which must  always  mean  imposing  burdens  on citizens and others, in public interest.   If  a  law  is passed by, the Legislature imposing a tax  which  in  its true nature and effect is meant to impose an  impediment  to  the  free flow of trade, commerce and  intercourse,  for  example,  by imposing a high tariff wall, or  by  preventing  imports  into  or  exports out of a State,  such  a  law  is  outside  the significance of taxation, as such, but  assumes  the character of a trade barrier which it was the  intention  of  the  Constitution makers to abolish by Part  XIII.   The  objections against the contention that taxation was included  within  the prohibition contained in Part XIII may  thus  be  summarised: (1) Taxation, as such, always implies that it is  in  public interest.  Hence, it would be outside  particular  restrictions,  which may be characterised by the  courts  as  reasonable  and in public interest. (2) The power is  vested  in   a  sovereign  State  to  carry  on   Government.    Our  Constitution  has laid the foundations of a  welfare  State,  which means very much expanding the scope of the  activities  of  Government and administration, thus making it  necessary  for the State to impose taxes on a much larger scale and  in  much  wider  fields.  The legislative entries in  the  three  Lists referred to above empowering the Union Government  and  the State Governments to impose certain taxations with refe-  rence to movement of goods and passengers would be  rendered  ineffective,  if not otiose, if it were held  that  taxation  simpliciter  is  within the terms of Art. 301.  (3)  If  the  argument  on  behalf of the appellants were  accepted,  many  taxes,  for  example,  sales tax by the  Union  and  by  the  States,  would  have to go through the gamut  prescribed  in  Arts.  303  and  304, thus very  much  detracting  from  the  limited  sovereignty  of  the States, as  envisaged  by  the  Constitution.  (4)  Laws  relating  to  taxation,  which  is  essentially a legislative function of the State, will become  justiciable and every 106  830  time  a taxation law is challenged as unconstitutional,  the  State  will have to satisfy the courts a course  which  will

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seriously  affect  the division of powers  on  which  modern  constitutions, including ours, are based. (5)     Taxation  on movement of goods and passengers is not   necessarily  an  impediment.  That  conclusion leads to a discussion of the other  extreme  position that taxation is wholly out of the purview of  Art.  301.  That extreme position is equally untenable in view  of  the fact that Art. 304 contains, and Art. 306, before it was  repealed  in  1956,  contained, reference  to  taxation  for  certain purposes mentioned in those Articles.  But Art. 306,  which  now stands repealed, contained references to  tax  or  duty  on the import of goods into one State from another  or  on  the  exports of goods from one State to  another.   Such  imposts were really in the nature of impediments to the free  flow  of  goods  and  commodities  on  account  of   customs  barriers, which it was the intention of Art. 301 to abolish.  Similarly,  Art. 304 while recognising the power of a  State  Legislature to tax goods imported inter-State, insists  that  a  similar tax is imposed on goods manufactured or  produced  within  the  State.  The Article thus brings out  the  clear  distinction  between  taxation as such for  the  purpose  of  revenue  and taxation for purposes of making  discrimination  or  giving  preference,  both of which are  treated  by  the  Constitution as impediments to free trade and commerce.   In  other words, so long as the impost was not in the nature  of  an  impediment  to the free flow of  goods  and  commodities  between one State and another, including in this  expression  Union  territories also, its legality was not subject to  an  attack based on the provisions of Part XIII.  But that  does  not  mean  that  State Legislatures derive  their  power  of  taxation  by  virtue  of  what is  contained  in  Art.  304.  Article  304  only left intact such power of  taxation,  but  contained  the  inhibition  that such  taxes  shall  not  be  permitted to have the effect of impeding the free flow  of goods and commodities.  Article  301, with which Part XIII commences,  contains  the  crucial words " shall be free " and provides  831  the  key to the solution of the problems posed by the  whole  Part.   The  freedom  declared by this  Article  is  not  an  absolute   freedom   from  all  legislation.    As   already  indicated,  the  several entries in the  three  Lists  would  suggest  that  both Parliament and State  Legislatures  have  been  given  the  power to legislate in  respect  of  trade,  commerce  and  intercourse,  but it is  equally  clear  that  legislation   should   not  have  the  effect   of   putting  impediments  in the way of free flow of trade and  commerce.  In  my  opinion,  it  is  equally  clear  that  the  freedom  envisaged by the Article is not an absolute freedom from the  incidence  of  taxation in respect of  trade,  commerce  and  intercourse,  as  shown by entries 89 and 92 A  in  List  1,  entries 52, 54 and 56 to 60 in List II and entry 35 in  List  111.   All  these  entries in terms  speak  of  taxation  in  relation  to  different  aspects  of  trade,  commerce   and  intercourse.   The Union and State  Legislature,  therefore,  have the power to legislate by way of taxation in respect of  trade,  commerce and intercourse, so as not to  erect  trade  barriers, tariff walls or imposts, which have a  deleterious  effect on the free flow of trade, commerce and  intercourse.  That  freedom  has further been circumscribed by  the  power  vested  in  Parliament or in the Legislature of a  State  to  impose restrictions in the public interest.  Parliament  has  further  been authorised to legislate in the way  of  giving  preference  or  making discrimination  in  certain  strictly  limited  circumstances  indicated in el. (2)  of  Art.  303.

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Thus, on a fair construction of the provisions of Part XIII,  the following propositions emerge: (1) trade, commerce,  and  intercourse  throughout  the  territory  of  India  are  not  absolutely  free,  but  are subject  to  certain  powers  of  legislation by Parliament or the Legislature of a State; (2)  the freedom declared by Art. 301 does not mean freedom  from  taxation  simpliciter, but does mean freedom  from  taxation  which  has the effect of directly impeding the free flow  of  trade,  commerce and intercourse; (3) the freedom  envisaged  in  Art. 301 is subject to  non-discriminatory  restrictions  imposed  by  Parliament in public interest (Art.  302);  (4)  even discriminatory or preferential legisla-  832  tion  may be made by Parliament for the purpose  of  dealing  with  an emergency like a scarcity of goods in any  part  of  India  (Art.  303(2)); (5) reasonable  restrictions  may  be  imposed by the Legislature of a State in the public interest  (Art.  304(b)); (6) non-discriminatory taxes may be  imposed  by the Legislature of a State on goods imported from another  State or other States, if similar taxes are imposed on goods  produced  or manufactured in that State (Art.  304(a));  and  lastly  (7) restrictions imposed by existing laws have  been  continued,  except in so far as the President may  by  order  otherwise direct (Art. 305).  After  having  discussed the arguments for and  against  the  proposition  that Art. 301 includes within its  large  sweep  taxation simpliciter, I now proceed to discuss the terms  of  the  impugned Act in order to find out whether in the  light  of the discussion above, any of its provisions are liable to  be  struck down as unconstitutional, because  they  infringe  Art.  301,  as contended on behalf of the  appellants.   The  Act, as the preamble shows, is intended to " impose a tax on  certain  goods carried by road or inland waterways Dealer  "  has been defined in s. 2(4) as under: -  "Dealer’ means a  person who owns jute in bales before it is  carried  by motor vehicle, cart, trolley, boat,  animal  and  human  agency or any other means except railways or  airways  and includes his agent."  Producer has been defined by cl.’(12) of s. 2 as follows:-  " ’Producer’ means a producer of tea and includes the person  in charge of the garden where tea is produced ".  Section  3,  which is the charging  section,  provides  that  manufactured  tea in chests carried by motor vehicle,  etc.,  except  railways and airways, shall be liable to a tax at  a  certain  rate per pound of such tea and that this tax  shall  be  realised from the producer.  It also provides that  jute  carried in bales by motor vehicle, etc., except railways and  airways,  shall  be liable to a tax at a  certain  rate  per  maund on such jute, which shall be realised from the dealer.  It is not necessary  833  to set out the rate of taxes aforesaid, because ’no argument  was  advanced  to the effect that they  were  oppressive  or  excessive.   The tax on manufactured tea in chests is to  be  paid  by  the producer, which term includes  the  person  in  charge of the garden where tea is produced.  This  provision  has occasioned the argument that it is an excise duty in the  garb of a tax and will be dealt with later in the course  of  this  judgment.   The tax on jute carried in bales  is  made  realisable from the dealer which means a person who owns the  jute in bales.  Section 6 lays down the taxing  authorities.  Section  7  requires every producer and  dealer  to  furnish  returns of such tea or such jute as have been made liable to  tax under s. 3, as aforesaid.  Section 8 makes provision for  licensing of balers, which means persons who own or  possess

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a  pressing machine for the compression of jute into  bales.  Section  9 lays down the procedure of assessment and  s.  10  the procedure for cancellation of assessment in certain cir-  cumstances.    Section  11  lays  down  the  procedure   for  assessment in such cases as have escaped assessment or there  has  been  an evasion of the tax.  It is  not  necessary  to  refer  to the other provisions of the Act, because they  are  not relevant to the arguments advanced at the Bar.  It  will  be seen from the bare summary of the relevant provisions  of  the statute that it is a taxing statute simpliciter  without  the  least suggestion even of any attempt at  discrimination  against dealers and producers outside the State of Assam  or  of  preference in favour of those inside the State.  On  the  face  of it, therefore, the Act does not suffer from any  of  the  vices against which Part XIII of the  Constitution  was  intended.  It has not been suggested that the Act imposes  a  heavy  burden on the dealer or the producer as the case  may  be.  On the terms of the Statute, it cannot be said that  it  is  intended to put obstacles or impediments in the  way  of  free  flow  of traffic in respect of jute and tea.   On  the  face of it, it would not be in the interest of the State  of  Assam to put any such impediments, because Assam is a  large  producer  of  those  commodities and the  market  for  those  commodities is mainly in Calcutta.  834  In   those  I  circumstances,  it  is  difficult,   if   not  impossible,  to  come to the conclusion that the  Act  comes  within the purview of Art. 301 of the Constitution.  If that  is  so,  no further consideration arising out of  the  other  provisions  of Part XIII of the Constitution calls  for  any  decision.  Having  thus disposed of the main ground of  attack  against  the  constitutionality of the Act based on Art. 301  of  the  Constitution,  it  is  necessary  to  advert  to  the  other  contentions raised on behalf of the appellants.  It has been  contended that the Act is beyond the legislative  competence  of  the Assam Legislature.  We have, therefore,  to  address  ourselves  to the question whether or not it is  covered  by  any  of  the  entries in List 11 of  the  Seventh  Schedule.  Entry 56, in its very terms, " Taxes on goods and passengers  carried by rail or in inland waterways ", completely  covers  the impugned Act.  There is no occasion in this case to take  recourse to the doctrine of pith and substance, inasmuch  as  the  Act  is a simple piece of taxing statute meant  to  tax  transport of goods, in this case jute and tea, by road or on  inland  waterways.  In my opinion, it is a very simple  case  of taxation completely covered by entry 56, but the argument  against  the  competence of the Assam Legislature  has  been  sought  to  be supported by the subsidiary  contention  that  though in form it is a tax on the transport of goods  within  the  terms of entry 56, in substance it is an imposition  of  excise duty within the meaning of entry 84 in List 1 of  the  Seventh Schedule, but, in my opinion, there is no  substance  in  this  contention for the simple reason that so  long  as  jute  or tea is not sought to be transported from one  place  to another, within the State or outside the State, no tax is  sought to be levied by the Act.  It is only when those goods  are  put  on a motor truck or a boat or a steamer  or  other  modes  of transport contemplated by the Act, that the  occa-  sion for the payment of tax arises.  A similar argument  was  advanced  in the case of The Tata Iron & Steel Co.  Ltd.  v.  The  State  of  Bihar (2), and Das, C.  J.,  delivering  the  majority  judgment  of the Court, disposed of  the  argument  that the tax in that case was not  (2) [1958] S.C.R. 1355.

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835  on  sale of goods, but was, in substance, a duty of  excise,  in these terms:  " This argument, however, overlooks the fact that under  el.  (ii)  the producer or manufacturer became liable to pay  the  tax  not because he produced or manufactured the goods,  but  because he sold the goods.  In other words the tax was  laid  on the producer or manufacturer only qua seller and not  qua  manufacturer or producer as pointed out in Boddu  Paidanna’s  case (1942) F.C.R. 290.  In the words of their Lordships  of  the  Judicial Committee in Governor General v.  Province  of  Madras,  72  I.A.  91  at p. 103, ’  a  duty  of  excise  is  primarily  a  duty levied on a manufacturer or  producer  in  respect of the commodity manufactured or produced.  It is  a  tax on goods not on sales or the proceeds of sale of goods’.  If  the  goods  produced  or  manufactured  in  Bihar   were  destroyed  by fire before sale the manufacturer or  producer  would not have been liable to pay any tax under s. 4(1) read  with  s.  2(g), second proviso.  As Gwyer, C.  J.,  said  in  Boddu Paidanna’s case, supra, at p. 102, the manufacturer or  producer would be  liable, if at all, to a sales-tax because  he sells and not because he manufactures or produces; and he  would  be  free  from liability if he  chose  to  give  away  everything  which came from his factory’." (See p.  1369  of  the Report).  The observations quoted above completely cover  the  present  controversy.  The Legislature has  chosen  the  dealer  or  the  producer  as  the  convenient  agency   for  collection of the tax imposed by s. 3, but the occasion  for  the  imposition  of  the tax is not the  production  or  the  dealing,  but  the  transport  of  those  goods.   It  must,  therefore, be held that the Act does what it sets out to do,  namely to impose a tax on goods carried by road or on inland  waterways.  Another  line of argument directed to the same end,  namely,  of  attacking  the competence of the Assam  Legislature  was  that  it impinged on the provisions of the Tea Act, XXIX  of  1953.  It was argued that the tea industry was a  controlled  one  within the competence the Union Legislature.   The  Tea  Act  declared that it was expedient in the  public  interest  that the  836  Union should take the tea industry under its control.   With  a  view to controlling the industry in public  interest  the  Act established the Tea Board (s. 4) whose function it  was,  inter  alia,  to  regulate  the  production  and  extent  of  cultivation  of  tea, of improving the quality  of  tea,  of  promoting    co-operative   effort   among    growers    and  manufacturers  of  tea,  etc.,  etc.  (s.  10).   With   the  objectives  aforesaid, Chapter III lays down provisions  for  the  control  over  the extension  of  tea  cultivation  and  Chapter IV deals with provisions for control over the export  of tea and tea seed.  Chapter V lays down provisions for the  imposition of duty of customs on export of tea outside India  and the proceeds of the cess thus levied have to be credited  to the Consolidated Fund of India.  Out of that Fund, called  the  Tea Fund, the expenses of the establishment created  by  the  Tea Act have to be met.  The rest of the provisions  of  the  Act are meant to implement the main provisions  of  the  Act.   There-are no provisions of the Tea Act which  can  be  said  to  come  into conflict with  the  provisions  of  the  impugned  Act.   In our opinion, therefore, this  ground  of  attack also fails.  A  third line of argument against the  constitutionality  of  the Act was that it is extra-territorial in its operation in  so  far as it purports to tax producers and dealers who  may

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not  be residents of the State of Assam.  This argument  has  been  advanced  in  the  interest  of  the  appellants   and  petitioners from West Bengal, who have to carry their  goods  by  road  or on waterways passing through the  territory  of  Assam,  from one part of West Bengal to another.  So far  as  this group of cases is concerned, the main grievance of  the  appellants is that no doubt their goods have to pass through  a portion of the territory of Assam, but the goods have been  produced,  packed  and transported as merchandise  from  one  part  of West Bengal to another part of the same State.   It  is not denied that there is some real and substantial  nexus  to  support  the taxing statute, but it  is  contended  that  relatively  to  the  whole  journey to  be  covered  by  the  merchandise,  the portion of the territory of Assam  covered  in  837  that journey is very small.  But in judging the validity  of  a  legislation  with reference to the  contention  based  on  extra-territoriality  it  is not relevant  to  consider  the  question of the proportion between the extent of territorial  nexus  to  the  whole  length  of  the  journey.   If  goods  belonging  to or carried by the appellants traverse  any  of  the  territory of Assam the taxation cannot be  successfully  assailed on this ground, once it is held that it was  within  the  legislative competence of the Legislature imposing  the  tax in question.  See in this connection the observations of  this Court in The Tata Iron and Steel Co. Ltd. v. The  State  of Bihar (1) at pp. 1369 to 1371, where Das, C. J., speaking  for  the majority of the Court, has examined the  theory  of  nexus with reference to a large body of case-law bearing  on  the  question.  I respectfully adopt that line of  reasoning  and  hold  that  the Act does not suffer from  the  vice  of  extra-territoriality.  It is true that the incidence of  the  taxation  may fall upon per.sons not ordinarily residing  in  the State of Assam or upon goods not produced in Assam, but,  in this connection, it is enough to point out that what  has  been said above in respect of the tax being in the nature of  a  duty of excise applies which equal force to this part  of  the  argument also.  The tax is leviable from such goods  as  traverse  in  their  journey any part of  the  territory  of  Assam, not because the owners or the producers are residents  of Assam, but because the waterway or the roadway situate in  the  territory of Assam has been utilised for a  portion  of  the  journey.   It  is clear, therefore, that  there  is  no  infirmity  attaching  to the Act on the ground  that  it  is  extra-territorial in its operation.  It  only  remains  to consider the last  ground  of  attack,  namely, that the Act is discriminatory in character and thus  infringes Art. 14 of the Constitution.  In this  connection,  it has been argued that only tea in chests and jute in bales  have   been   selected  for  taxation,  leaving   the   same  commodities  in other hands or in other forms, or  in  other  receptacles  (1) [1958] S.C.R. 1353.      107  838  free  from the incidence of the taxation in  question.   The  Legislature  has  chosen to tax the transport over  land  or  over waterways of those commodities, in chests or in  bales,  apparently because those are the most convenient and usually  employed  methods of packing for carriage of those goods  to  long distances.  Hence, it is not a case of choosing for the  purposes  of  taxation one class of goods in  preference  to  another class of the same variety.  The Legislature was  out  to  tax  the  transport of those  commodities  and  must  be

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presumed  to have selected the most convenient way of  doing  it.  It has not been suggested that any large amount of such  commodities  is transported over long  distances,  otherwise  than  in chests or bales.  Furthermore, if  the  Legislature  has  to tax something, it is not bound to tax that thing  in  all its forms and varieties.  It may pick and choose with  a  view to raising such amount of revenue as it sets out to do.  It  is not for the courts to say that there were other  ways  of  doing  the thing or that all forms and  varities  should  have  been brought under the scope of the taxation.   It  is  open  to the Legislature to impose a tax in a form and in  a  way  which  it  deems most convenient for  the  purposes  of  collection and calculation of the tax.  As  all  the  grounds  of attack  raised  against  the  con-  stitutionality  of  the  Act  fail,  the  appeals  and   the  petitions, in my opinion, should be dismissed with costs.  I  have deliberately refrained from making references to  or  relying  upon decisions from other countries like the U.  S.  A.  or  Australia,  because  the  cases  decided  in   those  countries  cannot  be  any guide for  the  solution  of  the  problems  raised in this case inasmuch as the  framework  of  the  Constitution in those countries is not in pari  materia  with   ours.    Any  precedents  deciding   cases   on   the  construction of statutes, which are worded differently  from  ours,  cannot,  in  my  opinion, be a  safe  guide  for  the  decision   of   controversies  raised  in   terms   of   our  Constitution.  I  regret to have to differ from the majority of the  Court,  but  my  only justification for taking a different  view  is  that my reading of Part XIII of the  839  Constitution  does not justify the inference  that  taxation  simpliciter  is  within the terms of Art. 301  of  the  Con-  stitution.  GAJENDRAGADKAR   J.-The   vexed  question   posed   by   the  construction  of  the  provisions  of Part  XIII  Of  A  the  Constitution  which has been incidentally discussed in  some  reported  decisions of this Court falls to be Ga  considered  in the present group of cases.  This group consists of three  appeals  brought to this Court with a certificate issued  by  the Assam High Court under Art. 132 and two petitions  filed  under Art. 32.  The three appellants are tea companies,  two  of which (Civil Appeal No. 126 of 1958 and Civil Appeal  No.  128  of  1958) carry on their trade of growing  tea  in  the  District of Sibsagar in Assam while the third (Civil  Appeal  No. 127 of 1958) carries on its trade in Jalpaiguri in  West  Bengal.   All the three companies which would  be  described  hereafter  as the appellants carry their tea to Calcutta  in  order  that it may be sold in the Calcutta market  for  home  consumption  or  export  outside  India.   Tea  produced  in  Jalpaiguri has also to pass through a few miles of territory  in  the State of Assam, while the tea produced in Assam  has  to  go  all  the way through Assam to  reach  Calcutta.   It  appears  that a very small pro-portion of tea  produced  and  manufactured  in Assam finds a market in Assam itself;  bulk  of  it finds its custom in the market at Calcutta.   Besides  the tea which is carried by rail a substantial quantity  has  to go by road or by inland waterways and as such it  becomes  liable to pay the tax leviable under the Assam Taxation  (on  goods  carried by Roads or Inland Waterways) Act, 1954  (Act  XIII of 1954) (hereafter called the Act).  The Act has  been  passed by the Assam Legislature in order to provide for  the  levy  of  a tax on certain goods carried by road  or  inland  waterways  in  the State of Assam and it  has  received  the  assent  of the Governor on April 9,1954.  On behalf  of  the

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State  of  Assam,  which  will  be  described  hereafter  as  respondent,  its officers required the appellants to  comply  with  the several requirements imposed by the Act, and  made  tax  840  demands on them in respect of the tea carried by them.   The  tax thus demanded was paid by the appellants under  protest,  and  soon thereafter petitions were filed in the Assam  High  Court under Art. 226 challenging the validity of the Act  as  well  as  the  tax  demands made  by  the  officers  of  the  respondent.  By J. their respective petitions the appellants  prayed  that a writ of mandamus should issue  directing  the  respondent and its officers to forbear from giving effect to  the  provisions of the Act and from otherwise  enforcing  it  against  the  appellants.   The  petitioners  also   claimed  alternatively a writ of prohibition or any other appropriate  writ  restraining  the  respondent  and  its  officers  from  enforcing  the Act against the appellants.  That is how  the  validity  of  the Act came before the Assam High  Court  for  judicial scrutiny.  The  appellants challenged the vires of the Act  on  several  grounds.   The principal ground, however, was that  the  Act  had violated the provisions of Art. 301 of the Constitution,  and  since  it did not comply with the  provisions  of  Art.  304(b) it was ultra vires.  It was also urged that tea was a  controlled industry under the provisions of Act 29 of  1953,  and so it was the Union Government alone which was competent  to  regulate  the manufacture, production,  distribution  or  transport  of the said commodity ; that being so  the  Assam  Legislature was not competent to pass the Act.  The validity  of  the  Act  was further challenged on  the,  ground  that,  though the Act purported to have been passed under Entry  56  of  List  11, in substance and in reality it was a  duty  of  excise  and as such it could be enacted only under Entry  84  of List 1. According to the appellants the Act also suffered  from the vice that it was violative of the fundamental right  of equality before the law guaranteed by Art. 14.  The  correctness  of these contentions was disputed  by  the  respondent.  It urged that the Act was perfectly within  the  competence  of the Assam Legislature under Entry 56 of  List  II  and  that  the  provisions  of  Part  XIII  were  wholly  inapplicable  to  it.  The respondent further  pleaded  that  Art.  14  had  not  been violated  and  that  there  was  no  substance in the  841  argument  that as controlled industry it is only  the  Union  Government  which could deal with it or that in reality  the  Act bad imposed a duty of excise.  The  petitions  filed  by the appellants  were  heard  by  a  Special Bench of the Assam High Court.  All the pleas raised  by the appellants were rejected by Sarjoo Prasad, C. J.  and  Ram  Labhaya,  J., who delivered,, separate  but  concurring  judgments.  The appellants’ then applied for and obtained  a  certificate from the High Court under Art. 132 ; that is how  the  three appeals have come to this Court, and  they  raise  for our decision all the points which were argued before the  High  Court.  Naturally the principal contention  which  has  been   urged   before  us  at  length  centres   round   the  applicability of Part XIII.  The  two petitions filed under Art. 32  raise  substantially  the same question.  The petitioners are tea companies  which  carry  on  the  trade of growing and  manufacturing  tea  in  Jalpaiguri in West Bengal.  The respondent has attempted  to  subject  the petitioners to the provisions of the  Act,  and  the  petitioners  have  challenged  the  authority  of   the

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respondent  to levy a tax against them under the Act on  the  ground  that  the Act is ultra vires.  Since  the  principal  question   raised  in  these  appeals  appeared  to  be   of  considerable  importance in which other States may  also  be  interested  we directed that notice should be issued to  the  Attorney-General  of India and the Advocates-General in  all  the  States  of India.  Accordingly the  Attorney.   General  appeared before us and the States of Bihar, Madras,  Punjab,  Rajasthan and Uttar Pradesh have also been heard.  The challenge to the vires of the Act on the ground that  it  contravenes  Art. 301 necessarily raises the question  about  the  construction  of the relevant provisions  in  the  said  Part.  Art. 301 with which Part XIII begins provides that  "  subject to the other provisions of this Part trade, commerce  and intercourse through. out the territory of India shall be  free ". The appellants contend that this provision imposes a  limitation   on   the  legislative  power   of   the   State  Legislatures as well as the Parliament, and the vires of the  Act will  842  have to be judged on that basis.  The words used in Art. 301  are  wide  and unambiguous and it would be  unreasonable  to  exclude from their ambit a taxing law which restricts trade,  commerce  or intercourse either directly or indirectly.   On  the other band, the respondent the Attorney-General, and the  other   States  have  urged  that  taxing  laws   stand   by  themselves; ’they are governed by the provisions of Part XII  and  no provision of Part XIII can be extended to them.   In  the alternative it has been suggested that the provisions of  Part XIII should be applied only to such legislative entries  in the Seventh Schedule which deal with trade, commerce  and  intercourse.   This alternative argument would bring  within  the purview of Part XIII Entry 42 in List I which refers  to  interState  trade  and commerce, Entry 26 in List  II  which  deals  with trade and commerce, within the State subject  to  the provisions of Entry 33 in List III, and Entry 33 in List  III   which  deals  with  trade  and  commerce  as   therein  specified.  The arguments thus presented by both the parties  appear prima facie to be logical and can claim the merit  of  attractive simplicity.  The question which we have to decide  is  which of the contentions correctly represents  the  true  position  in  law.   Does  truth lie in  one  or  the  other  contention  raised  by the parties, or does  it  lie  midway  between those contentions ? This problem has to be  resolved  primarily by adopting a fair and reasonable construction  of  the  relevant Articles in Part XIII; but before  we  attempt  that  task  it would be relevant to deal with  some  general  considerations.  Let  us  first  recall  the  political  and   constitutional  background of Part XIII.  It is a matter of common knowledge  that, before the Constitution was adopted, nearly two-thirds  of  the territory of India was subject to British  Rule  and  was then known as British India, while the remaining part of  the territory of India was governed by Indian Princes and it  consisted of several Indian States.  A large number of these  States  claimed  sovereign  rights  within  the  limitations  imposed by the paramount power in that behalf, and they pur-  ported to exercise their legislative power of imposing  843  taxes in respect of trade and commerce which inevitably  led  to  the erection of customs barriers between themselves  and  the  rest of India.  In the matter of such barriers  British  India  was  governed  by the provisions of  s.  297  of  the  Constitution  Act, 1935.  To the provisions of this  section  we  will have occasion later to refer during the  course  of

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this  judgment.  Thus, prior to 1950 the flow of  trade  and  commerce was impeded at several points which constituted the  boundaries of Indian States.  After India attained political  freedom in 1947 and before the Constitution was adopted  the  historical  process  of the merger and  integration  of  the  several  Indian  States  with the rest of  the  country  was  speedily   accomplished  with  the  result  that  when   the  Constitution  was  first  passed the  territories  of  India  consisted of Part A States which broadly stated  represented  the Provinces in British India, and Part B States which were  made  up  of Indian States.  This merger or  integration  of  Indian  States with the Union of India was preceded  by  the  merger  and  consolidation  of some of  the  States  interse  between  themselves.  It is with the knowledge of the  trade  barriers  which  had  been raised by the  Indian  States  in  exercise of their legislative powers that the  Constitution-  makers framed the Articles in Part XIII.  The main object of  Art. 301 obviously was to allow the free flow of the  stream  of trade, commerce and intercourse throughout the  territory  of India.  In drafting the relevant Articles of Part XIII the makers of  the  Constitution were fully conscious that  economic  unity  was  absolutely essential for the stability and progress  of  the   federal   policy  which  had  been  adopted   by   the  Constitution  for the governance of the country.   Political  freedom  which had been won, and political unity  which  had  been  accomplished by the Constitution, had to be  sustained  and  strengthened  by the bond of economic  unity.   It  was  realised that in course of time different political  parties  believing  in different economic theories or ideologies  may  come in power in the several constituent units of the Union,  and that may conceivably give rise to local and  844  regional pulls and pressures in economic matters.  Local  or  regional fears or apprehensions raised by local or  regional  problems  may  persuade  the  State  Legislatures  to  adopt  remedial  measures  intended solely for  the  protection  of  regional interests without due regard to their effect on the  economy  of the nation as a whole.  The object of Part  XIII  was to avoid such a possibility.  Free movement and exchange  of goods throughout the territory of India is essential  for  the  economy of the nation and for sustaining and  improving  living standards of the country.  The provision contained in  Art.  301  guaranteeing the freedom of trade,  commerce  and  intercourse is not a declaration of a mere platitude, or the  expression of a pious hope of a declaratory character; it is  not also a mere statement of a directive principle of  State  policy ; it embodies and enshrines a principle of  paramount  importance  that  the  economic unity of  the  country  will  provide  the  main sustaining force for  the  stability  and  progress of the political and cultural unity of the country.  In  appreciating  the significance of these  general  consi-  derations  we may profitably refer to the observations  made  by  Cardozo,  J.,  in  C.A.F. Seelig,  Inc.  v.  Charles  H.  Baldwin(1)  while  he was dealing with the  commerce  clause  contained   in  Art.  1,  s.  8,  cl.  3  of  the   American  Constitution.   " This part of the Constitution ",  observed  Cardozo  J., " was framed under the dominion of a  political  philosophy less parochial in range.  It was framed upon  the  theory  that the peoples of the several states must sink  or  swim  together  and  that in the  long  run  prosperity  and  salvation are in union and not division ".  There  is  another  general  consideration  which  has  been  pressed  before us by the learned Attorney-General  and  the  States  to which reference must be made.  It is argued  that

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in  determining the scope and reach of the freedom  embodied  in  Art.  301 we should bear in mind the fact  that  to  the  extent to which the frontiers of this freedom are widened to  that extent is the legislative power of the States curtailed  or  limited.   The Legislatures of the States  have  plenary  powers to  (1) 294 U.S. 511, 523; 79 L. Ed. 1033, 1038.  845  legislate  in respect of topics covered by  the  legislative  entries in Parts II and III.  If the words used in Art.  301  receive  the  widest  interpretation  as  contended  by  the  appellants   it   would  obviously  mean  that   the   State  Legislatures  would  not  be able to  legislate  on  several  entries  in  the said Lists without adopting  the  procedure  prescribed by Art. 304(b).  In fact it would be unreasonable  to impose such a limitation on the legislative power of  the  State  Legislatures  and  thereby affect  their  freedom  of  action.   Whilst  appreciating  this  argument  it  may   be  pertinent to observe that what appears as a curtailment  of,  or  limitation  on,  the powers of  the  State  Legislatures  prescribed  by  Art. 304(b) day, from the point of  view  of  national   economy,   be  characterised   as   a   safeguard  deliberately  evolved to protect the economic unity  of  the  country ; even so it may be assumed that in interpreting the  provisions of Art. 301 and determining the scope and  effect  of  Part  XIII  we should bear in mind  the  effect  of  our  decision on the legislative power of the States and also  of  Parliament.  Having  thus referred to some general considerations let  us  now  proceed to examine the question as to whether tax  laws  are wholly outside the purview of Part XIII.  In support  of  the  argument that Part XIII does not apply to tax laws  the  learned  Attorney-General has emphasised the fact  that  the  power  to  levy a tax is an essential  part  of  sovereignty  itself, and he has suggested that this power is not  subject  to  judicial  review and never has been held to be  so.   In  this connection he has invited our attention to the observa-  tions made in Cooley’s " Constitutional Limitations " on the  power  of taxation.  ’The power to impose taxes ", says  the  author,  " is one so unlimited in force and so searching  in  extent, that the courts scarcely venture to declare that  it  is subject to any restriction whatever, except such as  rest  in the discretion of the authority which exercises it " (1).  The  author then has cited the observations of Marshall,  C.  J.,  in  McCulloch v. Maryland (2) where the  learned  Chief  Justice has  (1)  Cooley’s  " Constitutional Limitations ", Vol.  2,  8th  Ed., p. 986.  (2)  4 Wheat. 316, 428: 4 L. Ed. 579, 607.       108  846  stated  that  "  the power of taxing the  people  and  their  property   is  essential  to  the  very  existence  of   the  government, and may be legitimately exercised on the objects  to which it is applicable to the utmost extent to which  the  government  may  choose  to carry  it.   The  only  security  against the abuse of this power is found in the structure of  the  government itself ". Basing  himself on this  character  of  the  taxing  power of the State  the  learned  Attorney-  General  has  asked us to hold that Part XIII  can  have  no  application  to any statute imposing a tax.  In our  opinion  this  contention is not wellfounded.  The statement  of  the  law on which reliance has been placed is itself expressed to  be  subject to the relevant provisions of the  Constitution;  for  instance,  the same author has observed "  It  is  also

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believed  that  that provision in the  Constitution  of  the  United States which declares that the citizens of each state  shall  be entitled to all the privileges and  immunities  of  the  citizens of the several states will preclude any  state  from  imposing  upon the property which  citizens  of  other  states  may  own, or the business which they  may  carry  on  within  its  limits, any higher burdens by way  of  taxation  than are imposed upon corresponding property or business  of  its own citizens" (p. 1016).  Putting the same  propositions  in terms of our Constitution it cannot be suggested that the  power  of taxation can, for instance, violate  the  equality  before  the law guaranteed by Art. 14 of  the  Constitution.  Therefore  the true position appears to be that, though  the  power of levying tax is essential for the very existence  of  the  government, its exercise must inevitably be  controlled  by  the constitutional provisions made in that  behalf.   It  cannot be said that the power of taxation per se is  outside  the purview of any constitutional limitations.  It   is  true  that  in  Ramjilal  v.  Income-tax   Officer,  Mohindargarh  (1) it has been held that " since there  is  a  special  provision in Art. 265 of the Constitution  that  no  tax shall be levied or collected except by authority of law,  el.  (1)  of  Art. 31 must be  regarded  as  concerned  with  deprivation of property otherwise than by the  (1) [1051] S.C.R. 127.  847  imposition  or collection of tax, and inasmuch as the  right  conferred  by Art. 265 is not a right conferred by Part  III  of  the  Constitution, it could not be enforced  under  Art.  32".   It  is clear that the effect of this decision  is  no  more  than this that the protection against  the  imposition  and  collection  of  taxes, save by the  authority  of  law,  directly  comes  under Art. 265 and cannot   be  said  to be  covered by cl. (1) of Art. 31.  It would be unsafe to assume  that  this decision is, or was intended to be, an  authority  for the proposition that the levy of a tax by taxing statute  can, for instance, violate Art. 14 of the Constitution.  The  next  question which needs examination is  whether  tax  laws  are governed only by Part XII of the Constitution  and  not by Part XIII.  The argument is that Part XII is a  self-  contained  code; it makes all necessary provisions,  and  so  the  validity  of any taxing statute can be judged  only  by  reference  to the provisions of the said Part.  Article  265  provides that "no tax shall be levied or collected except by  authority of law".  It is emphasised that this Article  does  not  contemplate that its provision is subject to the  other  provisions  of  the Constitution, and so there would  be  no  justification for applying Part XIII to the taxing statutes.  It   is  also  pointed  out  that  restrictions  and   other  exceptions  which  the Constitution wanted to  prescribe  in  respect  of  taxation have been provided for by  Arts.  274,  276,  285, 287 and 288, and so we need not look  beyond  the  provisions  of this Part in dealing with tax laws.   In  our  opinion this argument fails to take notice of the fact  that  Art.  265  itself  inevitably  takes  in  Art.  245  of  the  Constitution  when in substance it says that a tax shall  be  levied  by authority of law.  The authority of law to  which  it refers and under which alone a tax can be levied is to be  found  in Art. 245 read with the  corresponding  legislative  entries in Schedule VII.  Now, if we look at Art. 245  which  deals with the extent of laws made by Parliament and by  the  Legislatures of States it begins with the words " subject to  the  provisions of this Constitution "; in other words,  the  power  of Parliament and the Legislatures of the  States  to  make laws including

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848  laws  imposing  taxes is subject to the provisions  of  this  Constitution  and that must bring in the application of  the  provisions  of Part XIII.  Therefore the argument  based  on  the  theory that tax laws are governed by the provisions  of  Part XII alone cannot be accepted.  The  power to levy taxes  is ultimately based on Art. 245, and the said power in terms  is subject to the provisions of the Constitution.  On  the other hand, the opening words of Art. 301  are  very  significant.  The doctrine of the freedom of trade, commerce  and intercourse enunciated by Art. 301 is not subject to the  other  provisions  of the Constitution but is  made  subject  only  to the other provisions of Part XIII; that means  that  once  the  width and amplitude of the freedom  enshrined  in  Art.  301  are determined they cannot be controlled  by  any  provision  outside  Part Xlll.  This  position  incidentally  brings  out  in bold relief the important  part,  which  the  Constitution-makers wanted the doctrine of freedom of  trade  to  play in the future of the country.  It is  obvious  that  whatever  may be the content of the said freedom it  is  not  intended  to  be an absolute freedom;  absolute  freedom  in  matters  of  trade, commerce and intercourse would  lead  to  economic  confusion,  if not chaos and anarchy; and  so  the  freedom  guaranteed  by  Art. 301 is  made  subject  to  the  exceptions provided by the other Articles in Part XIII.  The  freedom guaranteed is limited in the manner specified by the  said Articles but it is not limited by any other  provisions  of the Constitution outside Part XIII.  That is why it seems  to us that Art. 301, read in its proper context and  subject  to the limitations prescribed by the other relevant Articles  in Part XIII, must be regarded as imposing a  constitutional  limitation  on the legislative power of Parliament  and  the  Legislatures of the States.  What entries in the legislative  lists  will  attract the provisions of Art. 301  is  another  matter;  that  will depend upon the content of  the  freedom  guaranteed;  but wherever it is held that Art.  301  applies  the  legislative competence of the Legislature  in  question  will have to be judged in the light of the relevant Articles  849  of Part XIII; this position appears to us to be inescapable.  On behalf of the respondent it was suggested before us  that  the scope and extent of the application of Art. 301 can well  be determined in the light of s. 297 of the Constitution Act  of 1935.  Section 297 reads thus:  " 297(1).  No Provincial Legislature or Government shall-  (a)  by  virtue of the entry in the  Provincial  Legislative  List relating to trade and commerce within the Province,  or  the  entry in that List relating to the production,  supply,  and distribution of commodities, have power to pass any  law  or take any executive action prohibiting or restricting  the  entry  into,  or export from the Province of  goods  of  any  class or description ; or  (b)  by virtue of anything in this Act have power to  impose  any  tax,  cess,  toll,  or  due  which,  as  between  goods  manufactured  or produced in the Province and similar  goods  not so manufactured or produced, discriminates in favour  of  the  former, or which, in the case of goods manufactured  or  produced  outside the Province, discriminates between  goods  manufactured  or produced in one locality and similar  goods  manufactured or produced in another locality.  (2)  Any law passed in contravention of this section  shall,  to the extent of the contravention, be invalid.  There  is no doubt that the prohibition prescribed  by  this  section  was  confined  to the  Provincial  Governments  and  Provincial  Legislatures  and did not apply to  the  Central

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Government or Central Legislature.  It is also true that the  said  prohibition  had  reference  to  the  entries  in  the  Provincial Legislative List relating to trade and  commerce,  and  to production, supply and distribution of  commodities.  The section also deals with prohibitions and restrictions in  respect  of  import of goods into, or their export  from,  a  Province.     Likewise    discrimination    against    goods  manufactured  or  produced  outside the  Province  or  goods  produced  in  other  localities  is  also  prohibited.   The  argument  850  is that when the Constitution adopted Art. 301 it had s. 297  in view and the only substantial change which it intended to  make  was  to  extend  the  application  of  the  principles  enunciated  in the said section to the Union Government  and  the Union Parliament, and to apply it to the territory which  had subsequently become a part of India as indicated by  the  relevant  ’Articles;  the essential content  of  freedom  of  trade  and  commerce  as prescribed  by  the  said  section,  however, continues to be the same.  In support of this argument, reliance has been placed on the  observations  made by Venkatarama Aiyar, J., in the case  of  M. P. V. Sundararamier & Co. v. The State of Andhra  Pradesh  (1).   In that case the vires of some of the  provisions  of  the  Sales Tax Laws Validation Act, 1956 (7 of  1956),  were  challenged  on several grounds.  In dealing with one of  the  points  raised in support of the said challenge  Venkatarama  Aiyar,  J., who delivered the majority judgment,  considered  the content of Entry 42 in List 1. It had been urged  before  the Court that the said entry should be liberally  construed  and  should  be  held to include the power to  tax,  and  in  support  of this contention reliance was placed  on  certain  American  and  Australian  decisions.   This  argument   was  repelled  and it was held that Entry 42 in List I is not  to  be  interpreted  as including taxation.  In coming  to  this  conclusion   the   learned  judge   made   certain   general  observations  pointing out that it would not be always  safe  to   rely   upon  American  or   Australian   decisions   in  interpreting  the provisions of our Constitution.  Said  the  learned  judge,  " the threads of our Constitution  were  no  doubt  taken from other Federal Constitutions but when  they  were  woven into the fabric of our Constitution their  reach  and their complexion underwent changes.  Therefore, valuable  as the American decisions are as showing how the question is  dealt with in sister Federal Constitution great care  should  be  taken  in  applying them in the  interpretation  of  our  Constitution ". He made a similar comment about s. 92 of the  Commonwealth of Australia Constitution Act and  (1)  [1958] S.C.R. 1422, 1483-84.  851  the   decisions  thereunder,  and  in  that  connection   he  observed:’,  We  should  also add that Art.  304(a)  of  the  Constitution cannot be interpreted as throwing any light  on  the  scope  of Art. 301 with reference to  the  question  of  taxation  as  it  merely  reproduces  s.  297(1)(b)  of  the  Government  of  India  Act, and as there  was  no  provision  therein  corresponding  to Art. 301 s. 297(1)(b)  could  not  have  implied  what is now sought to be inferred  from  Art.  304(a)  ". The learned Attorney-General has relied on  these  observations.  It would be noticed that, incidental as these  observations are, what the learned judge was considering was  the  scope and effect of s. 297(1)(b) of the  Government  of  India  Act, 1935, and he held that the content of  the  said  section cannot be enlarged in the light of the provisions of  Art.  304(a).  No doubt the observations would seem to  show

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that the learned judge thought that Art. 304(a) cannot throw  any  light  on the scope of Art. 301 with reference  to  the  question of taxation ; but it is clear that the question  of  construing the said Articles did not fall to be  considered,  and  was  not  obviously  argued  before  the  Court.   With  respect, it may be pointed out that in the happy phraseology  adopted by the learned judge himself, in the setting of Part  XIII and particularly in the light of the wide words used in  Art.  301, the reach and complexion of Art. 304(a) is  wider  than s. 297(1)(b) and does include reference to taxation.  Then  as  to the merits of the argument that s. 297  of  the  Constitution  Act  of 1935 should  virtually  determine  the  scope of Art. 301, we are reluctant to accept the assumption  that the only change which the Constitution makers  intended  to  make by adopting Art. 301 was to extend the  application  of s. 297 to the Union Government and the Parliament.   Just  as the Constitution-makers had before them the said  section  they were also familiar with corresponding clauses  included  in  the  Federal  Constitutions  of  other  countries.   The  history  of  judicial decisions interpreting s.  92  of  the  Australian  Constitution  must have been  present  to  their  minds  as also the history of the growth and development  of  the American Law under  852  the commerce clause in the American Constitution.   Besides,  we  feel considerable hesitation in accepting the view  that  the  makers of the Constitution did not want to  enrich  and  widen  the  content of freedom guaranteed by s.  297.   They  knew that the Constitution would herald a new and  inspiring  era  in the history of India and they, were fully  conscious  of  the importance of maintaining the economic unity of  the  Union of India in order that the federal form of  government  adopted by the Constitution should progress in a smooth  and  harmonious manner.  That is why we are inclined to hold that  the  broad  and  unambiguous  words used  in  Art.  301  are  intended  to emphasise that the freedom of  trade,  commerce  and  intercourse guaranteed was richer and wider in  content  than was the case under s. 297; how much wider and how  much  richer  can  be  determined only on a  fair  and  reasonable  construction  of  Art. 301 read along with the rest  of  the  Articles  in  Part  XIII.  In our  opinion,  therefore,  the  argument  that  tax  laws are outside Part  XIII  cannot  be  accepted.  That  takes  us  to  the question as  to  whether  Art.  301  operates  only in respect of the entries relating  to  trade  and  commerce  already  specified.   Before  answering  this  question it would be necessary to examine the scheme of Part  XIII, and construe the relevant Articles in it.  It is clear  that  Art.  301  applies  not  only  to  inter-State  trade,  commerce and intercourse but also intrastate trade, commerce  and  intercourse.  The words " throughout the  territory  of  India " clearly indicate that trade and commerce whose free-  dom is guaranteed has to move freely also from one place  to  another  in  the  same State.  This  conclusion  is  further  supported by Arts. 302 and 304(b) as we will presently point  out.   There  is no doubt that the sweep of the  concept  of  trade,  commerce  and intercourse is very wide; but  in  the  present  case  we are concerned with trade, and so  we  will  leave  out of consideration commerce and intercourse.   Even  as  to  trade  it  is really not  necessary  to  discuss  or  determine what trade exactly means; for it is common  ground  that the activity carried on by the appellants  853  amounts  to trade, and it is not disputed that transport  of  goods  or  merchandise  from  one place  to  another  is  so

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essential  to trade that it can be regarded as its  integral  part.   Stated  briefly trade even in a narrow  sense  would  include all activities in relation to buying and selling, or  the interchange or exchange of commodities and that movement  from  place  to  place  is the very  soul  of  such  trading  activities.  When Art. 301 refers to the freedom of trade it  is  necessary to enquire what freedom means.   Freedom  from  what?  is the obvious question which falls to be  determined  in  the context.  At this stage we would  content  ourselves  with  the statement that the freedom of trade guaranteed  by  Art. 301 is freedom from all restrictions except those which  are provided by the other Articles in Part XIII.  What these  restrictions  denote  may raise a larger issue, but  in  the  present case we will confine our decision to that aspect  of  the matter which arises from the provisions of the Act under  scrutiny.   It  is  hardly necessary to  emphasise  that  in  dealing with constitutional questions courts should be  slow  to embark upon an unnecessarily wide or general enquiry  and  should  confine their decision as far as may  be  reasonably  practicable  within  the narrow limits  of  the  controversy  arising between the parties in the particular case.  We will  come  back  again  to Art. 301  after  examining  the  other  Articles in Part XIII.  Art.   302  confers  on  the  Parliament  power  to   impose  restrictions   on  trade,  commerce  and  intercourse.    It  provides that Parliament may by law impose such restrictions  on the freedom of trade, commerce or intercourse between one  State  and  another or within any part of the  territory  of  India  as may be required in the public interest.  It  would  be  immediately  noticed  that  the  reference  made  to   a  restriction  on the freedom of trade within any part of  the  territory of India as distinct from freedom of trade between  one State and another clearly indicates that the freedom  in  question   covers  not  only  inter-State  trade  but   also  intrastate trade.  Thus the effect of Art. 302 is to      109  854  provide for an exception to the general rule prescribed,  by  Art.  301.   Restrictions  on the freedom of  trade  can  be  imposed  by  Parliament if they are required in  the  public  interest  so  that the generality of freedom  guaranteed  by  Art. 301 is subject to the exception s provided by Art. 302.  That takes us to Art. 303.  It reads thus:  " 303. (1) Notwithstanding anything in article 302,  neither  Parliament  nor the Legislature of a State shall have  power  to  make any law giving, or authorising the giving  of,  any  preference  to  one  State  over  another,  or  making,   or  authorising  the making of, any discrimination  between  one  State and another, by virtue of any entry relating to  trade  and commerce in any of the Lists in the Seventh Schedule.  (2)  Nothing  in clause (1) shall  prevent  Parliament  from  making  any  law giving, or authorising the giving  of,  any  preference  or  making, or authorising the  making  of,  any  discrimination  if  it is declared by such law  that  it  is  necessary  to  do  so  for the purpose  of  dealing  with  a  situation arising from scarcity of goods in any part of  the  territory of India."  The first part of this Article is in terms an exception or a  proviso  to  Art.  302 as is indicated  by  the  nonobstante  clause.   This clause prohibits Parliament from  making  any  law  which  would  give any preference  to  one  State  over  another  or would make any discrimination between one  State  and  another by virtue of the relevant entries specified  in  it.   In  other  words,  in  regard  to  the  entries  there  specified,  the power to impose restrictions cannot be  used

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for  the purpose of giving any preference to one State  over  another or making any discrimination in that manner.  It  is  obvious  that the reference to the Legislature of the  State  in  this clause cannot be reconciled with  the  non-obstante  clause;  but  the object of including the Legislature  of  a  State  appears to be to emphasise that like Parliament  even  the  Legislature  of a State cannot give any  preference  or  make any discrimination.  Sub-Article (2) is an exception to sub-Art. (1) of Art. 303.  It  empowers  the  Parliament  to  make  a  law  giving   or  authorising to give any preference or making  855  any discrimination, but this power can be exercised only  if  it  is  declared by law made by the Parliament  that  it  is  necessary  so  to  do  for the purpose  of  dealing  with  a  situation arising from scarcity of goods in any part of  the  territory  of  India  ;  in other words,  it  is  only  when  Parliament  is faced with the task of meeting  an  emergency  created  by the scarcity of goods in any particular part  of  India  that  it  is  authorised  to  make  a  law  making  a  discrimination, or giving preference, in favour of the  part  thus affected.  On  behalf  of the States strong reliance is placed  on  the  fact  that  Art.  303(1) expressly  refers  to  the  entries  relating  to trade and commerce in any of the Lists  in  the  Seventh  Schedule, and it is urged tbat this gives  a  clear  indication  as  to the scope of the provisions of  Art.  301  itself  There is some force in this contention ; but on  the  whole we are not prepared to hold that the reference to  the  said  entries  should govern the construction of  Art.  301.  The setting in which the said entries are referred to  would  of course determine the scope and extent of the  prohibition  prescribed by Art. 303 (1); but that cannot be pressed  into  service in determining the scope of Art. 301 itself.  It  is  significant  that Art. 303(1) does not refer to  intercourse  and in that sense intercourse is outside its sphere.  It  is  likely   that   having  authorised  Parliament   to   impose  restrictions  by  Art.  302  it  was  thought  expedient  to  prohibit  expressly the said power of imposing  restrictions  from being used for the purpose of giving any preference  in  so  far as the relevant entries are concerned.  It may  also  be  that  the primary object of confining the  operation  of  Art.  303(1)  to  the  said  entries  was  to  introduce   a  corresponding  limitation  on  the power  of  Parliament  to  discriminate  under Art. 302.  However that may be,  in  our  opinion the limitation thus introduced in Art. 303(1) cannot  circumscribe  the scope of Art. 301 or otherwise affect  its  construction.   Besides,  as we will  presently  point  out,  there  are other Articles in this Part which  indicate  that  tax  laws are included within Art. 301, and if that  be  so,  the reference to the said entries in Art. 303(1) cannot  856  limit the application of Art. 301 to the said entries alone.  Article 304 reads thus:  "Notwithstanding anything in article 301 or article 303, the  Legislature of a State may by law--  (a) impose on goods  imported from other States or the Union  territories  any tax to which similar goods manufactured  or  produced  in that State are subject, so, however, as not  to  discriminate   between  goods  so  imported  and  goods   so  manufactured or produced; and  (b)  impose such reasonable restrictions on the  freedom  of  trade, commerce or intercourse with or within that State  as  may be required in the public interest:  Provided  that  no  Bill or amendment for  the  purposes  of

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clause  (b) shall be introduced or moved in the  Legislature  of a State without the previous sanction of the President."  The effect of Art. 304(a) is to treat imported goods on  the  same  basis as goods manufactured or produced in any  State;  and it authorises tax to be levied on such imported goods in  the  same manner and to the same extent as may be levied  on  goods  manufactured or produced inside the State.  We  ought  to  add that this sub-Article assumes that taxation  can  be  levied  by  the State Legislature on goods  manufactured  or  produced  within its territory and it provides that  outside  goods cannot be treated any worse.  How a tax can be  levied  on internal goods is, however, provided by Art. 304(b).  The  non-obstante clause referring to Art. 301 would go with Art.  304(a), and that indicates that tax on goods would not  have  been  permissible but for Art. 304(a) with the  non-obstante  clause.  This incidentally helps to determine the scope  and  width  of the freedom guaranteed under Art. 301 ;  in  other  words Art. 304(a) is another exception to Art. 301.  Article  304(b)  empowers the State  Legislature  to  impose  reasonable  restrictions on the freedom of trade with  other  States or within its own territory.  Again, the reference to  the territory within the State supports the conclusion  that  Art. 301 covers the movement of  857  trade both inter-State and intrastate.  Article 304(b) is to  be read with the non-obstante clause relating to Art. 301 as  well  as  Art. 303, and in substance it gives power  to  the  State Legislature somewhat similar to the power conferred on  the  Parliament by Art. 302.  The reference to Art.  303  in  the non-obstante clause has presumably been made as a matter  of  abundant( caution since the Legislature of a  State  has  been  included in Art. 303(1).  There are, however,  obvious  differences  in  the  powers of  the  Parliament  and  State  Legislatures.    In  regard  to  an  act  which  the   State  Legislature intends to pass under Art. 304(b) no bill can be  introduced  without the previous sanction of the  President,  and  this requirement has obviously been inserted  in  order  that   regional   economic  pressures  which   may   inspire  legislation under the said clause should be duly examined in  the  light  of  the  interest  of  national  economy;   such  legislation  must  also  be in  the  public  interest  which  feature is common with the provision contained in Art.  302;  such  legislation must also satisfy the ’further  test  that  the  restrictions  imposed by it are  reasonable.   That  is  another additional restriction imposed on the powers of  the  State  Legislatures.  Thus there are three conditions  which  must  be satisfied in passing an Act under  Art.  304(b),the  previous  sanction  of the President must be  obtained,  the  legislation  must  be in the public interest,  and  it  must  impose  restrictions which are reasonable.  It is of  course  true  that if the previous sanction of the President is  not  obtained that infirmity may be cured by adopting the  course  authorised  by Art. 255.  The result of reading Art.  304(a)  and (b) together appears to be that a tax can be levied by a  State  Legislature  on  goods manufactured  or  produced  or  imported  in the State and thereby  reasonable  restrictions  can  be placed on the freedom of trade either  with  another  State  or  between different areas of the same  State.   Tax  legislation thus authorised must therefore be deemed to have  been included in Art. 301, for that is the obvious inference  from the use of the non-obstante clause.  Article 305 saves existing laws and laws providing  858  for  State monopolies.  It is unnecessary to deal with  this  Article.   Its  object clearly was not to  interrupt  or  to

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Affect  the operation of the existing laws except in so  far  as the President may by order otherwise direct.  Article 306  is relevant.  It reads thus:  "  Notwithstanding anything in the foregoing  provisions  of  this  Part or in any other provisions of this  Constitution,  any  State specified in Part B of the First  Schedule  which  before the commencement of this Constitution was levying any  tax or duty on the import of goods into the State from other  States  or  on the export of goods from the State  to  other  States may, if an agreement in that behalf has been  entered  into  between the Government of India and the Government  of  that  State, continue to levy and collect such tax  or  duty  subject  to the terms of such agreement and for such  period  not  exceeding  ten  years from  the  commencement  of  this  Constitution as may be specified in the agreement:  Provided  that  the  President may at  any  time  after  the  expiration of five years from such commencement terminate or  modify  any  such agreement if, after consideration  of  the  report  of the Finance Commission constituted under  article  280, he thinks it necessary to do so."  This  Article  has been subsequently deleted by  s.  29  and  Schedule to the Constitution (Seventh Amendment) Act,  1956,  but its initial inclusion in Part XIII throws some light  on  the scope of Art. 301.  Laws made by any State specified  in  Part B of the First Schedule levying any tax or duty on  the  import  of  goods into the State from other  States  or  the  export  of  goods  from  the  State  to  other  States  were  expressly  saved by a Art. 306 because it was realised  that  they  would otherwise be hit by Art. 301.  In  other  words,  taxing statutes or statutes imposing duties on goods  would,  but  for  Art. 306, have attracted the application  of  Art.  301.  Let  us now revert to Art. 301 and ascertain the  width  and  amplitude  of  its scope.  On a careful examination  of  the  relevant  provisions of Part XIII as a whole as well as  the  principle of economic unity  859  which  it  is  intended  to safeguard  by  making  the  said  provisions,  the conclusion appears to us to  be  inevitable  that  the  content of freedom provided for by Art.  301  was  larger  than  the  freedom contemplated by  s.  297  of  the  Constitution  Act of 1935, and whatever else it may  or  may  not  include, it certainly includes movement of trade  which  is  of  the very essence of all trade and  is  its  integral  part.   If the transport or the( movement of goods is  taxed  solely  on  the  basis that the goods are  thus  carried  or  transported  that,  in  our opinion,  directly  affects  the  freedom  of  trade  as contemplated by  Art.  301.   If  the  movement,  transport or the carrying of goods is allowed  to  be  impeded,  obstructed  or hampered  by  taxation  without  satisfying  the  requirements of Part XIII  the  freedom  of  trade  on which so much emphasis is laid by Art.  301  would  turn  to  be illusory.  When Art. 301  provides  that  trade  shall be free throughout the territory of India primarily it  is  the movement part of the trade that it has in  mind  and  the  movement  or the transport part of trade must  be  free  subject of course to the limitations and exceptions provided  by  the other Articles of Part XIII.  That we think  is  the  result  of  Art. 301 read with the other  Articles  in  Part  XIII.  Thus  the  intrinsic  evidence  furnished  by  some  of  the  Articles  of  Part  XIII  shows that  taxing  laws  are  not  excluded  from the operation of Art. 301 ; which means  that  tax  laws  can and do amount to  restrictions  freedom  from  which is guaranteed to trade under the said Part.  Does that

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mean  that all tax laws attract the provisions of Part  XIII  whether their impact on trade or its movement is direct  and  immediate  or indirect and remote ? It is precisely  because  the  words  used in Art. 301 are very woe, and  in  a  sense  vague and indefinite that the problem of construing them and  determining their exact width and scope becomes complex  and  difficult.   However, in interpreting the provisions of  the  Constitution  we must always bear in mind that the  relevant  provision " has to be read not in vacuo but as occurring  in  a single complex instrument in which one part may  860  throw  light on another ". (Vide: James V.  Commonwealth  of  Australia (1)).  In construing Art. 301 we must,  therefore,  have  regard  to the general scheme of our  Constitution  as  well as the particular provisions in regard to taxing  laws.  The  construction of Art. 301 should not be determined on  a  purely   academic  or  doctrinnaire  considerations   ;   in  construing  the  said  ’Article we must  adopt  a  realistic  approach  and  bear in mind the essential  features  of  the  separation of powers on which our Constitution rests.  It is  a federal constitution which we are interpreting, and so the  impact of Art. 301 must be judged accordingly.  Besides,  it  is  not irrelevant to remember in this connection  that  the  Article   we   are  construing  imposes   a   constitutional  limitation  on  the  power  of  the  Parliament  and   State  Legislatures  to  levy taxes, and generally,  but  for  such  limitation,  the power of taxation would be presumed  to  be  for public good and would not be subject to judicial  review  or   scrutiny.   Thus  considered  we  think  it  would   be  reasonable and proper to hold that restrictions freedom from  which is guaranteed by Art. 301, would be such  restrictions  as directly and immediately restrict or impede the free flow  or   movement  of  trade.   Taxes  may  and  do  amount   to  restrictions  ;  but it is only such taxes as  directly  and  immediately  restrict  trade  that  would  fall  within  the  purview of Art. 301.  The argument that all taxes should  be  governed by Art. 301 whether or not their impact on trade is  immediate  or  mediate,  direct or remote,  adopts,  in  our  opinion, an extreme approach which cannot be upheld.  If the  said argument is accepted it would mean, for instance,  that  even  a legislative enactment prescribing the minimum  wages  to industrial employees may fall under Part XIII because  in  an  economic  sense an additional wage bill  may  indirectly  affect trade or commerce.  We are, therefore, satisfied that  in determining the limits of the width and amplitude of  the  freedom guaranteed by Art. 301 a rational and workable  test  to  apply  would be: Does the impugned  restriction  operate  directly or immediately on trade or its  (1)  (1936) A.C. 578,613.  861  movement?   It is in the light of this test that we  propose  to  examine  the validity of the Act under scrutiny  in  the  present proceedings.  We  do not think it necessary or expedient to consider  what  other  laws would be affected by the interpretation  we  are  placing on Art. 301 and what other legislative entries would  fall under Part XIII.  We propose to confine our decision to  the Act with which’ we are concerned.  If any other laws are  similarly challenged the validity of the challenge will have  to be examined in the light of the provisions of those laws.  Our  conclusion, therefore, is that when Art.  301  provides  that  trade shall be free throughout the territory of  India  it  means  that  the  flow of trade  shall  run  smooth  and  unhampered  by any restriction either at the  boundaries  of  the  States  or  at  any  other  points  inside  the  States

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themselves.   It  is the free movement or the  transport  of  goods  from  one part of the country to the  other  that  is  intended  to  be saved, and if any Act  imposes  any  direct  restrictions on the very movement of such goods it  attracts  the  provisions  of  Art.  301,  and  its  validity  can  be  sustained only if it satisfies the requirements of Art.  302  or  Art.  304 of Part XIII.  At this stage we  think  it  is  necessary to repeat that when it is said that the freedom of  the movement of trade cannot be subject to any  restrictions  in  the  form of taxes imposed on the carriage of  goods  or  their   movement  all  that  is  meant  is  that  the   said  restrictions  can be imposed by the State Legislatures  only  after satisfying the requirements of Art. 304(b).  It is not  as  if  no restrictions at all can be imposed  on  the  free  movement of trade.  Incidentally  we  may  observe that the  difference  in  the  provisions contained in Art. 302 and Art. 304(b) would prima  facie  seem to suggest that where Parliament  exercises  its  power under Art. 302 and passes a law imposing  restrictions  on  the freedom of trade in the public interest, whether  or  not  the  given  law is in the public interest  may  not  be  justiciable, and in that sense Parliament is given the  sole  power  to decide what restrictions can be imposed in  public  interest as       110  862  authorised  by  Art.  302.  On the other  hand  Art.  304(b)  requires  not  only  that the law should be  in  the  public  interest  and should have received the previous sanction  of  the President but that the restrictions imposed by it should  also  be reasonable.  Prima facie the requirement of  public  interest can be said to be not justiciable and may be deemed  to  be  satisfied  by the sanction  of  the  President;  but  whether or not the restrictions imposed are reasonable would  be  justiciable and in that sense laws passed by  the  State  Legislatures   may  on  occasions  have  to  face   judicial  scrutiny.  However this point does not fall to be considered  in  the  present  proceedings  and we  wish  to  express  no  definite opinion on it.  Let us then examine the material provisions of the Act.   As  we  have  already  pointed  out  the  Act  has  been  passed  providing  for the levy of tax on certain goods  carried  by  roads  or inland waterways in the State of  Assam.   Section  2(11)  defines a producer as meaning a producer of  tea  and  including  the  person in charge of the garden where  it  is  produced.   Section 3 is the charging section.  It  provides  that  manufactured tea in chests carried by  motor  vehicles  etc., except railways and airways shall be liable to tax  at  the specified rate per lb. of such tea and this tax shall be  realised   from  the  producer.   It  also   makes   similar  provisions  for jute with which we are not concerned in  the  present   proceedings.   Section  6  provides   for   taxing  authorities  and  their powers.  Section 7  provides,  inter  alia,  that  every  producer shall furnish  returns  of  the  manufactured tea carried in tea chests ,in such form and  to  such  authority  as may be prescribed.  Section  8  makes  a  provision for licensing of balers who are persons owning  or  possessing  pressing  machines for the compression  of  jute  into bales.  Section 9 prescribes the procedure for  levying  the assessment ; and s. 10 provides for the cancellation  of  assessment  in the cases specified.  Section 11  deals  with  the  assessment in cases of evasion and escape; s.  12  with  rectification, and s. 13 with penalty for non-submission  of  returns  and  evasion  of taxes.  Section  19  provides  for  notice of demand, and is. 20 lays down when

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863  tax becomes payable.  This Act has been passed by the  Assam  Legislature  under  Entry  56 in List 11  and  naturally  it  purports to be a tax on goods carried by roads or by  inland  waterways.   It is thus obvious that the purpose and  object  of the Act is to collect taxes on goods solely on the ground  that they are carried by road or by inland waterways  within  the  area  of  the, State.  That being  so  the  restriction  placed by the Act on the free movement of the goods is  writ  large  on  its face.  It may be that one of the  objects  in  passing the Act was to enable the State Government to  raise  money  to keep its roads and waterways in repairs; but  that  object  may  and  can be effectively  achieved  by  adopting  another  course  of  legislation ; if  the  said  object  is  intended to be achieved by levying a tax on the carriage  of  goods it can be so done only by satisfying the  requirements  of  Art. 304(b).  It is common ground that before  the  bill  was  introduced  or  moved  in  the  State  Legislature  the  previous  sanction of the President has not been obtained  ;  nor  has the said infirmity been cured by recourse  to  Art.  255  of the Constitution.  Therefore we do not see  how  the  validity  of the tax can be sustained.  In our  opinion  the  High  Court  was in error in putting  an  unduly  restricted  meaning on the relevant words in Art. 301.  It is clear that  in  putting  that narrow construction on Art. 301  the  High  Court  was partly, if not substantially, influenced by  what  it  thought would be the inevitable consequence of  a  wider  construction  of Art. 301.  As we have made it clear  during  the course of this judgment we do not propose to express any  Opinion as to the possible consequence of the view which  we  are  taking in the present proceedings.  We are  dealing  in  the present case with an Act passed by the State Legislature  which  imposes a restriction in the form of taxation on  the  carriage  or  movement  of goods, and we hold  that  such  a  restriction can be imposed by the State Legislature only  if  the relevant Act is passed in the manner prescribed by  Art.  304(b).  This question can be considered from another point of  view.  When  a  State Legislature passes an Act under Entry  56  of  List II its initial legislative  864  competence is not in dispute.  What is in dispute is whether  or  not  such  legislative  competence  is  subject  to  the  limitations  prescribed by Part XIII.  Now what does an  act  passed  under the said Entry purport to do ? It purports  to  put  a restraint in the form of taxation on the movement  of  trade,  and  if  the movement of trade  is  regarded  as  an  integral  part of trade itself, the Act in substance puts  a  restriction  on trade itself.  The effect of the Act on  the  movement  of  trade  is  direct and  immediate;  it  is  not  indirect or remote; and so legislation under the said  Entry  must be held to fall directly under Art. 301 as  legislation  in respect of trade and commerce.  In some of the  decisions  of  this Court, in examining the validity of legislation  it  has been considered whether the impugned legislation is  not  directly  in  respect  of the subject matter  covered  by  a  particular  Article  of  the Constitution.   This  test  was  applied, for instance by Kania, C. J., in the case of A.  K.  Gopalan v. The State of Madras (1).  It was also adopted  by  this  Court in the case of Ram Singh v. The State  of  Delhi  (2).   It is no doubt true that the points which  arose  for  decision  in  those cases had reference to  the  fundamental  rights  guaranteed  by  Arts.  19, 21 or 22  ;  but  we  are  referring to those decisions in order to emphasise that  the  test  there  adopted would in the present case lead  to  the

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conclusion  that  the  Act with which we  are  concerned  is  invalid.   The  true approach according to Kania,  C.J.,  is  only to consider the directness of the legislation.  Now, if  the  directness  of legislation has to be considered  it  is  clear  that the Act imposes a tax on the carriage  of  goods  and  that  immediately takes it within the purview  of  Part  XIII.  In  the  course of arguments  the  learned  Attorney-General  invited  us to apply the test of pith and substance, and  he  contended  that if the said test is applied the validity  of  the Act can be sustained.  In support of his argument he has  relied  on the observations made by Das, C. J., in the  case  of  The  State of Bombay v. R.M.D. Chamarbaugwala  (3).   In  that case the Court  (1) (1950] S.C.R. 88.    (2) [1951] S.C.R. 451.  (3) [1957] S.C.R. 874.  865  was  called  upon  to consider the validity  of  the  Bombay  Lotteries and Prize Competitions Control and Tax (Amendment)  Act,  1952.   The  challenge to the  Act  proceeded  on  two  grounds,   (1)  that  it  violated  the  fundamental   right  guaranteed under Art. 19(1)(g) and (2)  that   it   offended  against  the  provisions of Art. 301. The challenge  on  the  first ground was repelled because it was held that  gambling  cannot be treated as trade or business under Art.  19(1)(g).  This  conclusion  was  sufficient to repel  also  the  other  ground  on  which the, validity of the  Act  was  challenged  because,  if gambling was not trade or business  under  Art.  19(1)(g), it was also not trade or commerce under Art.  301.  On the conclusion reached by this Court that gambling is not  a  trade  this  position would be  obvious.   Even  so,  the  learned Chief Justice incidentally applied the test of  pith  and  substance,  and observed that the impugned act  was  in  pith  and  substance  an  act  in  respect  of  betting  and  gambling,  and  since  betting or gambling  was  not  trade,  commerce or business " the validity of the Act had not to be  decided  by  the  yardstick  of  reasonableness  and  public  interest  laid  down  in  Arts. 19(6) and  304  ".  In  this  connection  it may, with respect, be pointed out  that  what  purports  to be a quotation from Lord Porter’s  judgment  in  Commonwealth  of  Australia  & Ors. v.  Bank  of  New  South  Wales(1)  has  not  been accurately  reproduced.   In  fact,  referring  to  phrases  such as ’pith  and  substance’  Lord  Porter has observed that " they no doubt raise in convenient  form  an appropriate question in cases where the real  issue  is  one  of subject-matter, as when the point is  whether  a  particular piece of legislation is a law in respect of  some  subject  within  the permitted field.  They may  also  serve  useful  purpose  in  the  process  of  deciding  whether  an  enactment   which  works  some  interference,  with   trade,  commerce  and intercourse among the States  is  nevertheless  untouched  by  s.  92 as  being  essentially  regulatory  in  character  "  (pp.  312,  313).   These  observations  would  indicate  that the test of pith and substance  is  generally  and  more appropriately applied when a dispute arises as  to  the  866  legislative competence of the legislature, and it has to  be  resolved  by reference to the entries to which the  impugned  legislation is relatable.  When there is a conflict  between  two  entries  in the legislative lists, and  legislation  by  reference  to  one  entry  would be  competent  but  not  by  reference  to the other, the doctrine of pith and  substance  is  invoked for the purpose of determining- the true  nature  and character of the legislation in question (Vide: Prafulla

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Kumar  Mukherjee  v. Bank of Commerce Ltd., Khulna  (1)  and  Subrahmanyan  Chettiar v. Muttuswami Goundan (2) . But  even  the application of the test of pith and substance yields the  same  result  in  the present  proceedings.   The  pith  and  substance of the legislation is taxation on the carriage  of  goods and that clearly falls within the terms of Art. 301.  At the commencement of this judgment we have stated that the  complexity of the problem which we are called upon to decide  in  the present proceedings has been incidentally  mentioned  or  considered  in some of the reported  decisions  of  this  Court.   We  may  in that connection refer to  two  of  such  decisions  at  this stage.  In The State of  Bombay  v.  The  United  Motors  (India) Ltd. (3), Patanjali Sastri,  C.  J.,  observed that the freedom of inter-State trade and  commerce  declared in Art. 301 is expressly subordinated to the  State  power  of taxing goods imported from sister States  provided  only no discrimination is made in favour of similar goods of  local  origin.  According to the learned Chief  Justice  the  commercial  unity  of India is made to give way  before  the  State power of imposing any non-discriminatory tax on  goods  imported from sister States.  This observation would suggest  that Art. 304(a) and (b) deal with taxes and to that  extent  it  is  inconsistent  with the argument that  tax  laws  are  outside Part XIII.  The  next case in which this question has been  incidentally  discussed  is in Saghir Ahmed v. The State of U. P. (4).  In  that  case  the  impugned  provisions  of  the  U.  P.  Road  Transport Act, 1951 (U.  P. Act II of  (1) (1947) L.R. 74 I.A. 23.  (2) [1940] F.C.R. 188.  (3) [1953] S.C.R. 1069.     (4) [1955] 1 S.C.R. 707.  867  1951),  were  declared to be unconstitutional on  two  other  grounds  which had no direct connection with  the  challenge  under  Part XIII of the Constitution.  Even  so,  Mukherjea,  J., as he then was, who spoke for the Court, has referred to  the  problem  raised by Part XIII as " not quite  free  from  difficulty " and has indicated its pros and cons which  were  urged  before the Court.  One of the points thus  urged  was  that Art. 301 provides safeguards for carrying on trade as a  whole as distinct from the rights of an individual to  carry  it  on. In other words the said Article was  concerned  with  the  passage  of  commodities or persons  either  within  or  without   the   State  frontiers  but  not   directly   with  individuals carrying on the trade or commerce.  The right of  individuals, it was said, was dealt with under Art. 19(1)(g)  so that the two Articles had been framed in order to  secure  two  different objects.  To the same effect are some of  the  observations  made  by Das, C. J., in the case of R.  M.  D.  Chamarbaugwala  (1).   It  is  unnecessary  on  the  present  occasion  to  consider whether the fields  covered  by  Art.  19(1)(g)  and  Art. 301 can be distinguished in  the  manner  suggested  in the said observations.  It may be possible  to  urge that trade as a whole moves inevitably with the aid  of  human agency, and so protection granted to trade may involve  protection  even  to the individuals carrying  on  the  said  trade.   In  that  sense  the  two  freedoms  may   overlap.  However, it is unnecessary to pursue this point any  further  in the present proceedings.  Before  we conclude we would like to refer to two  decisions  in which the scope and effect of the provisions of s. 92  of  the Australian Constitution came to be considered.  We  have  deliberately not referred to these decisions earlier because  we  thought it would be unreasonable to refer to or rely  on  the said section or the decisions thereon for the purpose of  construing  the  relevant  Articles  of  Part  XIII  of  our

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Constitution.   It is commonplace to say that the  political  and  historical background of the federal polity adopted  by  the Australian Commonwealth, the setting of the Constitution  itself, the distribution of powers and the general scheme of  the Constitution are different, and so it  (1)  [1957] S.C.R. 874.  868  would  not be safe to seek for guidance or  assistance  from  the Australian decisions when we are called upon to construe  the  provisions of our Constitution.  In this connection  we  have  already  referred  to the note of  warning  struck  by  Venkatarama Aiyar, J., against indiscriminate reliance being  placed on Australian and American decisions in  interpreting  our Constitution in the case of M. P. V. Sundararamier & Co.  (1).   The  same caution was expressed by Gwyer, C.  J.,  as  early as 1939 when he observed in The Central Provinces  and  Berar  Sales  of Motor Spirit and Lubricants  Taxation  Act,  1938 (2) " there are few subjects on which the decisions  of  other Courts require to be treated with greater caution than  that  of  federal  and provincial powers, for  in  the  last  analysis  the  decision must depend upon the  words  of  the  Constitution  which the Court is interpreting; and since  no  two  Constitutions  are in identical terms it  is  extremely  unsafe  to  assume  that a decision on one of  them  can  be  applied  without qualification to another.  This may  be  so  even  where  the words or expressions used are the  same  in  both  cases, for a word or a phrase may take a  colour  from  its context and bear different senses accordingly ". Even so  the  reported decisions of this Court show that  in  dealing  with constitutional problems reference has not  infrequently  been made to Australian and American decisions; and that, we  think, brings out the characteristic feature of the  working  of  the  judicial process.  When you are  dealing  with  the  problem  of construing a constitutional provision  which  is  none-too-clear  or  lucid you feel inclined to  inquire  how  other  judicial  minds  have  responded  to  the   challenge  presented   by   similar   provisions   in   other    sister  Constitutions.   It  is in that spirit that  we  propose  to  refer  to two Privy Council decisions which dealt  with  the  construction of s. 92 of the Australian Constitution.  The first paragraph of s. 92 of the Australian Constitution,  around  which  has grown, in the words of Lord  Porter  a  "  labyrinth  where there is no golden thread ", reads thus:  "  On the imposition of uniform  (1) [1958] S.C.R. 1422. 1483-84.  (2) A.I.R. 1939 F.C. 1, 5.  869  duties  of customs, trade, commerce, and  intercourse  among  the  States, whether by means of internal carriage or  ocean  navigation,  shall be absolutely free ". The part played  by  Frederick  Alexander  James,  who carried on  the  trade  of  growing  and processing dried fruits, in  securing  judicial  pronouncements  on  the true scope and effect  of  the  said  section is wellknown. He fought three valiant legal  battles  in  which  he successfully asserted his right  as  a  trader  against  legislative  encroachment.  In James  V.  State  of  South Australia (1) s. 20 of the Dried Fruits Export Control  Act, 1924, was struck down.  In James V. Cowan (2) s. 28 was  challenged,   whereas   in  the  last  case  of   James   V.  Commonwealth   of   Australia  (3)  James  had   claimed   a  declaration  that the Dried Fruits Act 11 of 1928 and  5  of  1935  and the regulations framed thereunder were invalid  as  offending  against s. 92 of the Constitution.  It is to  the  observations  made by the Privy Council in the last case  to  which we wish to refer.  Referring to the word " free " used

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in the said section Lord Wright observed that the said  word  in  itself  is  vague and indeterminate; it  must  take  its  colour from the context.  Then he referred to the fact  that  "’free  trade’ ordinarily means freedom from tariffs ",  but  he  immediately  added  that " free " in  s.  92  cannot  be  limited  to freedom in the last-mentioned sense.   According  to  this  judgment, every step in the series  of  operations  which  constitute  the particular transaction is an  act  of  trade, and control under the State law of any of these steps  must be an interference with its freedom as trade.  In  this  connection it was also observed that not much help is to  be  got  by reflecting that trade may still be free  though  the  trader  has  to  pay for the different  operations  such  as  tolls, railway rates and so forth; it would thus appear that  the  result  of this decision is that imposition  of  tolls,  railway rates and so forth might impede the freedom of trade  contemplated  by  s. 92, which in other words  supports  our  conclusion that a tax may amount to a restriction under Art.  301.  (1) (1927) 40 C.L.R. 1.  (3) (1936) A.C. 578,613.  (2) (1932) A.C. 542.  III  870  In  the  case of Commonwealth of Australia v.  Bank  of  New  South Wales (1) to which reference has already been made  in  connection  with  the test of pith and substance  the  Privy  Council  was examining the validity of s. 46 of Banking  Act  (Commonwealth)  (No.  57  of  1947)  in  the  light  of  the  provisions  of  s. 92 of the  Australian  Constitution.   In  deciding  the  said  question one of  the  tests  which  was  applied by Lord Porter was : " Does the act not remotely  or  incidentally (as to which they will say something later) but  directly restrict the inter-State business of banking ", and  he  concluded  that  "  two  general  propositions  may   be  accepted,  (1)  that  regulation  of  trade,  commerce   and  intercourse among the States is compatible with its absolute  freedom,  and  (2)  that  s. 92 is  violated  Only  when  a,  legislative  or  executive  act operates  to  restrict  such  trade, commerce and intercourse directly and immediately  as  distinct  from  creating  Some  indirect  or   consequential  impediment  which may fairly be regarded as remote  ".  This  decision thus justifies the conclusion we have reached about  the scope and effect of Art. 301.  In  the  result  we  hold that the  Act  has  put  a  direct  restriction  on the freedom of trade, and since in doing  so  it  has not complied with the provisions of Art.  304(b)  it  must be declared to be void.  In view of this conclusion  it  is unnecessary to consider the other points urged in support  of the challenge against the validity of the Act.  The three  appeals  and the two petitions are accordingly  allowed  and  writs  or  orders  directed to be  issued  as  prayed.   The  appellants  and  the petitioners will be entitled  to  their  costs from the respondent.  SHAH.  J.-The  validity  of the  Assam  Taxation  (on  Goods  carried by Roads or lnland Waterways) Act,  1954-hereinafter  referred to as the, Act, is challenged by certain  producers  of tea in the States of West Bengal and Assam.  The Act  was  passed  by the Assam Legislature and received the assent  of  the  Governor of Assam on April 9, 1954.  To  the  introduc-  tion of the Bill (which was enacted into the Act) in  871  the   State  Legislature,  the  previous  sanction  of   the  President was not obtained : nor did the President assent to  the  Act.   By s. 3 of the Act,, it is provided  inter  alia

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that " manufactured tea in chests carried by motor vehicles,  cart,  trolly,  boat, animal and human agency or  any  other  means except, railways and airways shall be liable to a  tax  of  one  anna per pound of such tea and this  tax  shall  be  realised from the producer".  " Producer " is defined by  s.  2 cl. (2) as meaning a producer of tea and included a person  in charge of the garden where tea is produced.  By s. 4, tax  is charged on the total net weight carried during the return  period.   Section 7 provides that every producer and  dealer  shall  furnish  a  return of  manufactured  tea  carried  in  chests.   By  s. 23, cl. (3), the Commissioner of  Taxes  is  authorised to recover taxes and penalties due under the  Act  as  arrears  of land revenue.  Sections 27 and 28  impose  a  duty  upon the producers to maintain accounts in  the  forms  prescribed  under  the Act and to preserve the same  and  to  producer  them whenever called upon, to the Commissioner  or  other persons as may be appointed by the Government in  that  behalf  The  rules framed under the Act make  it  obligatory  upon  the  producers  to submit  quarterly  returns  to  the  Superintendent of Taxes and to maintain the registers in the  forms  prescribed  and  failure  to  maintain  registers  is  penalised.  In exercise of the powers conferred by s. 7, sub-s. (3), the  Commissioner  of  Taxes issued a notification in  the  Assam  Government  Gazette notifying for general  information  that  returns  under  the  Act and the Rules  thereunder  for  the  period between June 1, 1954 and September 30, 1954, shall be  furnished  on  or  before  October 30,  1954,  and  for  the  subsequent  quarters  on  or  before  the  dates   specified  therein.  Three producers who transported their tea by  road  or  by  inland waterways to Calcutta in the  State  of  West  Bengal  challenged  by  petitions  under  Art.  226  of  the  Constitution  filed  in  the  High  Court  of  Assam,   tile  authority of the Legislature of the State of Assam to  enact  the  Act on the plea that the Act violated the guarantee  of  freedom of trade, commerce and intercourse under  872  Art.  301 of the Constitution.  The High Court rejected  the  plea  raised  by  the petitioners, and  against  the  orders  passed,  three  appeals with certificates of  fitness  under  Art. 132 of the Constitution have been preferred.  Two other  producers have challenged the vires of the Act by  petitions  under Art. 32 of the Constitution presented to this court.  The  principal  question canvassed in these  proceedings  is  about  the competence of the Assam Legislature to enact  the  Act.   The  producers  contend  that  by  Art.  301  of  the  Constitution, trade, commerce and intercourse being declared  free   throughout  the  territory  of  India,  the   statute  authorising  imposition of restrictions or burdens  on  that  freedom  by levying tax under the authority of an Act  which  does  not  conform  to  the  conditions  prescribed  by  the  Constitution is invalid.  Item 56 of List II of the  seventh  schedule   to   the  Constitution   authorises   the   State  Legislature to impose taxes on goods and passengers  carried  byroad or on inland waterways.  In terms, the tax imposed by  the  Act  is  a  tax on goods carried  by  road  and  inland  waterways and is not of the nature of a duty of excise.   If  the vires of the Act are to be adjudged solely in the  light  of the power conferred by Art. 246 cl. (3) read with item 56  of List 11 of the seventh schedule, the tax must be regarded  as within the competence of the State.  But the exercise  of  legislative   power   of  the  Parliament  and   the   State  Legislatures   conferred   by  the  legislative   lists   is  restricted  by diverse provisions of the  Constitution.   By  Art.  301, it is declared that subject to the provisions  of

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Part   XIII  of  the  Constitution,  trade,   commerce   and  intercourse throughout the territory of India shall be free.  The  language  of the Article is general; it  admits  of  no  implications  and  of  no  exceptions  bar  those  expressly  imposed  by  Part  XIII.  It comprehensively  sets  out  the  guarantee  of  freedom  and  defines  in  terms,  clear  and  precise, that trade, commerce and intercourse throughout the  territory  of India subject to the provisions of Part  XIII,  shall  be free, i.e., trade, commerce and intercourse  shall  not,   except   to  the  extent  expressly   permitted,   be  prohibited, controlled, burdened or impeded.  Our  873  Constitution  even  though in form federal, has  in  diverse  provisions thereof, emphasised the unity of India; and  with  a  view  to promote that unity appears to  have  guaranteed,  subject to specific restrictions, freedom of trade, commerce  and  intercourse throughout the territory.  The  Article  is  not  merely declaratory of State policy like  the  directive  principles defined by Part IV of the Constitution which  are  expressly  not  made  enforceable by any  court  though  the  principles  are  "  fundamental in  the  governance  of  the  country ’. It incorporates a restriction on the exercise  of  power by Governmental agency- legislative as well as  execu-  tive.   Besides placing an irremovable ban on the  executive  authority,  it  restricts  the  legislative  power  of   the  Parliament  and  the State legislatures conferred  by  Arts.  245,  246 and 248 and the relevant items in the  legislative  lists  relating to trade, commerce and intercourse.  On  the  exercise of the legislative power to tax trade, commerce and  intercourse,   restrictions   are  prescribed   by   certain  provisions Contained in Part XII, e.g., Arts. 276, 286, 287,  288  and  289: but these restrictions  do  not  exhaustively  delimit the periphery of that power.  The legislative  power  to  tax  is  restricted also  by  the  fundamental  freedoms  contained  in  Part III, e.g., Arts.  14,15(1),19(1)(g)  and  31(1) and is further restricted by Part XIII.  Article  245,  cl.  (1),  of the Constitution expressly provides  that  the  legislative powers of the Parliament and the State  Legisla-  tures  to  make laws are subject to the  provisions  of  the  Constitution  ;  and  Art. 301 is  undoubtedly  one  of  the  provisions to which the legislative powers are subject.  The   power of taxation is essentially an attribute  of  the  sovereignty   of   the  State  and  is  not   exercised   in  consideration  of the protection it affords or  the  benefit  that  it confers upon citizens and aliens.  Its  content  is  not  measured by the apparent need of the amounts sought  to  be  collected,  and its incidence does not depend  upon  the  ability of the citizens to meet the demand.  But it is still  not an unrestricted power.  By Art. 265 of the Constitution,  the power to tax can be exercised by authority of law  alone  and  the  Constitution  affirmatively grants  the  power  of  taxation  874  under  diverse  heads under the three lists of  the  seventh  schedule.   The  power  of taxation has there.  fore  to  be  exercised  by  the Legislature strictly  within  the  limits  prescribed   by   the   Constitution,   and   any    alleged  transgression either by Parliament or the State  Legislature  of the limits imposed by the Constitution is justiciable.  Trade  and commerce do not mean merely traffic in goods,  i.  e., exchange of commodities for money or other  commodities.  In  the  complexities of modern conditions,  in  their  wide  sweep  are included carriage of persons and goods  by  road,  rail,  air  and  waterways,  contracts,  banking,  insurance  transactions  in  the stock exchanges and  forward  markets,

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communication  of information, supply of energy, postal  and  telegraphic  services and many more activities-too  numerous  to be exhaustively enumerated-which may be called commercial  intercourse.   Movement of goods from place to place may  in  some  instance,%  be an important  ingredient  of  effective  commercial  intercourse,  but movement is not  an  essential  ingredient  thereof Dealings in goods and  other  commercial  activities which do not import a concept of movement are  as  much  part of trade and commerce as  transactions  involving  movement  of goods.  The guarantee of freedom of  trade  and  commerce  is  not  addressed  merely  against  prohibitions,  complete or partial; it is addressed to tariffs,  licensing,  marketing   regulations,   price-control,   nationalisation,  economic   or  social  planning,   discriminatory   tariffs,  compulsory  appropriation of goods, freezing or  stand-still  orders and similar other impediments operating directly  and  immediately  on  the freedom of  commercial  intercourse  as  well.   Every  sequence in the series  of  operations  which  constitutes trade or commerce is an act of trade or commerce  and  burdens  or impediments imposed on any  such  step  are  restrictions  on the freedom of trade, commerce  and  inter-  course.   What  is  guaranteed  is  freedom  in  its  widest  amplitude-freedom  from  prohibition,  control,  burden   or  impediment   in   commercial   intercourse.    Not    merely  discriminative  tariffs  restricting movement of  goods  are  included in the restrictions which are hit by  875  Art  301, but ball taxation on commercial intercourse,  even  imposed  as a measure for collection of revenue is  so  hit.  Between discriminatory tariffs and trade barriers on the one  hand   and  taxation  for  raising  revenue  on   commercial  intercourse,  the  difference is one of purpose and  not  of  quality.    Both  these  forms  of  burden   on   commercial  intercourse trench upon the freedom guaranteed by Art. 301:  The guarantee of freedom is again not merely against burdens  or  impediments  on  inter-State  movement:  nor  does   the  language   of  Art.  301  guarantee  freedom   merely   from  restrictions  on  trade, commerce and intercourse  as  such.  Articles  302,  303,  304 and 306, which  I  will  presently  advert  to,  make  it  abundantly  clear  that  the  freedom  contemplated was freedom of trade, commerce and  intercourse  in  all  their varied aspects inclusive  of  all  activities  which constitute commercial intercourse and not merely  from  restrictions on " trade, commerce and intercourse as such ".  Article 301 as has already been observed enunciates a fetter  upon the exercise of legislative power under the entries  in  the lists of the seventh schedule concerning or relating  to  trade,  commerce  and  intercourse.   The  basic   principle  underlying  Art. 301 appears to have been adopted  from  the  Constitution   of  the  Australian  Commonwealth.   In   the  American Constitution, by the 8th section, Art. 1, power  to  regulate commerce is granted; but the freedom of commerce as  guaranteed  by our Constitution is not found  enunciated  in  the  Constitution of the United States.  Section 92  of  the  Constitution  of the Commonwealth of Australia  provides  by  the 1st paragraph that " on the imposition of uniform duties  of  customs,  trade,  commerce  and  intercourse  among  the  States,  whether  by  means of internal  carriage  or  ocean  navigation,  shall be absolutely free ". That  guarantee  of  freedom  of  trade, commerce and intercourse though  Dot  as  extensive as the guarantee enshrined in our Constitution, is  of  the same pattern.  But our Constitution has made a  sig-  nificant departure from the Australian Constitution, Whereas  by s. 92 of the Australian Constitution,  876

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freedom  of  trade, commerce and intercourse  is  guaranteed  among   the   States,  i.e.,  at  inter-State   level,   our  Constitution  has made trade, commerce and intercourse  free  throughout  the territory of India.  The freedom  guaranteed  by  our  Constitution is more pervasive: it  is  freedom  of  trade, commerce and intercourse intraState as well as inter-  State.  But this extension of the area of its operation does  not  alter the content of that freedom.  It is freedom  from  tax burdens as well as other impediments.  Section  92  of the Commonwealth of Australia Act  does  not  encompass the wide freedom guaranteed by our Constitution-it  protects  trade, commerce and intercourse from  restrictions  in   inter-State   commerce;  but  in   my   judgment,   the  interpretation  put by the Judicial Committee of  the  Privy  Council  in James v. Commonwealth of Australia (1) upon  the  meaning  of the expression " free " in s. 92 is not on  that  account less illuminating in the interpretation of Art.  301  of  our Constitution which is largely based on that  section  of the Australian Constitution.  Lord Wright in delivering the judgment of the Board in James  v.  Commonwealth  of Australia (1) (supra)  at  pp.  627.628  observed :  " ’ Free’ in s. 92 cannot be limited to freedom in the  last  mentioned sense (freedom from tariffs).  There may at  first  sight  appear to be some plausibility in that idea,  because  of  the  starting point in time specified  in  the  section,  because  of the sections which surround, s. 92, and  because  proviso to s. 92 relates to customs duties.  But it is clear  that  much more is included in the term; customs duties  and  other  like  matters constitute a merely  pecuniary  burden;  there  may  be different and perhaps more  drastic  ways  of  interfering  with freedom, as by restriction or  partial  or  complete prohibition of passing into or out of the State.  Nor   does   "  free  "  necessarily  connote   absence   of  discrimination between inter-State and intrastate trade.  No  doubt  conditions restrictive of freedom of trade among  the  States  will frequently ’involve a discrimination; but  that  is not essential or decisive........  (1)  L.R. (1936) A.C. 578.  877  A  compulsory  seizure of goods  may  include  indifferently  goods  intended for intrastate trade and goods intended  for  trade  among  the  States.  Nor can freedom  be  limited  to  freedom  from legislative control; it must  equally  include  executive  control  Every step in the series  of  operations  which  constitute  the particular transaction is an  act  of  trade; and control under the State law of any of these steps  must be an interference with its freedom as trade."  These  observations  made  in the  context  of  a  guarantee  against  obstruction  to the flow of  interstate  trade  and  commerce,  involved  the " conception " of  "  freedom  from  customs    duties,   imports,   border   prohibitions    and  restrictions  of every kind : the people were to be free  to  trade  with  each other, and to pass to and  fro  among  the  States,  without any burden, hindrance or restriction  based  merely  on the fact that they were not members of  the  same  State ".  Freedom  guaranteed by Art. 301 is however not absolute:  it  is  subject to the provisions contained in Part XIII of  the  Constitution.   Article 302 authorises Parliament to  impose  restrictions   on  the  freedom  of  trade,   commerce   and  intercourse  between  one State and another  or  within  any  ’part  of the territory of India as may be required  in  the  public    interest.    The   Constitution   has    therefore  circumscribed  the guarantee under Art. 301  by  authorising

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the   Parliament  to  impose  restrictions  thereon.    Such  restrictions  on  trade,  commerce and  intercourse  may  be  intrastate as well as inter-State: the only condition  which  the restrictions must fulfil is that they must be imposed in  the  public  interest.  The learned  Attorney-General  urged  that  the  courts  are incompetent to  adjudge  whether  the  quantum, and the incidence of a tax imposed by a Legislature  in  exercise of its powers are in the public  interest,  and  therefore it must be inferred that Arts. 301 and 302 do  not  deal with freedom from taxation and the limits which may  be  placed thereon.  Counsel urged that in the modern  political  thought, exercise of the sovereign power of taxation is  not  restricted to collection of revenue for governmental  112  878  purposes; it is reported to for diverse purposes, often with  a view to secure a pattern of social order ensuring justice,  liberty and equality amongst citizens.  That the courts  may  not in adjudging upon the validity of a restriction  imposed  by   a   parliamentary  statute,  lightly  enter   upon   an  investigation whether the amount sought to be recovered  and  its  incidence are in the public interest, is not  a  ground  for  holding that Art. 302 does not deal  with  restrictions  which may be placed upon trade, commerce and intercourse  by  the imposition of taxes.  The courts will normally rely upon  the  wisdom  of the Parliament and presume  that  taxes  are  generally imposed in the public interest: but that does  not  exclude  the  jurisdiction of the court in a given  case  to  enter  upon  an  enquiry  whether  an  impugned  legislation  satisfies  the constitutional test.  If an enquiry into  the  validity of a burden or impediment imposed on the freedom of  trade,  commerce ’and intercourse imposed otherwise than  by  levying  a  tax is within the competence of the  court,  the  restraint  which the courts put upon their own functions  by  raising a presumption of constitutionality in dealing with a  burden  imposed by a taxing statute cannot be forged into  a  fetter upon their jurisdiction.  By el. (b) of Art. 304, the  State  Legislatures are invested with similar  authority  to  impose  restrictions on the freedom of trade,  commerce  and  intercourse  with or within the State as may be required  in  the   public  interest.   The  territorial  extent  of   the  operation of the laws which may be made under Arts. 302  and  304(b)  may  not from the very nature  of  the  jurisdiction  exercised  by the Legislatures be co-extensive, but  subject  thereto,  the  Parliament  and the  State  Legislatures  are  entrusted  in exercise of legislative authority with  powers  to restrict freedom of trade, commerce and intercourse.  Why  the Constitution should have enacted that the  Parliamentary  law may impose restrictions as may be required in the public  interest   and   the  State  law   may   impose   reasonable  restrictions  as may be required in the public interest,  it  is  difficult  to  appreciate.  It is  unnecessary  for  the  purpose of these cases to enter  879  upon  a  discussion whether there is  any  real  distinction  between the quality of restrictions which may be imposed  by  legislation   by  the  Parliament  and  State   Legislatures  exercising authority respectively under Arts. 302 and 304(b)  of  the  Constitution.   The  two  Articles  enact  that  to  oirucmscribe effectively the freedom of trade, commerce  and  intercourse,  the restriction must satisfy the primary  test  that  it is " required in the public interest ". Clause  (b)  of  Art.  304  is  subject to a  proviso  that  no  Bill  or  amendment for the purpose of el. (b) shall be introduced  or  moved  in  the Legislature of a State without  the  previous

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sanction  of  the  President.  The authority  of  the  State  Legislature  to enact legislation imposing  restrictions  on  trade, commerce and intercourse is therefore subject to  the  condition that before the Bill or amendment of a statute  is  moved,  the  previous  sanction of  the  President  must  be  obtained.   Legislative  power of  the  Parliament  imposing  restrictions   on  the  freedom  of  trade,   commerce   and  intercourse  may  therefore  be  validly  exercised  if  the  restrictions  are required in the public interest.   On  the  exercise   of  authority  in  that  behalf  by   the   State  Legislatures,  there are placed two restrictions,  (1)  that  the  restriction  must  be reasonable and  required  in  the  public  interest,  (2) that the Bill or  amendment  imposing  restriction  can be moved or introduced in  the  Legislature  only  with the previous sanction of the President.  In  this  context,  I may refer to Art. 255 which provides, in so  far  as it is material, that no Act of the Legislature of a State  shall  be invalid by reason only that the previous  sanction  required  by  the Constitution was not given, if  assent  to  that Act was given under el. (c) where the previous sanction  required was that of the President, by the President.   Even  if  the  previous  sanction of the President  has  not  been  obtained  to  the  moving or introduction  of  the  Bill  or  amendment falling within el. (b) of Art. 304, the Act  still  would  not  be invalid if the President  has  signified  his  assent to the Act enacted by the Legislature.  Article  303(1) is an exception to Art. 302 as well as  Art.  304(b).  Notwithstanding the wide sweep of the  880  legislative  power restored by Arts. 302 and 304(b)  to  the  Parliament and the State Legislatures to make laws  imposing  restrictions   on  the  freedom  of  trade,   commerce   and  intercourse,  prohibition is imposed on the exercise of  the  power  in making laws giving or authorising the  giving  of,  any  preference  to  one State over another  or  making,  or  authorising  the making of, any discrimination  between  one  State and another, by virtue of any entry relating to  trade  and  commerce in any of the Lists in the  seventh  schedule.  Cl.   (1)  of  Art.  303  emphasises  the  object   of   the  Constitution. makers to safeguard the economic unity of  the  nation and to prevent discrimination between the constituent  States in the matter of trade and commerce.  It is true that  under  cl.  (1)  of Art. 302, the  discrimination  which  is  prohibited  is  under  a  law made by  virtue  of  an  entry  relating to trade and commerce in the seventh schedule.  But  thereby,  discrimination which is prohibited is not  limited  to  discrimination  under laws made  under  items  expressly  relating  to  the trade and commerce items  of  the  seventh  schedule.  The expression " relating to trade and commerce "  used  in  Art.  302(1) in my  judgment  includes  all  those  entries in the lists of the seventh schedule which deal with  the power to legislate, directly or indirectly in respect of  activities in the nature of trade and commerce.  By el.  (2)  of Art. 303, the rigour of cl. (1) in the matter of laws  to  be  enacted  by Parliament is to a certain  extent  reduced.  That  clause  authorises the Parliament, but not  the  State  Legislatures,  to make laws notwithstanding el. (1) when  it  is   declared   by  law  that  it  is  necessary   to   make  discrimination  which  is  prohibited  for  the  purpose  of  dealing with the situation arising from scarcity of goods in  any part of the territory of India.  Article  304,  in so far as it is  material,  provides  that  notwithstanding  anything  in  Art. 301  or  Art.  303,  the  Legislature  of  a  State may by law, (a)  impose  on  goods  imported  from other States (or the Union  territories)  any

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tax to which similar goods manufactured or produced in  that  State  are  subject,  so, however, as  not  to  discriminate  between goods so imported and goods so  881  manufactured   or  produced.   This  clause   implies   that  notwithstanding anything contained in Art. 301 or Art.  303,  the  State Legislature has the power to im. pose tax on  the  import  of  goods  to which similar  goods  manufactured  or  produced  in the State are subject, provided that by  taxing  the goods imported from another State or Union territory, no  discrimination  is practised.  If Art. 301 and Art. 303  did  not deal with restrictions or burdens in the nature of  tax,  the  reason  for incorporating the  non-obstante  clause  to  which Art. 304, el. (1), is subject, cannot be  appreciated.  Undoubtedly, the provisions of Part XIII of the Constitution  do not impose additional or independent powers of  taxation;  the  powers of taxation are to be found conferred  by  Arts.  245,  246  and  248  read with  the  lists  in  the  seventh  schedule, and the provisions of Part XIII are limitative  of  the  exercise of legislative power.  The  circumstance  that  the Constitution has chosen to deal with a specific field of  taxation as an exception to Arts. 301 and 303 (which  should  really be Art. 303(1) ) strongly supports the inference that  taxation was one of the restrictions from the imposition  of  which  by  the guarantee of Art. 301,  trade,  commerce  and  intercourse are declared free.  Clause (b) of Art. 304 is subject to the proviso prescribing  that  the  previous  sanction  of  the  President  shall  be  obtained  to  the  moving  or  introduction  of  a  Bill  or  amendment  imposing  restrictions on the freedom  of  trade,  commerce   and  intercourse.   There  is  however  no   such  condition  imposed  in  the  matter  of  enactment  of  laws  imposing  non-discriminative tariffs under el. (a).  But  on  that account, the nature of the restrictions contemplated by  cls.  (a) arid (b) is not in any manner  different.   Clause  (b)  deals  with  a general  restriction  which  includes  a  restriction  by the imposition of a burden in the nature  of  tax.  Clause (a) deals with a specific burden of taxation in  a limited field.  Article  305 protects existing laws except in so far as  the  President  may  by order or otherwise direct,  and  it  also  validates certain enactments made before the commencement of  the   Constitution   (Fourth  Amendment)  Act,   1955,   and  authorises the Parliament  882  and  the State Legislatures in future to make laws  relating  to matters referred to in sub-cl. (2) of cl. (6) of Art. 19.  Article  306 of the Constitution which was repealed  by  the  Constitution (Seventh Amendment) Act, 1956, provided, in  so  far as it is material, that notwithstanding anything in  the  foregoing provisions of Part XIII or any other provisions of  the  Constitution, a State specified in Part B of the  First  Schedule  which before the commencement of the  Constitution  was levying any tax or duty on the import of goods into  the  State  from other States or on the export of goods from  the  State  to other States may, if an agreement in  that  behalf  has  been entered into between the Government of  India  and  the  Government of that State continue to levy  and  collect  such   tax   or   duty  subject  to  the   terms   of   such  agreement........... The marginal note of the Article refers  to the power of the States specified in Part B of the  First  Schedule  to levy tax as a power to impose  restrictions  on  trade  and  commerce,  and clearly supports  the  view  that  within the meaning of Art. 301, freedom was to include free-  dom from taxation and the restrictions contemplated by Arts.

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302 and 304 contemplated imposition of burdens of the nature  of taxation.  On a careful review of the various Articles, in my judgment,  by  Part  XIII,  restrictions have  been  imposed  upon  the  legislative power granted by Arts. 245, 246 and 248 and  the  lists  in  the seventh schedule to the  Parliament  and  the  State Legislatures and those restrictions include burdens of  the  nature  of  taxation.   Therefore,  the  power  to  tax  commercial  intercourse vested by the legislative  lists  in  the  Parliament or the State Legislatures, is  circumscribed  by Part XIII of the Constitution and if the exercise of that  power does not conform to the requirements of Part XIII,  it  would be regarded as invalid.  As  observed  hereinbefore,  the previous  sanction  of  the  President  was not obtained to the moving of the Bill  which  was  enacted  as the impugned Act.  Even  though  the  Assam  Legislature   had  by  item  56  of  the  seventh   schedule  legislative  authority to impose this tax, the  State  could  not  exercise this authority in the absence of the  previous  sanction of the President and  883  the  invalidity  of the Act imposing the tax  on  goods  and  passengers  is not cured, the President not having  assented  to  the  Act at any time after it was passed  by  the  Assam  Legislature.    The  argument  that  this   view   seriously  restricts the " sovereignty " of the States has, in my view,  little  force.  Even a cursory review of our  constitutional  provisions  clearly  shows that the primary  object  of  the  Constituent  Assembly was to erect a governmental  machinery  with  a  strong  central  Government,  with  the  object  of  building  up  a healthy economy, and  unifying  the  various  component  States, consisting of the former  British  Indian  Provinces  and  the merged Indian States,  by  subordinating  local   and  parochial  interests  to  the  wider   national  interest.   In  any  event,  in adjudging  the  vires  of  a  statute,  the  impact of the view which  the  interpretation  placed by the court may produce on some cherished notion  of  sovereignty of the component States must be ignored.  In that view, the Assam Taxation (on Goods carried by  Roads  or Inland Waters) Act, 1954, must be regarded as  infringing  the  guarantee of freedom of trade and commerce  under  Art.  301, because the Bill moved in the Assembly had not received  the  assent of the President as required under  Art.  304(b)  proviso, and the Act has not been validated by the assent of  the President under Art. 255(c).  In  the view expressed by me, I do not deem it necessary  to  enter  upon  certain  subsidiary  contentions  such  as  the  application  of the " pith and substance doctrine "  to  the  interpretation   of  the  relevant  clauses,   the   alleged  violation  by the Act of the equal protection clause of  the  Constitution, and the effect of Act XXIX of 1953 enacted  by  the Parliament, which were debated at the Bar.  In the view taken, the appeals must be allowed and the  Rule  in the two applications made absolute, with costs.  ORDER  OF  COURT:  In view of  the  majority  judgment,  the  appeals  and the writ petitions are allowed  with  costs-one  set of hearing fees.  884