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2230 Words Oct 24th, 2015 9 Pages
THE TEST OF DIRECT AND IMMEDIATE RESTRICTION
ATIABARI TEA CO LTD v STATE OF ASSAM, AIR 1961 SC 232( A five judge bench decision)
In this case the Supreme Court was concerned with the Assam Taxation (on goods carried by Roads and Inland Waterways) Act 1954 which was passed under Entry 56 of List II of the seventh Schedule of the Constitution. The appellants carried on the business of growing tea and exporting it to Calcutta via Assam. In the course of passing through Assam the tea was liable to tax under the Act.
The appellants contended that the Act had violated the freedom of trade guaranteed by Article 301as it had obstructed free flow of trade and as it was not passed after obtaining the sanction of the
President as required by
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The freedom of movement of trade cannot be subject to any restriction in the form of taxes imposed on carriage of goods or their movements. Such restriction can be imposed by the State legislatures only after satisfying the requirements of Article 304(b) of the Constitution”
“Restriction freedom from which is guaranteed by Article 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 restriction but it is only such taxes which directly and immediately restrict free movement of trade would fall within the purview of Article 301.”
However, such regulatory measures as traffic regulations, licensing of vehicles, marketing and health regulations, price control, economic and social planning , prescribing minimum wages only indirectly impeded the free flow of trade. These are regulatory measures which promote and facilitate trade and are permissible for an orderly society.
Since the impugned Act had not satisfied the requirement of obtaining previous assent to the Bill by the President as required by Article 304(b) it was struck down as unconstitutional.
THE COCEPT OF COMPENSATORY TAX
AUTOMOBILE TRANSPORT CO v STATE OF RAJASTHAN AIR 1962 SC 925( A seven judge bench decision)
In Automobile case the Court held that regulatory measures or compensatory taxes for the

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