# THE AUTOMOBILE TRANSPORT (RAJASTHAN) LTD v. THE STATE OF RA.JASTHAN AND OTHERS

- **Citation:** [1963] 1 S.C.R. 491
- **Court:** Supreme Court of India
- **Decided:** 1962-04-09
- **Bench:** S. K. Das, J. L. Kapur, A. k. SARKAR, K. Subba. Rao, M. Hidayatullah, N. Rajagopala Ayyangar, J. R. Mudholkar1
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-automobile-transport-rajasthan-ltd-v-the-state-of-ra-jasthan-and-others-2609
- **Pages:** 158

## Headnote

Fre~om of Trade-State carriages-Tax on Vehicles--Btafe
law imposing tax on vehicles used in public place. or kept for
use--Oonstitutional validity-Rajasthan Motor Vehicles Tax·
ation .Act, 1951 (Rajasthan 11 of 19.SZ), Rll, 4, 11, Bcher11ul~
Oonstitution of India, .Arts. 19, 245, 301, 304 Sevr:.nth Sch. List I,
entry 42, List JI, entry 57.
Sub-section (1) of s. 4 of the Rajasthan Motor Vehicles
Taxation Act, l 951. provided :
" ...... No motor vehicle
shall be used in any public place or kept for use in Rajasthan
unless the owner thereof has paid in rcsper.t of it, a tax at the
appropriate rate specified in the schedules to this Act within
the time allowed ...... "
The appellants were carrying on the business of plying
shge carriages in the State of Ajmer.
They held permits and
plied their buses on diverse routes. There was one route
which lay mainly in Ajmcr State but it crossed narrow strips
of the te1Titory of the State of Rajasthan. Another route,
Ajmcr to Kishangarh, was substantially in the Ajmer State,
but a third of it was in Rajasthan. Formerly, there was an
agreement between the Ajmer State and the former State ()f
K.ishan~arh, by which neither State charged any tax or fees
on vehicles registered in Ajmer or K.ishangarh. Later, Kishan-
· garh became a part of Rajasthan. On the passing ()f the
Rajasthan Motor Vehicles Taxation Act,
1951, and the
pr()mulgation of the rules made thcrcund~r, the Motor Vehicles
Taxation Qfficcr,.Jaipur, demanded of the appellants payment
of the tax due on their motor Vehicles for the period April 1,
1951, to March 3 l, 1954. By virtue of the provisions ()f s. 4
()f the Act read with the Schedules no one could use or keep
a motor vehicle in Rajasthan without paying the appropriate
. tax for it and if he did so he was made liable to the penalties
imposed under s. I l of the Act. The appellants challenged
the legality of the demand on the grounds that s. 4 of the Act
read with the Schedules constituted a direct and immediate
1962
April 9,
1962
Automobile
Tf'ansp01t
(R•Jast""") Ltd.
v.
Stall of Raa5tha n
492 SUPREME OOURT REPORTS [1963]
restriction on the movement of trade and commerce with and
within Rajasthan inasmuch as motor vchiclr:S which carried
passengers and goods within or through Raja•than had
to
pay the tax which imposed a pecuniary burden on a com·
mercial activity and was, therefore, hit by Art. 301 of the
Constitution of India and was not saved by Art. 304(b)
inasmuch as the proviso to Art. 304(b) was not complied with,
nor was the Act assented to by the President within the
meaning of Art.· 255 of the Constitution. The respondents
claimed that taxation for the purpose of raising revenue or
for the maintenance of roads etc., was not hit by Art. 30 I and
that the Act did not constitute an immediate or direct imp·
edimcnt to the movement of trade and commerce inasmuch as
the tax impnsed was a consolidate tax on the vehicle itself
though the quantum of ·the tax was fixed in some instances
with reference to the seating capacity or loading capacity etc.
Held (per S. K. Das, Kapur, Sarkar and Subba Rao,
JJ.), that the Rajasthan Motor VehiclesT .. xation Act 1951, did
not violatr, the provisions ot Art. 301 of the Constitu1ion of
India and that the taxes imposed under the Act were comp·
ensatory or rrgu1atory taxc~ which did not hinder the freedom
of trade, commerce and intercourse assurcd __ by that Article.
Such taxes, therefore, were legal.
Per S. K. Das, Kapur and Sarkar, JJ.-(1) The con·
cept of freedom of trade, commerce and intercourse postulated
by Art. 30 I must be understood in the context of an ordinary
society and as part of a Constitution which envisaged a
distribution of powers between the States and the Union, and
if so understood, the concept must recognised the n•ed and
legitimacy of some de!!fCe of regulatory control, whether by the
Union or the State!!!. Regulatory measures or measures impos•
ing compensatory taxes for the use of trading faciliti~s did not
hamper t

## Text

_Characters 0–39,945 of 306,963. This is a partial read: ask again with offset=39945 for what follows._

1 s.c.R.
SUPREME COURT REPORTS
491
THE AUTOMOBILE TRANSPORT
(RAJASTHAN) LTD.
v.
THE STATE OF RA.JASTHAN AND OTHERS
(And Connected Appeals)
(S. K. DAS, J. L. KAPUR, A. k. SARKAR, K. SUBBA.
RAO, M. HIDAYATULLAH, N. RAJAGOPALA
AYYANGAR and J. R. MUDHOLKAR1 JJ.)
Fre~om of Trade-State carriages-Tax on Vehicles--Btafe
law imposing tax on vehicles used in public place. or kept for
use--Oonstitutional validity-Rajasthan Motor Vehicles Tax·
ation .Act, 1951 (Rajasthan 11 of 19.SZ), Rll, 4, 11, Bcher11ul~
Oonstitution of India, .Arts. 19, 245, 301, 304 Sevr:.nth Sch. List I,
entry 42, List JI, entry 57.
Sub-section (1) of s. 4 of the Rajasthan Motor Vehicles
Taxation Act, l 951. provided :
" ...... No motor vehicle
shall be used in any public place or kept for use in Rajasthan
unless the owner thereof has paid in rcsper.t of it, a tax at the
appropriate rate specified in the schedules to this Act within
the time allowed ...... "
The appellants were carrying on the business of plying
shge carriages in the State of Ajmer.
They held permits and
plied their buses on diverse routes. There was one route
which lay mainly in Ajmcr State but it crossed narrow strips
of the te1Titory of the State of Rajasthan. Another route,
Ajmcr to Kishangarh, was substantially in the Ajmer State,
but a third of it was in Rajasthan. Formerly, there was an
agreement between the Ajmer State and the former State ()f
K.ishan~arh, by which neither State charged any tax or fees
on vehicles registered in Ajmer or K.ishangarh. Later, Kishan-
· garh became a part of Rajasthan. On the passing ()f the
Rajasthan Motor Vehicles Taxation Act,
1951, and the
pr()mulgation of the rules made thcrcund~r, the Motor Vehicles
Taxation Qfficcr,.Jaipur, demanded of the appellants payment
of the tax due on their motor Vehicles for the period April 1,
1951, to March 3 l, 1954. By virtue of the provisions ()f s. 4
()f the Act read with the Schedules no one could use or keep
a motor vehicle in Rajasthan without paying the appropriate
. tax for it and if he did so he was made liable to the penalties
imposed under s. I l of the Act. The appellants challenged
the legality of the demand on the grounds that s. 4 of the Act
read with the Schedules constituted a direct and immediate
1962
April 9,
1962
Automobile
Tf'ansp01t
(R•Jast""") Ltd.
v.
Stall of Raa5tha n
492 SUPREME OOURT REPORTS [1963]
restriction on the movement of trade and commerce with and
within Rajasthan inasmuch as motor vchiclr:S which carried
passengers and goods within or through Raja•than had
to
pay the tax which imposed a pecuniary burden on a com·
mercial activity and was, therefore, hit by Art. 301 of the
Constitution of India and was not saved by Art. 304(b)
inasmuch as the proviso to Art. 304(b) was not complied with,
nor was the Act assented to by the President within the
meaning of Art.· 255 of the Constitution. The respondents
claimed that taxation for the purpose of raising revenue or
for the maintenance of roads etc., was not hit by Art. 30 I and
that the Act did not constitute an immediate or direct imp·
edimcnt to the movement of trade and commerce inasmuch as
the tax impnsed was a consolidate tax on the vehicle itself
though the quantum of ·the tax was fixed in some instances
with reference to the seating capacity or loading capacity etc.
Held (per S. K. Das, Kapur, Sarkar and Subba Rao,
JJ.), that the Rajasthan Motor VehiclesT .. xation Act 1951, did
not violatr, the provisions ot Art. 301 of the Constitu1ion of
India and that the taxes imposed under the Act were comp·
ensatory or rrgu1atory taxc~ which did not hinder the freedom
of trade, commerce and intercourse assurcd __ by that Article.
Such taxes, therefore, were legal.
Per S. K. Das, Kapur and Sarkar, JJ.-(1) The con·
cept of freedom of trade, commerce and intercourse postulated
by Art. 30 I must be understood in the context of an ordinary
society and as part of a Constitution which envisaged a
distribution of powers between the States and the Union, and
if so understood, the concept must recognised the n•ed and
legitimacy of some de!!fCe of regulatory control, whether by the
Union or the State!!!. Regulatory measures or measures impos•
ing compensatory taxes for the use of trading faciliti~s did not
hamper trade, commerce and intercourse but rather facilitated
them and, therefore, were not hit by the freedom declared by
Art. 301 ; such measures need out comply with the require·
ments of the provisions of Art. 304(b) of the Constitution.
(2) In view of the provisions of Art. 245; the restriciions in
Part XIII of the Constitution applied to taxation laws ;
and such laws were not confined only to legislation with respect to entries relating to trade and clJmmcrce in any of the
lists in the Seventh Schedule.
(3)
On a proper co~struction
of the Act and the Schedules. the taxes imposed were really
taxes for the use of the roads in Rajasthan.
Jn basing the
taxes on passenger capacity or loading capacity, the· legislature had n.<rt ly evolved a method and measure of compensation demanded by the State, but the taxes were
still
compensation and charge for regulation.
1 S.O.R.
SUPREME COURT REPORTS
493
Per Sobba Rao, J.-(1)
The freedom declared under
Art. 301 of the Constitution of India referred to the right of
free movement of trade without any obstructions by way of
barriers, inter-State or . intra-State, or other impediments
operating as such barriers ; and the said freedom was not
impeded, but on the other hand, promoted, by regulations
creating conditions for the free movement of trade, such as,
police regulations, provisions for services, maintenance of
roads, provision for aerodromes, wharfs etc., with or without
compensation.
(2) Parliament. may by law impose restrictions on such freedom in the public interest, and the States
also, in exercise of its _legislative power, may impose similar
restrictions, subject to the proviso mentioned therein.
(3)
Laws of taxation were not outside the freedom enshrined
either in Art. 19 or Art. 301.
Per
Hidayatullah, Rajagopala Ayyangar and Mudholkafl JJ.-(1) St>ction 4(1) of th Rajasthan Motor Vehicles
Truta1ion Act, 1951, as rearl with Schs. · II, III and Part I
of Sch. IV, offended. Art. 301 of the Constitution, and as
resort to the procedure prescribed by Art 304(b) was not
taken it was ultr:a tiires .the Constitution. (2) The pith and
substance of the Act was the levy of tax on motor vehicles in
Rajasthan or their use in that State irrespc:ctive of where the
vehicles ca:me from and not legblation in respect of inter·
State trade or commerce.
The Act was ~ithia entry 57 of
the List of the Seventh Schedule and not ·unt;ler .entry 42 of
Union List.
(3) A tax which is made thc'e<;>ndition precedent of the right to enter upon and carry on business is a
restriction on the right , to carry on trade· and: commerce
within Art. 301.
In the present case, the. trade,
which
consisted in making use of . motor vehicles for carriage of·
passengers and goods, could be carried on only ·if the tcx was
paid, and, therefore, th~ taxes imposed by Schs.11, III and
IV( I) operated on trade and commerce directly.
('~) The
tax levied under the Act was not, truly a fair recompense
for wear and tear of roads, but a restriction,
which
Art. 301 forbade.
(5)' The Act was i:iot, in its true character,
regulatory becau~e there was no provisioμ therein; which
could be regarded as regulatory of motor vehicles.
The Act
plainly levied a tax upon possession or use of motor vehieles.
Atiabari Tea Oo., Lta. v. The State of Assam· ana Othera
(1961] 1. S.C .R. 809, discussed.
·
·
·
American and Australian decisiens with .regard to the
Commerce Clause or the American Constitution and s. 92 of
the Australian Constitution, considered ..
19tll
A.ulomobile
Tr•11s/o'I
(Rajastlum) Lli.
v.
S1at1 of Rojastha
19f2
Automobile
Transpor'
( Rajasthcn) Ltd.
••
State of Rajas;han
494
SUPREME COURT REPORTS [1963)
C1vIL
APPELLATE JumsnrcTION :
Civil
Appeals Nos. 4~ to 44 of l!J50.
Appeals from the final judgment and order
dated August 0, 1957, of thn Rajasthan High Court
(Jaipur Bench) at Jaipur in Cid] 'Vrit Petitions
Nos. 40J to 402 of 1954.
G. S. Pathak, J.B. Dadachanji, S. N. And/ey,
Rameshwar Nath and P. L. Vohra, for the appellants.
G. 0. Kasliwal, Advocate-General for the Stat~ of
Rajasthan, A. V. Viswanatha Sastri, S. K. Kap~tr and
P. D. Menon, for the respondents.
H. M. Seervai, Advocate-General for the State of
Maharashtra and Naunit Lal, for the Nate of Assam
(Intervener).
V. K. T. Chari, Advocate-General for the State of
Madras, R. Ganapathy Iyer, T. J[. Sen and P. D.
Menon, for the State of Madras (Intervener).
S. N. Sikri, Advocate-General for the State of
P.unj11J, N. 8. Bindra, T. JI. 8en and P. D Menon,
for the State of Punjab (Intcrvcr:er).
H. M. Seervai, Advocate-General for the State of
Maharashtra, T. JJf. Sen and P. D . .lfcnon, for the
State of Maharashtra (IntflTt•ner).
K. Bhimsankarom, 'l'. M. Sen and P. D. Menon,
for the State of Andhra l'rndesh (Int.e'1nmer).
B. Sen,
S. 0. Bo-<e and P. K. Bose, for the
Sta to of 'Ve8t BengH l (Tnterv<.>ner).
L<1l Narain Sinha, Ln.lcshma?>
Saran Singh.
D. P. Singh, R. K. Gara, 31. K. Ramn.mvrthi and
S. 0. Aggarwal. for the State of Bihar (Intervener).
Dinbandhit Sn.hit, Adi·ocate-Genrrnl for lh.e State
of Orissu, B. K.P. Sinha, 'l'. M. Sen nrn1 P. r>. l1Ie11on,
for the Stat<' of 01 isE9 (llltNv~ner).
1 S.C.R.
SUPREME COURT REPORTS
495
K. D. Hathi and P. D. 2~enon, for the State of
Gujarat (Intervener).
ft!. Adhikari, Advocate-General .for the Stale of
Madhya Pradesh, B. Sen,
B. K. B. Naidu, and
I. N. Shroff, for the State of Madhya Pradesh
(Intervener).
Ranade.b Chaudhu1"i, S. N. Andley, Rameshwar
Nath and P . .L. Vohra,, for M.A. Tulloch and Co.
(Intervener).
K. Srinii•asniurty
aud D. Gobu.rdhun, for
Nazeeria Motor Service, Nellore, and
Andhra
Pradesh Motor Union (Interveners).
N. C. Chatterjee, S. O. ~laz'umdar and R.H.
Dhebar,
for the Attorney-General
for
India.
(intervener).
1.962. April 9. The following judgments were
delivered. The judgment of S. K. Das, J. L. J{apur
and A. K. Sarkar, JJ., l\'as delivered by S. K. Das,
J. The judgment ofM. Hidayatul1ah, N. H,ajagopala
Ayyangar and J. R. Mudholkar, JJ., was delivered
by .M:. Hidayatullah, J.
19li2
Automobile
Transport
( Rr.jasthun) L:d.
y,
State flf Rajastha11
S. K. DAS, J.-These aro three consolidated·
DasJ.
appeals which arise from the judgment and order of
a Division Bench of Rajasthan High Court dated
August, 9, 1957. They have been preferred to this
Court on the strength of a certificate granted by
the said High Court under Art. J 32 of the Constitution certifying that the cases involve a substantial
question oflaw as to the interpretation of Art. 301
and other connected articles relating to trade, commerce and intercouroe within the territory of India,
contained in Part XIII of the Constitution. These
appeals were originally heard by a Bench of five
Judges and on April 4, 1961, that Bench recorded
an order to the effect that having regard to tho
importance of the constitutional issues involved
19U
.4Womo6il1
l'u.up.I
(Rttiasllon) Lt4.
••
s1a11 of a.;..,1,_
.D., J.
496
SUPREME COURT REPORTS [1963]
and the views expressed in the decision of this
Court in Atiabari Tea Co. /.,Id. v. The State of AsBam (')
the appeals should be heard by a larger Bench.
The appeals were then placed before the learned
Chief Justice for necessary orders, and on his orders
have now come to this Bench of seven Judges for
disposal. As the constitutional issues involved
alfect tho state of the Union, notices were issued to
the Advocate1·General concerned. A notice was
also iasued to the Attorney General on behalf of
the Union of India. The St3tes of Andhra Pradesh,
.Asaam, Bihar Gujrat, Madras, Maharashtra, Orissa,
Punjab, Uttai Pradesh and West Bengal intervened
and were represented before u1 either through
their respective Advooate1·General or other Counsel
M/a. M. A. Tulloch & Co., Andhra Pradesh Motor
CongreBS and Nazeeria Motor Service, Nellore,
applied for intervention on the ground that they
would be affected in a pending litigation by the
decision of this Court on the consututional iasuee
involved. Those applications were allowed by ua.
The reault has been that we have heard very full
arguments not only from Counsel appear for the
appellants and the respondents, but alao from the
learned Counsel appearing on behalf of the Union
of India, the learned Advocates·General or Counsel
appearing for the intervening States and alao from
learned Counsel appearing on behalf of the three
int;erveners referred to above.
The appellants in the there appea~ are.( l) ~h.e
Automobile Transport (Raj.) Ltd., A1mer m C1v1l
Appeal No. 42 of 1959. (2) the Rajasthan Roadways
Ltd., Ajmer in Civil Appeal No. 43 of 1959, and (3)
Framji C. Framji and others in Civil Appeal No .. 44
of 1959. The respondents are (1) the State of ~aJll.S·
than, (2) the Regional Transport Officer w!io JS ex.
officio Motor Vehicles Taxation Officer, J a1pur, and
(I) [11161] I. S. C.R. 809.
I S.C.R.
SUPREME COURT REPORTS
497
(3) the Collector of Jaipur. The first two Appellants are priva.ta, limited liability companies registered under the Indian Companies Aot, 1913 and
having their reu;istered offices a.t Ajmer. The third
appellant is a partnership firm named Framji
Motor
Transport
registered under the India
Partnership
Act.
These
three
a.ppel-
)ants carried on the business of plying stage
carriages. The first appellant had nine transport
vehicles plying between two .stations in the State of
Ajmer and between Ajmer and Kishangarh, a town
in Rajasthan at the relevant period. The two
stations in Ajmer were Na.sire.bad and DeoJi. The
road from Nasirabad to Deoli was mainly in the
former State of Ajmer but for some <listance it
passed through certain narrow strips of territory of
the State of Rajasthan. Similarly. the road from
Ajmer to Kisbangarh was partly in the former State
of Ajmer and partly in the State of Rajasthan,
approximately two-thirds of the road lying in Ajmer
and one-third in Ra.ja.sthan. The second and the
third appellant also had some transport vehicles
which plied on the Nasirabad-Deoli route or from
Kisha.ngarh to Sarwar, a. town situated on the
Nasiraba.d-Deoli road in the State of Rajasthan. On
the passing of the Ra.jasthan Motor Vehicles Taxation Act, 1951 (Ra.jasthan Act XI of 1951) (hereina.fter referred to as the Act), and the promulgation
of the rules made thereunder, the second respondent demanded of the appellants payment of the
tax due on their motor Vehicles for the period beginning on April 1, 1951. and ending on March 31,
1954. The first appellant was called upon to pay
Rs. 22,260, the second appellant Rs. 6,540 and the
third appellant Rs. 10,260 under r. 23 of the Rajasthan Motor Vehicles Taxatian Rules. When the
appellants failed to pay the tax demanded from
them, the second
rt~sponclent issued ct'rtificates
under s. I:-3 of the Act to the third res11ondent
for the
recovery of
the tax due as
arrears
1962
.A.utomol>ile
Trans/1<1'e
( Rajaslli•n) Ltd.
v.
Stat1 of R.Jasthon
DasJ.
J962
Auti,mobil•
Trans/HP t
.;asihan) Ltd.
v.
State of Rajc.5than
DasJ.
498
SUPREME COURT REPORTS [1963]
of land
revenue. On
receipt of the
demand
notices
the second and the
third appellants
filed appeals before the Transport Commissioner,
Jaipur, under s. 14 of the Act. These appeals were
however, dismissed by an order of the Transport
Commissioner dated October 21, 1953. The first
appellant did not file any appeal. Thereafter the
three appellants filed three separate writ petitions
in the Rajasthan High Court in which their main
contention was that the relevant provisions of the
Act imposing a tax on their motor vehicles were
unconstitutional and void as they contravened the
freedom of trade, comme:r;ce and intercourse through
ont the
territory of India declared
by Art.
30 I of
t.he Constitution
and
therefore the
demand
and attempted collection of such
tax
were illegal and should be prohibited. The prayers which the appellants made in their respective
writ petitions were mainly there-(1) that it be
declared that the Rajasthan Motor Vehicles Tax·
ation Act of 1951 and the Rules made thereunder
are invalid and not in accordance with the provisions of the Constitution of India and consequently
null and void and inoperative, and (2) that a writ
of prohibition or mandamus or any other approp·
riate writ, direction or order directing the respon·
dents not to realise any tax from the appellants
under the provisions of the Rajasthan Motor
Vehicles Taxation Act of 1951 be iEsued. The three
writ petititions were heard together by a Division
Ben~h consisting of Bapna and Bhandari, JJ.
They dealt with and disposed of certain other objection to the validity of the Act, with which we
are no longer concerned; but as to the contravention
of Art. 30 l of the Constitution, they felt that in
view of the complexity of the points involved and
the apparent conflict between certain decisions of
other High Courts, the question should be referred
to a Full Bench. Accordingly, they referred the
question whether ss. 4 and 11 of the Act infringed
1 S.C.R.
SUPREME COURT REPORTS
499
the right of freedom of tra.de, commerce or intercourse granted under Art. 301 of the Constitution.
The Full Bench dealt with the· question from two
different stand points. Firstly. they considered the
validity of the Act from the stand point of Act, 19
(1) of the Constitution which guarantees, to all
citizens of India the right to move freely throughout
the territory of India; this the Full Bench dealt
with under the heading of freedom of intercourse
from the stand point of the individual citizen and
came to the conclusion that restrictions which the
Act imposed on the individual citizen were reasonable restrictions having regard to the necessity of
raising funds for the maintenance of roads and the
making of new roads in the State of Ra.jasthan.
Then the High Court considered
the validity
of
the relevant
provisions of the
Act from
the stand point of trade, commerce and came to
the conclusion that the regulation of trade, commerce and intercourse within the territory of India,
both inter-8tate and intra-State. was not incompatible with its freedom and in the matter of such regulation of trade, commerce and intercourse a. distinction must be drawn between restrictions which are
direct and immediate and restrictions which are
indirect and consequential. The High Court expressed its final conclusion in the following words :
''Transport vehicles are provided by
individuals carrying on business in them
and those who carry on trade and commerce as a. whole, can use these transport vehicles. The fact that on account
of this taxation, the charges of transport
vehicles are higher, let us say by an anna
a maund is, in our opinion, merely an
indirect or consequential result of this
Act, and such an impediment may fairly
be called remote. It would be a diffe.
rent matter if the taxation is so high that
1962
AutomoWe
Transp,,,1
(Rajaslhan) Ltd.
v.
State of R'j aslh 'n
--
DasJ.
1961
Automohrle
'TransptJri
( llqjaslhan) LJd.
v.
Stolt of Rajasthan
DasJ
500
SUPREME COURT REPORTS [1963]
it virtually kills trade and commerce by
compelling the traders to raise their
prices to an exorbitant rate. But this
being not the nature of the tax in this
case, and the taxation being not directly
on trade, commerce or intercourse ........ .
we are of opinion that this taxation can
not be said to offend against Art. 301,
for its effeut on trade and commerce is
only indirect and consequential and the
impediment, if any,
may fairly be
regarded as remote."
In view of that conclusion the Full Bench answered
the question referred to it in the negative. The
cases then went back to the Division Bench with
the answer given by tho Full Bench and the writ
petitions were dismissed by the Division Bench by
its judgment and order dated August 9, 1957. The
three appellants then moved the High Court for a
certificate under Art. 132 of the Constitution whiah
certificate the High Court granted by its order
dated October 16, 195 7.
It may be here stated that neither the Division Bench nor the Full Bench of the Rajasthan
High Court had the advantage of the decision of
this Court in Atiabari Te,a Co., case ('), which decision
came much later in point of time. The main argument on behalf of the appellants before us has been
that the provisions of the Act under which the
appellants were @ought to be taxed in respect of
their motor vehicles plying on the Nasirabad-Deoli
or Kishangarh road contravened Art. 301 of the
Constitution and were not saved by Art. 304 (b) of
the Constitution. We shall presently read the relevant provision of the Act, but before we do so we
may breifly refer to one short point by way of olea·
ring the ground for the diaouasion which will follow.
Artie]., 30ii of the Constitution as it originally stood
said tllat nothing in Arts, 30 l and 303 shall affect
(1) [1961) 1. S. C.R. 809.
I S.C.R.
SUPREME COURT REPORTS 501
the provisions of any existing law except in so far
as the President may by order otherwise provide.
This article was substituted by another artiole, soz;.:ie
what wider in scope, by the Const.itution (Fourth
Amendment) Act, 1955.
The new article repeated
the words of the old article in the first p11.rt thereof
and in the second part it said that nothing in Art.
301 shall affect the operation of any law made before the commencement of the Constitution (Fourth
Amendment) Act, 1955, in so far as it relates to, or
prevent Parliament or the Legislature of a State
from making any law relates to, any such matter
a.a is referred to in sub·cl. (ii) of cl. (6) of Art. l9
that sub·clau8e refers to the carrying on by the
State or by a corporation owned or controlled by
the State, of any trade, businefls, industry or service, whether to the exclusion, complete or partial,
of citizens
or
otherwise.
The
first _part
of Art. 305 does not apply in the present cases be,
cause the expression "existing law" means any law,
ordinance, order, bye-law etc. passed or made before the commencement of the Qonstitution.
Tue
Act which we are considering now in the present
appeals was made
in 1955, i.e.,
after
the
commencement
of
the
Constitution.
The
second part of Art. 305 has also no bearing on the
questions which we have to consider in these
appeals. Article 3l!51 old or new, is, therefore1 out
of our way.
We now proceed to read th'e relevant pro-
'\'isions of the Act. The Act was ma.de by the
Ra.jpramukh of the State of Rajasthan on April 1,
195 i. The history of the constitution of the United
State of Rajasthan and the powers of the Rajpramukh under the covenant creating the State were
stated in Thakur Amar Singhji v. Staf,e of Ra}astkanC)
at pp. 312 to 316 of the report~ With that history
we a.re not concerned in the present cases.
The
competence of the Rajpramukh to make the Act
(1) [1955] 2. S.C.R. 303.
L96S
Autamobil1
Transport
( Rf!iasthan) Ltd.
v.
State of ttajasthan
DasJ.
1962
~utmnniile
Trnnsport
(Rojast'1an) Ltd,
••
Stat~ of R<dasth'n
D•s J.
502
SUPREME COURT REPORTS [1963]
was challenged in the High Court but was decided
against the appellantK. That point has not been
agitated before us and we must proceed on the
footing that the Act was validly made by the R:i.jpramukb. Section 4 of the Act is the charging
section, the validity of which has been challenged
before us on the ground that it violates the
freedom of trade, commerce and intercourse granted
under Art. 301 of the Constitution. It is, therefore,
necessary to quote s. 4.
"4. Imposition of tax.-( l) Save as otherwise provided by this Act or by rules made
thereunder or by any other law for the time
being in force, no motor vehiole shall be used
in any public place or kept for use in Rajasthan
unless the owner thereof has paid in respect
of it, a tax at the appropriate rate specified
in the Schedules to this Act within the time
allowed by section 5 and, save as hereinafter
specified, such tax shall be payable annually
notwithstanding that the motor vehicle may
from time to time cease to be used.
(2) An owner who keeps a motor vehicle
of which the certificate of fitness and the
certificate of registration are current, shall,
for the purposes of this Act be presumed to
keep such vehicle for use.
(3) A person who keeps more than ten
motor vehicles for use solely in the course of
trade and industry shall be entitled to a
deduction of ten per cent on the aggregate
amount of tax to which he is liable.
"4. Explanation.-The expression trade and
industry" includes transport for hire."
Sections 5 to 7 deal with (1) payment of tax, (2) tax
payable on first liability to tax, and (3) refund of
tax. With these details we are not concerned here.
Section 8 imposes on the owner of every motor
1 S .C.R. SUPREl'CE COURT REPORTS
503
vehicle an obligation to make a declaration every
year in respect of the motor vehicle in the prescribed form stating the prescribed particulars etc.; it
also imposes an obligation on every owner to pay
the tax which he is liable to pay in respect of the
motor vehicle. This sectipn is also challenged as
unconstitutional and it is obvious that it is connected with s. 4. Ifs. 4 is unconstitutional, so must be
s. 8. Section 9 deals with the payment of additional
tax in circumstances which need not be stated here.
Section 10 deals with the grant of receipt and token.
Section 11 says :
''11. Penalties 'II/Mer this Act.-whoever
contravenes any of the provisions of this Act
or of any rule made thereunder shall on conviction be punishable with fine which may
extend to Rs. 100 and in the event of such
person having been previously convicted of an
offence under this Act or under any rule made
thereunder with fine which may extend to
Rs. 2-00."
Section 12 deals with the compounding of offences
ands. 13 lays down that when any person without
any reasonable cause fails orC"efuses to pay the tax,
the Taxation Officer may forward to the Collflctor
of the district concerned a certificate over his signature specifying the a.mount of tax due from such
person and the· CoJlector shall recover the tax as if
it were an arrear of land revenue. Section 14
provicies for appeals to the Transport Commissioner.
Section 16 Jays down that the liability of a person
to pay the tax shall not be questioned or determined otherwise than as provided in the act or in the
rules made thereunder. Sections 17 to 21 deal with
certain ancillary matters and s. 22 enables the
Government to make rules fo:r carrying into effect
the purpose of the Act. There are four Schedules
to the Act to which a more detailed reference will
be made later. It is _enough to state here that the
19~%
.dut,moi11i
Transport
( Raj111th4n) Ulf.
v.
Stat1 of Raja•than
JIG!
Automobi11
T1a•s;o1e
(R.iiutlum) Ltd.
••
Stfll1 -.! Rojas,...
DesJ.
504
SUPREME COURT REPORTS [1963]
Schedules divide motor vehicles into two parts :
Schedule I deals with vehicles other than transport
vehicles plying for hire or reward; Schedule II deals
with transport vehicles of two kinds transport
vehicles and goods vehicles; Schedule III deals with
goods vehicles registered outside Rajasthan but
using roads in Rajasthan; and Schedule IV deals
with vehicles used for the carriage of goods in
connection with a trade or business carried on
by the owner of the vehicle under a private carrier's
premit. Various rates of tax are
provided for
various kinds of vehicles in these Schedules. The
High Court has pointed out that Schedule 1 is
concerned with vehicles other than transport
vehicles and is mainly concerned with what would
come within the term "intercourse" in Art. 301 and
the other :--chedules deal with what would come
within the term "trade and commerce" in that article.
The
result of reading s. 4 of Act with the
Schedules is that on one can use 01 keep a motor
vt·hicle in Rajasthan without paying the appropriate
tax for it and if he does so he is made liable
to the penalties imposed under s. 11 of the Act. In
brief, this appears to be the scheme of the Act.
Is this scheme in conflict with the freedom
of trade, commerce and intercourse within the
territory of India assured by Art. 301 anti other
connect.ad articles in Part XIII of the Constitution ?
That is tho problem before us. It is necessary,
therefore. to read at this 8tage the relevant articles
in Part XIII of the Constitution. For this purpose
we must reatl Arts. 301 to 304 as they stood at the
relevant time.
'•301. Subject to, the other provisions of
this Part, trade, commerce and intercourse
throughout the territory of India shall bc
free.
302. Parliament may by law impose
such restrictions on the freed om of trade,
J
1 s.c.R.
SUPREME COURT REPORTS
505
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.
303. (1) Notwithstanding
anything in
Articles 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 Se·venth
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.
304. Notwithstanding
anything
in
Article 301 or Article 303, the Legislature of
a State may by law-
( a) impose on goods imported from
other States any fi&x to which similar goods
manufactured or proiuced in that State are
subject, so, however.. as not to discriminate
between goods so imported and goods so
manufactured or produced; and
(b) impose suoh 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
IHI
.4utomobile
'l'ronrport
(RoJa1tfaa"} Ltd.
v.
Sta'1 of Rajasthan
DGl.T;
1962
.Automobil1
Transport
(Rajasthan) Ltd .
••
State of RajasChan
D1s I.
506
:iUPREME COURT REPORTS [1963J
the purposes of clause (b) shall be introduced
or moved in the Legislature of a State without
the previous sanction of the President"
Article 301) we have already stated is out of our
way. Article 306, which was later repealed by the
Constitution (Seventh Amendment) Act, 1956, is also
not material for the 0onsideration of the problem
before us. Article 307 is also not material as it
relates to the appointment of an appropriate
authodty for carrying
out
the purposes of
Arts. 301 to 304.
The series of articles on the true scope
and
effect
of
which
the decision of the
problem before us depends were the
Au bject
matter of consideration of this Court in the Atiabari
Tea Co. case ('), In that decision three views were
expressed and one of the questions mooted and
argued before us is whether the principle of the
majority decision in that oase requires reoons'ideration, or modification in any respect; or whether any
of the other two views expressed therein is the correct view. Another ccnnected question is that if
the majority view is the correct view, does the principle underlying it apply to the facts of the present
cases? It is, therefore, necessary to set out briefly
the facts of the Atiabari Tea Co. case (1) and the
three views expressed therein. The three appellants
in that case were tea companies, two of which
carried on the trade of growing tea in Assam and
the other carried on its trade in Jalpaiguri in West
Bengal. They carried their tea to Calcutta in
order that it mi2'ht be sold in the Calcutta market
for home consumption or export outside India.
Tea produced in Jalpaiguri had to pass through a
few· mi!Ps of territory in Assam, while the tea
produced in Assam had to go all the way through
Assam to reach Calcutta. Besides the tea which
was carried by rail, a substantial quantity bad to
go by road or by inland water-ways and as such
(1) (1961) I S.C.R, 809.
1 S.C.R.
SUPREME COURT REPORTS
507
became liable to pay the tax leviable under the
Assam Taxation (on goods carried by Roads or
Inland Waterways) Act, 1954. That Act levied a.
tax: on certain goods carried by road or inland
waterways in the State of Assam and the validity
of the levy of such a tax: was in question in the
Atiabar·i Te,a Go. case (1). The principal ground of
attack was that the Assam Act violated the provisions of Art. 301 of the Constitution and was not
sa\'ed by the provisions of Art. :104(b). We may
now summarise the views expressed in that decision.
First, al!I to the views of the learned Chief Justice:
He expressed the view that taxation simpliciter was
not within the tor ms of Art. 3f) l and a tax on
movement of !!·l01~ or pai;isengeri:1 did not necessarily conn_ote impedim..:nt or restnint in the matter
of trade arid commerca. He drnw :t distinction betweon tax,l.tion a'I such for the purpose of revenue
on the one hand and taxation for the purpose of
making dlsorimina.tion or giving porfer.ance on the
other hand; the letter, he said, could be treated aa
impediment to free trade and commerce. He expressed his final conclusion in these words.
"Thus, on a fair construction of the provisions of Part XIII, the following propositions
emerge: (l) 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 dee.lated by Art. 30l does not mran freedom from
taxation simpliciter, but dors 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 s11bject to non·discriminatory restrictions imposed by Parliament in public
interest (Art. :392); (4) evep <~is0dniinatory or
II>
[l';l.il] I. S.C.R,809~
1962
~utom,bi/1
Tr11mflo1 I
( Raj1Utllan) Lti.
v.
E late •f Rajasthan
DasJ.
196!
Auromobile
Tr111upo1t
( B'!/a.rllion) Lid,
v.
Sto.t1 oJ Raj•sthGtJ
Dasi.
508
SUPREME COURT REPORTS (1963]
preferential legislation may be made by Parliament. for the purpose of dealing with an
emergency like a scarcity of
good~ in
any
part of
India (Art.
303(2) l; (5)
reasonable restrictions may be
imposed
by the Legislature of a
State in
the
public
interest (Art. 304(b)); (6) non-discriminatory taxes may he imposed by the
Legislature of a State on goods imported from
another State or other States, if similar taxes
are impoaed on goods produced of manufactured in that State (Art. 30t(a l; and lastly (7)
restrictions imposed by existing laws have
been continued, except in so far as the President may by order ot.herwise direct(Art. 305)."
(pp. 831-832.)
The majority view differed from that of the learned
Chief Justice in that it did not accept as correct the
contention that tax laws were governed by th<i provisions of Part XII of the Constitution only and
were outside Part XIII. The majority expressed
the view that when Art. 301 provided that trade
shall be free throughout the territory of India, it
was the movement or transport part of the trade
that must be free. The majority said:
••It is a federal constitution which we are
interpreting, and so the impact of Art. 301
must be judged accordingly. Besides, it is not
irrf'levant to remember in this connection that
the Article we are construing imposes a constitutional limitation on the power of the
Parliament and the State Legislatures to levy
taxes, and generally, but for such limitation,
the power of taxation would he presumed to
be for public good and would not be subject to
judioial review or sen.tiny. Thus considered
we think it would be reasonable and proper to
hold that restrictions freedom from which is
I S.C.R.
SUPREME COURT REPORTS
509
gua.ranteed 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. 30 l. 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." (p. 860.)
The third view held by Sh~h. J., was that the freedom contemplated was freedom of trade, commerce
and intercourse in all theit varied aspects inclusive
of all activities which constitute commercial intercourse and not merely restrictions on the movement
aspect. He said :
"The guarantee of freerlc1m of trade and
commerce is not ad<lresl3ed merely against
prohibitions, complete or partial; it is addressed to tariffs, licensing, marketing regulations,
price-control, nationalisation, economic or
social plaining, discriminatory tariffs, compulsory appropriation of goods, freezing or
stand-stiJI 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 slep are restrictions on the freed om of trade commerce and
intercourse. What is guaranteed is freedom
in its widest amplitude-freedom from prohi·
bition, control, burden or impediment in commercial intercourse." (p. 874.)
So far we have set out the factual and legal
background againdt which the problem before us
JBll -
..fulomobiU
Transp.tt
(RaJuthan) Lid.
v.
Stot1 •f lltJjosU..
D<J1J,
1963
A tomt;bi/1
Tran.sport
(Rajaslhao) ltd,
v.
State of RaJaathan
DasJ.
510 SUPREME COURT REPORTS (1963]
has to be solved. We must now say a. few words
regarding the historical background. It is necessary
to do this, because exten~ive references have been
made to Australian and American decisions, Australian decisions with regard to the interpretation
of s. 92 of the Australian Constitution and American decisions with regard to the Commerce Clause
of the American Constitution. This Court pointed
out in the Atiabari Tea Go. case (1) that it would
not be always safe to r~ly upon the American or
Australian decisions in interpreting the provisions
of our Constitution. Valuable as those decisions
might be in showing how the problem of freedom
of t,rade, commerce and intercourse was dealt with
in other federal constitutions, the provisions of our
Constitution must be interpreted against the historical back(lround in which our Constitution was
madt>; the background of problems which the Constitution makers tried to solve according to the
genius of the Indian people whom the Constitution·
makers represented in the Constituent Aesembly.
The first thing to be noticed in this connection is
that the Constitution-makers were not writing on a
clean slate. They had the Government of India
Act. 1935, and they also had the administrative
set, up which that Act envisaged. India. then consisted of various administrative units known as
Provinces, each with its own administrative set up.
There were differences of language, religion etc.
Some of the Provinces were euonomically more
developed than the others. Even inside the same
Province, there were under-developed, developed
and highly developed areas from the point of view
of industries, communications etc. The problem of
economic integration with which the Constitution.
makers were faced was a problem with many facts.
'.;rwo questions, however, stood out.; one question
was how to achieve a federal, economic and fiscal
integration, so that economic policies affecting the
interests of India. as a whole could be carried out
(I) [1961] I. S. C.R.