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TMI Blog1962 (4) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, if the law imposing such restriction is made by the State Legislature. If, however, it does not reach the stage of restriction of trade and remains only a regulation incidentally touching trade and commerce, the regulation is outside the operation of Arts. 301 and 304. Freedom in Art. 301 does not mean anarchy. Similarly, a demand for a tax from traders in common with others is not a restriction of their right to carry on trade and commerce. A system of licensing of motor vehicles is a regulation, but does not impair the freedom of trade and commerce unless the licensing is made to depend upon arbitrary discretion of the licensing authority. Similarly, a fee for administrative purposes may also be viewed as a part as regulation. Such licensing and fees fall outside Art. 301, because they cannot be viewed as restrictions, and therefore do not need to be processed under Art. 304. Tax can be justified as regulatory or compensatory. For this purpose, some facts must be stated. The appellants are three. They owned buses which were registered in the former State of Ajmer. They plied on diverse routes. There was one route. Nasirabad to Deoli, which lay mainly in Ajmer State, but it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Fullagar, J., in McCarter v. Brodie ([1950] 80 C.L.R.432) but not the taxing provisions which even in Australia would not be regarded either as compensatory or regulatory. It is impossible, therefore, to turn to the Australian precedents for help. Further, the duty of maintaining roads is a duty of the State, and it performs it not from any special fund which is created from the receipt of these taxes but from its general funds. The wear and tear of the roads is not caused by the transport vehicles only but other vehicles not employed in the trade of transport. The tax which is levied is not based on any theory of recompense, which has been evolved in Australia. There, the distance traveled, the load carried are taken into account, and a charge is payable by each operator according to the distance actually travelled by him in consonance with the weight carried. A further circumstance which goes into the determination of the amount payable is the kind of tyres and the number of wheels which the vehicle has. To say that the impugned tax is compensatory without any attempt to apportion the charge according to the actual wear and tear, is to borrow a theory for justification wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the said High Court under Art. 132 of the Constitution certifying that the cases involve a substantial question of law as to the interpretation of Art. 301 and other connected articles relating to trade, commerce and intercourse 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 the importance of the constitutional issues involved and the views expressed in the decision of this Court in Atiabari Tea Co. Ltd. v. The State of Assam ([1961] 1. S. C. R. 809) 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 affect the state of the Union, notices were issued to the Advocates-General concerned. A notice was also issued to the Attorney General on behalf of the Union of India. The States of Andhra Pradesh, Assam, Bihar Gujrat, Madras, Maharashtra, Orissa, Punjab, Uttar Pradesh and West Bengal intervened and were represented b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Act, 1951 (Rajasthan Act XI of 1951) (hereinafter 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, 195 1, and ending on March 3 1, 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 Taxation Rules. When the appellants failed to pay the tax demanded from them, the second respondent issued certificates under s. 13 of the Act to the, third respondent for the recovery of the tax due as arrears 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 vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of India, both inter-State 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 different matter if the taxation is so high that 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 effect on trade and commerce i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression "existing law" means any law, ordinance, order, bye-law etc. passed or made before the commencement of the Constitution. The 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 hearing on the questions which we have to consider in these appeals. Article 305, old or new, is, therefore, out of our way. We now proceed to read the relevant provisions of the Act. The Act was made by the Rajpramukh of the State of Rajasthan on April 1, 1951. 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. State of Rajasthan([1955] 2. S.C.R. 303) at pp. 312 to 316 of the report. With that history ,we are not concerned in the present cases. The competence of the Rajpramukh to make the Act was challenged in the High Court but was decided against the appellants. That point has not been agitated before us and we must proceed on the footing that the Act was validly made by the Rajpramukh. Section 4 of the Act is the charging section, the validity of which has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of offences and s. 13 lays down that when any person without any reasonable cause fails or refuses to pay the tax, the Taxation Officer may forward to the Collector of the district concerned a certificate over his signature specifying the amount of tax due from such person and the Collector shall recover the tax as if it were an arrears of land revenue. Section 14 provides for appeals to the Transport Commissioner. Section 16 lays 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 for 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 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 Rajasth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thstanding anything in Article 301 or Article 303, the Legislature of a State may by law- (a) impose on goods imported from other States 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 clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President". Article 305 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 consideration of the problem before us. Article 307 is also not material as it relates to the appointment of an appropriate authority 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 subject matter of consideration of this Court in the Atiabari Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 nondiscriminatory restrictions imposed by Parliament in public interest (Art. 392); (4) even discriminatory or preferential legislation 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 of 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade or commerce and burdens or impediments imposed on any such step are restrictions on the freedom of trade commerce and intercourse. What is guaranteed is freedom in its widest amplitude-freedom from prohibition, control, burden or impediment in commercial intercourse." (p. 874.) So far we have set out the factual and legal background against which the problem before us has to be solved. We must now say a few words regarding the historical background. It is necessary to do this, because extensive 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 Co. case ([1961] 1. S. C. R. 809.) that it would not be always safe to rely 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 trade, commerce and intercourse was dealt with in other federal constitutions, the provisions of our Constitution must be interpreted against the historic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Schedule. The Constitution itself says by Art. 1 that India is a Union of States and in interpreting the Constitution one must keep in view the essential structure of a federal or quasi-federal Constitution, namely, that the units of the Union have also certain powers as has the Union itself One of the grievances made on behalf of the intervening States before us was that the majority view in the Atiabari Tea Co. case([1931] 1.S.C.R. 809) did not give sufficient importance to the power of the States under the Indian Constitution to raise revenue by taxes under the legislative heads entrusted to them, in interpreting the series of articles relating to trade, commerce and intercourse in Part XIII of the Constitution. It has been often stated that freedom of inter-State trade and commerce in a federation has been a baffling problem to constitutional experts in Australia, in America and in other federal constitutions. In evolving an integrated policy on this subject our Constitution-makers seem to have kept in mind three main considerations which may be broadly stated thus: first, in the larger interests of India there must be free flow of trade, commerce and intercourse, both inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade and commerce inasmuch as the tax imposed was a consolidated 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. The argument is that in this respect the facts of the present cases differ from the facts of the Atiabari Tea Co. case([1961] 1. S. C. R. 809); it is argued that in the latter the tax was on the carriage of goods, whereas in the present cases the tax is a consolidated tax on the vehicle itself, like a property tax, and, therefore, it does not relate to the movement part of trade, commerce and intercourse, though it may have an indirect effect on trade, and commerce by raising the tariff or fare for passengers and goods. The learned Counsel for the respondents has in this way tried to distinguish the majority decision in the Atiabari Tea Co. case([1961] 1. S. C. R. 809), but he has mainly argued in favour of the view expressed by the learned Chief Justice. On behalf of the interveners, some have supported the majority view with or without modifications and some the other two views. Mr. N. C. Chatterjee appearing on behalf of the Union of India supported the majority view, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds; (ii) the historical background of s. 297 of the Government of India Act, 1935; (iii) the decisions of the Australian cases upto 1950 when the Constitution of India was made; and (iv) Part XIII of the Constitution as compared and contrasted with Part III and Part XII thereof. As to taxation, his contention is that it does not come within Part XIII except to the extent mentioned in Art. 304(a). Mr. Lalnarain Sinha appearing for the State of Bihar has supported the view of the learned Chief Justice in Atiabari Tea Co. case though the reasons given by him are somewhat different. His argument has been that Art. 301 secures for trade, commerce and intercourse throughout the territory of India a qualified freedom from restrictions based on geographical classifications only; the freedom thus secured is in regard to barriers (in the geographical sense) impeding trade, commerce and intercourse between one State and another or between one territory and another within or without the same State, and also against territorial discriminations in respect of trade, commerce and intercourse either inter-State or intra-state. With regard to taxation, his contention is that taxes (meant for raising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce or intercourse between one State and another or within any part the territory of India as may be required in the public interest". Having relaxed the restriction in respect of Parliament under Art. 302, a restriction is put upon the relaxation by Art. 303(1) to the effect that Parliament shall not have the power to make any law giving any preference to any one State over another or discriminating between one State and another by virtue of any entry relating to trade and commerce in lists I and III of the Seventh Schedule. Article 303(1) which places a ban on Parliament against the giving of preferences to one State over another or of discriminating between one State and another, also provides that the same kind of ban should be placed upon the State Legislature also legislating by virtue of any entry relating to trade and commerce in lists II and III of the Seventh Schedule. Article 303 (2) again carves out an exception to the restriction placed by Art. 303(1) on the powers of Parliament, by providing that nothing in Art. 303(1) shall prevent Parliament from making any law giving preference to one State over another or discriminating between one State and another, if it is neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of State legislation under cl. (b) provided in the proviso thereto, there are two important differences between Art. 302 and Art. 301(b) which require special mention. The first is that while the power of Parliament under Art. 302 is subject to the prohibition of preferences and discriminations decreed by Art. 303(1) unless Parliament makes the declaration contained in Art. 303(2), the State's power contained in Art. 304(b) is made expressly free from the prohibition contained in Art. 303(1), because the opening words of Art. 304 contain a non obstante clause both to Art. 301 and Art. 303. The second difference springs from the fact that while Parliament's power to impose restrictions under Art. 302 upon freedom of commerce in the public interest is not subject to the requirement of reasonableness, the power of the States to impose restrictions on the freedom of commerce in the public interest under Art. 304 is subject to the condition that they are reasonable. On the basis of the aforesaid textual construction, which is perhaps correct so far as it goes, the view expressed is that the freedom granted by Art. 301 is of the widest amplitude and is subject only to such r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a review of the earlier cases, said in Commonwealth of Australia v. Bank of New South Wales ([1950] A.C. 235) that in the "labyrinth of cases decided under s. 92 there was no golden thread." What is more important for our purpose is that he expressed the view that two general propositions stood out from the decisions: (i) that regulation of trade, commerce and intercourse among the States is compatible with its absolute freedom, and (ii) that s. 92 of the Australian Constitution 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 inconsequential impediment which may fairly be regarded as remote. Lord Porter admitted "that in the application of these general propositions, in determining whether an enactment is regulatory or something more or, whether a restriction is direct or only remote or incidental, there cannot fail to be differences of opinion." It seems clear, however, that since "the conception of freedom of trade, commerce and intercourse in a community regulated by law presupposes some degree of restriction upon the individual", that freedom mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'freedom to do whatever one wants to do, then chaos may be the result; for example, one owner of a motor vehicle may wish to drive on the left of the road while another may wish to drive on the right of the road. If they come from opposite directions, there will be an inevitable clash. Another class of examples relates to making a charge for the use of trading facilities, such as, roads, bridges, aerodromes etc. The collection of a toll or a tax for the use of a road or for the use of a bridge or for the use of an aerodrome is no barrier or burden or deterrent to traders who, in their absence, may have to take a longer or less convenient or more expensive route. such compensatory taxes are no hindrance to anybody's freedom so long as they remain reasonable; but they could of course be converted into a hindrance to the freedom of trade. If the authorities concerned really wanted to hamper anybody's trade, they could easily raise the amount of tax or toll to an amount which would be prohibitive or deterrent or create other impediments which instead of facilitating trade and commerce would hamper them. It is here that the contrast, between 'freedom' (Art. 301) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h power has been held to be plenary with regard to subjects in list 11. The States must also have revenue to carry out their administration and there are several items relating to the imposition of taxes in list 11. The Constitution-makers must have intended that under those items the States will be entitled to raise revenue for their own purposes. If the widest view is accepted, then there would be for all practical purposes, an end of State autonomy even within the fields allotted to them under the distribution of powers envisaged by our Constitution. An examination of the entries in the lists of the Seventh Schedule to the Constitution would show that there are a large number of entries in the State list (list II) and the Concurrent list (list III) under which a State Legislature has power to make laws. Under some of these entries the State Legislature may impose different kinds of taxes and duties, such as property tax,, sales tax, excise duty etc., and legislation in respect of any one of these items, may have an indirect effect on trade and commerce. Even laws other than taxation laws, made under different entries in the lists referred to above, may indirectly or remotely af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to intercourse and the word throughout' has reference to space rather than to movement. The expression ,subject to' it is stated, means conditional upon', thus connecting the provisions of Art. 303 with the provisions of Art. 301. Article 303 specifically uses the expression "by virtue of any entry relating to trade and commerce in any of the lists in the Seventh Schedule." It is argued that by reason of the connection between Art. 301 and Art. 303, the words "by virtue of any entry relating to trade and commerce etc." must be read into Art. 301 also so that Art. 301 will then be construed as a fetter on the commerce power i. e., the power given to the Legislature to make laws under entries relating to trade and commerce only. As to taxation being out of the provisions of Part XIIL of the Constitution except for Art. 304(a), the argument is that we must look to the historical background of s. 297 of the Government of India Act, 1935, and Arts. 274, 276 and 285 to 288 in Part XII of the Constitution. It is pointed out that the power to tax is an incident of sovereignty and it is divided between the Union and the States under the Constitution ; Part XII of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficult to accept the argument that the restrictions in Part XIII of the Constitution do not apply to taxation laws. As to the argument that Art. 301 must take colour from Art. 303, we are unable to accept as correct the argument that the provisions of Art. 303 must delimit the general terms of Art. 301. It seems to us that so far as Parliament is concerned, Art. 303(1) carves out an exception from the relaxation given in favour of Parliament by Art. 302 ; the relaxation given by Art. 302 is itself in the nature of an exception to the general terms of Art. 301. It would be against the ordinary canons of construction to treat an exception or proviso as having such a repercussion on the interpretation of the main enactment so as to exclude from it by implication what clearly falls within its express terms. After carefully considering the arguments advanced before us we have come to the conclusion that the narrow interpretation canvassed for on behalf of the majority of the State cannot be accepted, namely, that the relevant articles in Part XIII apply only to legislation in respect of the entries relating to trade and commerce in any of the lists of the Seventh Schedule. But we m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reedom to a citizen whereas freedom granted by Art. 301 is not confined to citizens. Another distinction which has been drawn is that Art. 19 looks at the right from the point of view of an individual, whereas Art. 301 looks at the matter from the point of freedom of the general volume of trade, commerce and intercourse. We do not think that this distinction, if any such distinction at all exists, is material in the present cases, because an individual trade may complain of a violation of his freedom guaranteed under Art. 19(1)(g) and he may also complain if the freedom assured by Art. 301 has been violated. In a particular set of circumstances the two freedoms need not be the same or need not coalesce. In some of the Australian decisions a distinction was sought to be drawn between the free flow of the same volume of inter-State trade and the individual's right to carry on his trade in more than one State and it was argued that s. 92 of the Australian Constitution related to the free flow of the volume of trade as distinguished from an individual's right to carry on his trade. Such a distinction was negatived and the Privy Council pointed out that the redoubtable Mr. James ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a wide sense or in a narrow sense. Even taking the word ,intercourse' in a wide sense, the question will still be what does the word ,free' mean? Does it mean free from all regulation which is necessary for an orderly society? We have already stated that the word 'free' in Art. 301 cannot be given that wide meaning. We have, therefore, come to the conclusion that neither the widest interpretation nor the narrow interpretations canvassed before us are acceptable. The interpretation which was accepted by the majority in the Atiabari Tea Co. case is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the s use of trading facilities do not come within the purview of the restrictions contemplated by Art. 301 and such measures need not comply with the requirements of the proviso to Art. 304(b) of the Constitution. Now the question is, do the relevant provisions of the Act read with the Schedules fall within what we have called permitted regulation which does not really or materially affect freedom of trade, commerce and intercourse; or do the taxes imposed by the relevant provisions of the Act read with the Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the roads in Rajasthan or are kept for use therein, either throughout the whole area or parts of it. The tax is payable by all owners of motor vehicles, traders or otherwise. In dealing with the question whether these taxes were reasonable restrictions on the right of individuals to move freely throughout the territory of India etc. the High Court said: "In this connection, it is well to remember that the State maintains old roads, and makes new ones, and these roads are at the disposal of those who use motor vehicles either for private purposes or for trade or commerce. This naturally costs the State. It has, therefore, to find funds for making new roads and maintenance of those that are already in existence. These funds can only the raised through taxation, and if the State taxes the users of motor vehicles in order to make and maintain roads, it can hardly be said that the State is putting unreasonable restrictions on the individuals' right to move freely throughout the territory of India, or to practice any profession or to carry on any occupation, trade or business. We have looked into figures of income and expenditure in this connection of the Rajasthan State to judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not so. It seems to us that a working test for deciding whether a tax is compensatory or not is to enquire whether the trades people are having the use of certain facilities for the better conduct of their business and paying not patently much more than what is required for providing the facilities. It would be impossible to judge the compensatory nature of a tax by a meticulous test, and in the nature of things that cannot be done. Nor do we think that it xi ill make any difference that the money collected from the tax is not put into a separate fund so long as facilities for the trades people who pay the tax are provided and the expenses incurred in providing them are born by the State out of whatever source it may be. In the instruments of commerce that have been mentioned is no violation of the freedom of inter-State trades lies in the relation to inter-state trade which their nature and purpose give them. The reason why public authority must maintain them is in order that the commerce may use them, and so for the commerce to bear or contribute to the cost of their upkeep can involve no detraction from the freedom of commercial inter. course between States." (p. 43) The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and entry 33 of List III of the Seventh Schedule to the Constitution. (5) The law of fiscal taxation is entirely outside the domain of freedom declared by Art. 301. All the learned counsel appearing in the case has agreed, or at any rate no argument was advanced to the contrary, that the freedom, whatever may be its content or scope on which there is difference of opinion, relates to both inter-State and intra-State trade. Before considering the provisions of the said articles, it will be useful to make certain general observations. We have to bear in mind in approaching the problem presented before us that our Constitution was not written on clean slate. Many of the concepts were borrowed from the Government of India Act or from other Constitutions and adapted to suit the conditions of our country. We cannot ignore the fact that the Constitution was drafted by persons some of whom had a deep knowledge of the constitutional problems of other countries; and therefore, they must be assumed to have had the knowledge of the interpretation put upon certain legal concepts by the highest tribunals of those countries. At the same time, it can be reasonably assumed that they have made a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely, economic, commercial, industrial and transport revolutions of that country. It is not necessary for the purpose of this case to consider the conflict or the various nuances of the decision the concept of commerce was enlarged or reduced to meet the exigencies of different situations; but the common thread was that transportation across the borders, either physically or conceptually, was uniformly held to be a necessary ingredient of the expression "commerce". After noticing the conflict, Willis in his book on Constitutional Law, summarizes the latest position thus, at p. 288: "............... today the correct definition of commerce is that it is traffic and commercial intercourse. This, of course, gives Congress power wherever traffic or intercourse concerns an inter-State market. When "commerce" is properly defined as traffic, and the mental picture is formed, not of an isolated journey across a state boundary line, but of an onward coursing stream of business which knows no state lines, which is constantly fed and as constantly feeds the streams of production, and which debauches into the inter-state market, then regulations of it by Congress, J. whether taking the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation are conferred on the Commonwealth in respect of trade and commerce. Section 51 reads: "Trade and commerce with other countries and among the States". Section 98 says: "The power of the Parliament to make laws with respect to trade and commerce extends to navigation and shipping and to railways the property of any State". Section 99 prohibits the Commonwealth, by any law or regulation of trade, commerce, or revenue, from giving preference to one State or any part thereof over another State or any part thereof. Section 100 prohibits the Commonwealth from abridging, the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation. Other legislative powers are conferred in respect of specific subjects' of trade and commerce, such as, bounties, currency, coinage, bills of exchange, bankruptcy, copy-rights, customs, excise, etc. Section 92 says: "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". Unlike the American Constitution, the Australian Constitution confers a legislative power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idest sense as including trade in all its manifestations involving transportation or movement across the frontiers of the State it also includes non-commercial intercourse. On the second question, some of the leading Australian decisions contain an interesting and instructive exposition of the conflict of jurisdiction and useful suggestions for resolving it. In this context the following decisions may usefully be consulted : James v. Cowan ([1930] 43 C.L.R. 386), Commonwealth of Australia v. Bank of New South Wales ,Hughes and Vale Proprietary Ltd. v. State of New South Wales ((1955] A.C. 241), Hughes and Vale Private Limited v. The State of New South Wales [No. 2] ([1956] 93 C.L.R. 127) Grannall v. Marrickville Margarine Proprietary Ltd. ([1955] 93 C.L.R. 155), Armstrong v. State of Victoria [No. 2] ([1957] 99 C.L.R. 28.), Commonwealth Freighters Proprietary Ltd. v. Sneddon ([1959] 102 C.L.R. 280. 546). The Australian decisions broadly laid down the following three propositions : (i) the impugned law, whether fiscal or otherwise, shall directly and immediately restrict traffic across the borders before it could be said to violate the freedom under a. 92 of the Commonwealth of Aus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e problem, and they are : (i) trade, commerce and intercourse, (ii) throughout the territory of India, and (iii) shall be free. The expression "trade, commerce and intercourse" is a composite one and has received, as already noticed, the fullest judicial attention from the highest courts of America and Australia : though they may not be words of art, they have acquired a secondary meaning or significance. I shall accept the meaning acquired by that expression by the gradual evolution of law in those countries. Now, let us analyse the words "shall be free". Three questions occur to one's mind in regard to this, namely, (i) what is free ? (ii) free from what ? and (iii) where is it free ? As I have already indicated, the said composite expression means trade across the borders: what is free is that trade. It is implicit in the concept of freedom that there will be obstructions to it. Such obstructions or barriers may be, in the present context, to the freedom to trade across the borders. Article 301 provides for freedom from the said barriers or impediments in effect operating as barriers. This freedom from barriers cannot operate in vacuum and must be limited by space. A b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision operates as a restriction impeding the free movement of trade or only as a regulation facilitating the same. Restrictions obstruct the freedom, whereas regulations promote it. Police regulations, though they may superficially appear to restrict the freedom of movement, in fact provide the necessary conditions for the free movement. Regulations such a provision for lighting, speed, good condition of vehicles, timings, rule of the road and similar others, really facilitate the freedom of movement rather than retard it. So too, licensing system with compensatory fees would not be restrictions but regulatory provisions ; for without it, the necessary lines of communication, such as roads, waterways and air-ways cannot effectively be maintained and the freedom declared may in practice turn out to be an empty one. So too, regulations providing for necessary services to enable the free movement of traffic, whether charged or not, cannot also be described as restrictions impeding the freedom. To say all these is not to say that every provision couched in the form of regulation but in effect and substance a restriction can pass off as a permissible regulation. It is for the Court in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strict the freedom to the area covered by those entries, and, secondly, laws made under the other entries may more effectively and directly affect the movement of trade. If a law directly and immediately imposes a tax for general revenue purposes on the movement of trade, it would be violating the freedom. On the other hand, if the impact is indirect and remote, it would be unobjectionable. The Court will have to ascertain whether the impugned law in a given case affects directly the said movement or indirectly and remotely affects it. At this stage, an argument elaborated by Mr. Lalnarain Sinha may also be noticed. The learned Advocate said that the filed occupied by Art. 19 of Part III of the Constitution and that occupied by Part XIII thereof are distinct, that Art. 19 deals generally with freedom of trade and that Art. 301 with discriminatory barriers and that fiscal statutes could not be restrictions under Art. 19 and, therefore, they could not equally be restrictions under Art. 301. He would say that whatever might be said of "regulatory taxes" or ','destructive ones". fiscal taxes are always in public interest and it is not possible for a court to decide whether a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freedom. It is also admitted that a fiscal law may offend the fundamental right enshrined in Art. 14 of the Constitution. If so, it is beyond my comprehension on what principle the law of taxation could offend with impunity the freedom enshrined in Art. 19 (1) (g). Article 13(2) says in express terms "The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall to the extent of the contravention, be void." A law of taxation is made by Parliament or the Legislature of a State, as the case may be, in exercise of the power conferred under the Constitution by virtue of the entries, found therein. It is a law just like any other law made under the Constitution. This Court, in K. Thathunni Moopil Nair v. State of Kerala ([1961] 3 S.C.R.77) and in Balaji v. I. T. Officer ([1962] 2 S.C.R. 983), hold that a law of taxation would be void if it infringed the fundamental right guaranteed under Art. 19 of the Constitution. Therefore, the law of taxation also should satisfy the two tests laid down in Art. 19(6) of the Constitution. It is said that a law of taxation is always in public interest. Ordinarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature, and does not also meticulously go in to the question, but only looks at the broad features. On the argument of learned counsel when it is permissible and possible for a court to ascertain whether a tax is fiscal or regulatory, I do not see how it becomes impossible, though it may be difficult, to hold whether a fiscal tax is reasonable or not. The distinction lies not in the nature of the enquiry but only in degree. That apart, no restriction, if it is unreasonable, can be more deleterious to the freedom than the imposition of fiscal burden on it, which may in certain circumstances destroy the very freedom. I, therefore, hold, on a true construction of the expressed words of Art. 19 of the Constitution, that it is not possible or even permissible to hold that laws of taxation are outside the scope of the freedom enshrined therein. As the premises of Mr. Lalnarain Sinha's argument lack a reasonable basis his further argument that the freedom in Art. 301 excludes from its scope fiscal laws must be rejected. Having ascertained the scope and content of the freedom envisaged in Art. 301 of the Constitution, let us look at the succeeding provisions which place limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 303, which prohibits the Parliament from making a law giving preference to one State over another or making any discrimination between one State and another, is confined only to the entries relating to trade and commerce. But Art. 303 is in the nature of an exception or proviso to Art. 302. "The proviso leaves the generality of the substantive enactment unqualified except in so far as it concerns the particular subjects to which the proviso relates." "Where the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment so as to exclude from it, by implication, what clearly falls within its expressed terms": see M. & S. M. Railway v. Bezwada Municipality (A. I. R. 1944 P. C. 71, 73.). The words in Art. 302 are clear and unambiguous and they do not confine its operation to any particular entries and, therefore, the limitation imposed under Art. 303 cannot curtail the generality of the provisions of the said article. But the more difficult question is, what does the word ",restrictions" mean in Art. 302? The dictionary meaning of the word ,'restrict" it "to confine, bound, limit." Therefore, any lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation on the freedom of movement of trade. If it does, the extent of the impediment relates to the question of degree rather than to the nature of it. If it is a restriction, it must satisfy the conditions laid down in Art. 302 of the Constitution. Article 303 is an exception or a proviso to Art. 302. Article 303 opens out with a non-obstante clause, namely, "Notwithstanding anything in article 302". This phrase is equivalent to saying that "in spite of article 302" or that "article 302 shall be no impediment to the operation of article 303". It is accepted on all hands that there is a defect in the phraseology used in this article. This article prohibits both Parliament and the State Legislature from making a law giving preference to a State or States or making a discrimination among the States. The non-obstante clause has no relevance so far as the Legislature of a State is concerned, for Art. 302 does not deal with Legislature of a State. In these circumstances, the non-obstante clause can only be made applicable to that to which it is appropriate i.e., only to the limitations imposed on Parliament under Art. 303. The article, so far as it relates to Parliament, may be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... among the States is objectionable, it should also be objectionable, if made by virtue of any other entry. I would, therefore, hold that any law made by Parliament by virtue of any entry imposing the said discriminatory restrictions would be bad Under the said article. Article 303 (2) lifts the ban imposed on Parliament under Art. 303 (1), if a law made by Parliament imposing such discriminatory restrictions is necessary for the purpose of dealing with a situation arising out of scarcity of goods in any part of the territory of India. That part of Art. 303, which prohibits the Legislature of a State from making a law of the nature mentioned therein, also bears the same constructions and it is not necessary to restate it, except to mention that clause (2) of Art. 303 does not lift the ban in respect of the State Legislature. Coming to Art. 304, we are again confronted with a defect in phraseology. The article opens out again with a nonobstante clause, namely, "Notwithstanding anything in article 301 or article 303". Under Art. 301 (a), the Legislature of a State may by law impose on goods imported from other States or the Union territories any tax to which similar goods manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some of the learned Advocates appearing for the States, relying upon the other provisions of the Constitution for holding that taxation laws are outside the ken of the said provisions. Reference is made to Arts. 31 (5) (b) (i), 248, 265, 276, 285, 287 and 288. I do not propose to consider the arguments based on the said articles in detail, as, in my view, these and similar articles of the Constitution do not even remotely touch the question raised before us. They fit in the scheme of the Constitution. The Constitution confers power on the Legislatures to make laws of taxation, circumscribes that power with reference to the entries in the Seventh Schedule and other constitutional provisions, and provides for resolving conflict of powers. The aforesaid articles, except Art. 31 (5) (b) (i) and Art. 248, appear in Ch. I of Part XII under the general heading Finance", Article 265 declares that no tax shall be levied or collected except by authority of law; that is to say, tax cannot be levied or collected by an executive flat. Article 276 fixes a ceiling on taxes payable to local boards on professions, trades, callings and employments. Article 285 exempts property of the Union from Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be equated to that of the freedom of trade declared under Art. 301. I should not be understood to have expressed any view on the construction of that article in the present case. Article 305, as it stood before the Constitution (Fourth Amendment) Art. 1955, only saves the existing laws from the operation of Art. 301, and Art. 303, and it does not throw any light on the construction of Art. 301. Article 306 was omitted 'by the Constitution (Seventh Amendment) Act, 1956; but the said article saved the operation of any law made by any States specified in Part B in the First Schedule before the commencement of the Constitution levying any tax or duty on the import of any goods in to the State from other States or on the export of goods from the State to other States and enacted that if there be an agreement between the Government of India and the Government of that State in that behalf, the said tax or duty might be levied or collected for such period not exceeding ten years from the commencement of the Constitution, subject to the terms of the said agreement. If a law of taxation cannot, under any conceivable circumstances, be a restriction on the freedom of trade, why did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... III of the Constitution and also discloses an integrated scheme of freedom of trade,, commerce and intercourse maintaining a balance between federalism and provincial autonomy. I agree with my learned brother., Dan, J... that the provisions of the Rajasthan Motor Vehicles Taxation Act (XI of 1951) are regulatory in character and that they do not infringe the freedom enshrined in Art. 301 of the Constitution. The appeals fail and are dismissed with costs. HIDAYATULLAH, J.-The Rajasthan Motor Vehicles Taxation Act, 1951 (No. XI of 1951), in s. 4 provided: "(1) 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 vehicle 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 actually 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 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 301; that even if permissible, it is not a reasonable restriction of =and commerce within Art. 304, and that not having been enacted with the previous sanction of the President, it is not effective as law under Art. 265. At an earlier hearing, the attention of the Constitution Bench of this Court was drawn to Atiabari Tea Co. Ltd. v. State of Assam ([1961] 1 S.C.R. 809), where this Court struck down by majority the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954, as offending against the freedom of trade, commerce and intercourse. On that occasion, three views were expressed. Sinha, C. J.. held that the freedom guaranteed by Art. 301 was against "trade barriers, tariff walls, or imposts which have a deleterious effect on the free flow of trade, commerce and intercourse" but not against taxation Simpliciter. Shah, J., held that the freedom envisaged was wide enough to comprehend within itself a ban of prohibition, control or impediment of any kind whatever and of taxes whether they fell on movement of trade or commerce or otherwise. The majority (Gajendragadkar, Das Gupta and Wanchoo, JJ.) hold that though taxes as such were not within the ban of Part XI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that question; and the only way in which they can properly do so, is by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted. If what has been done is legislation within the general scope of the affirmative words which give the power, and if it violates no express condition or restriction by which that power is limited it is not for any Court of Justice to inquire further, or two enlarge constructively those conditions or restrictions." We have thus to see what powers have affirmatively been conferred on the legislatures of the State and what are the restrictions on that power. In this connection, we must also bear in mind the weighty observations of Gwyer, C. J., in Bhola Prasad v. The King Emperor ([1942] F.C.R. 17, 27) "We must again refer to the fundamental proposition enunciated in The Queen. v. Burah((1878) 3 App. cas. 889) that Indian Legislatures within their own sphere have plenary powers of legislation as large and of the same nature as those of Parliament itself. If that was true in 1878, it cannot be less true in 1942. Every intendment ought therefore to be made in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be of three kinds. The first may arise from the operation of the power of legislation granted to Parliament by Entry 42 of the Union List, and the contention in this connection is that the present impugned Act in its pith and substance is legislation under that Entry and thus void. The second may arise from Art. 19, sub-cls. (d), (f) and (g) if the law deprives the motor operators of the right (a) to move freely throughout the territory of India' (b) to acquire, hold and dispose of property, and (c) to practice any profession, or to carry on any occupation, trade or business, and the restriction is incapable of being justified as reasonable. The third may arise from the provisions of Part XIII where freedom of trade, commerce and intercourse throughout the territory of India has been ,guaranteed', subject only to the provisions of that Part. These, in the main, are also the contentions. and these appeals can be effectively disposed of from these three view points. The first contention that the impugned Act is bad because it is legislation directly under Entry 42 of the Union List need not detain us long. The subject of Entry 42 of the Union List is not taxation but "inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case to examine the subject from the angle of Art. 19, because a law to be good under that Article must satisfy the test of reasonableness. If the impugned sections here are declared to be unreasonable restrictions upon the freedom of trade, commerce and intercourse, they would fall also under Part XIII. If this were to happen, it would be wholly unnecessary to decide whether taxation laws are within the reach of Art. 19 and also whether the impugned provisions have to pass the independent scrutiny of Art. 19 before they can be sustained. This brings us to the consideration of the last point on which arguments occupied the Court for several days. It would be necessary (if not, impossible) to try to discuss the arguments which, though proceeding from the same side, were often conflicting. The use of language borrowed from a. 92 of the Australian Constitution in Art. 301 of our Constitution led to the citation of many Australian rulings. Those rulings are so numerous that they provoked a former Chief Justice of the High Court of that Country to say that when he died, s. 92 would be found to be written on his heart But it is reasonable to suppose that those who borrowed the lang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity and the absence of discrimination in matters of trade and commerce after the imposition of uniform duties of customs which was to be achieved in two years. Section 92 then epitomizes the whole concept of this unity and freedom from preferential treatment by enacting : "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." It may be pointed out here that the alternative phrase "throughout the Commonwealth" was not accepted, though it was suggested as an amendment more than once. The provisions of the Australian Constitution such as bear on trade and commerce, are no more than covenants entered into at the Conventions, which have been introduced bodily into the Australian Constitution, the fate of which depended for a long time on how to secure an agreement about uniform tariffs customs, excises and bounties. The declaration of freedom of trade, commerce and intercourse was the logical culmination of the negotiations for the establishment of the Federation. The language of s. 92 was thus made emphatic, even though its full purport remained vague. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y knew that in spite of the force of the words "absolutely free", it was well-settled that the freedom so contemplated was a qualified freedom. In Duncan v. State of Queensland ((1916) 22 C. L. R. 536, 573) Griffith, C. J., had observed, what was generally accepted, that "the word free' does not mean extra legem, any more than freedom means anarchy". The task of the Bench as also the Bar was to ascertain the limits of freedom or more appropriately, the limits to which restrictions could go. In this, the Australian High Court was the actor in the main ; but the Privy Council also delivered four judgments. Of these, two were before our draft Constitution and two, thereafter. It is, therefore necessary to investigate, to find out what was the accepted position in about 1948 to be able to see if any of the principles so laid down were accepted and to what extent they were modified to suit our Constitution in the light of our own history. We shall first notice those cases which were decided before our Constitution was drafted in 1948. This first point on which difference arose in Australia was whether s. 92 of the Commonwealth of Australia Act was addressed only to the States, or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndividuals are not guaranteed freedom in relation to their trade and commerce so long as trade and commerce as a whole are not impaired. (6)Free from pecuniary imposts-that is the narrowest meaning of s. 92." These six propositions fairly represent the view in the various judgments of the Australian High Court. Isaacs, J., in Rex v. Smithers ([1912] 16 C. L. R.99) had observed : "In my opinion, the guarantee of inter-State freedom of transit and access for persons and property under a. 92 is absolute-that is, it is an absolute prohibition on the Commonwealth and States alike to regard State borders as in themselves possible barriers to intercourse between Australians." In McArthur'a Case ([1920] 28 C. L. R. 533), the claim was made against all Governmental control and the majority also held that to be its meaning. The Privy Council examined the scheme of the Constitution of Australia and drew the line thus : "The true criterion seems to be that what is meant is freedom as at the frontier or, to use the words of s. 112, in respect of 'goods passing into or out of the State'. What is meant by that needs explanation, The idea starts with the admitted fact that federat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also added that "it may have a large meaning." The view of Knox, C.J., was expressly disapproved by a Privy Council in James v. Commonwealth of Australia ([1936] A.C 578) involving, as it did, a conception of inter-State trade, commerce and intercourse commencing at whatever stage in the State of origin, and continuing until the moment in the other State when the operation of inter-State trade could be said to end, the freedom attaching to every stop in the transaction from beginning to end. It was said that such a view would lead to an immunity from law of a whole body of acts or dealings by the mere fact "that they are parts of an interState transaction." The concept of trade and commerce was thus limited to that movement to which crosses a State barrier. As regards "intercourse" also, the earlier meaning was wide. The question was whether such ,,intercourse" must be "commercial". It was held in earlier cases that this conferred a personal right on an Australian and "independent of any commercial attributes he may possess, to pass over the Continent irrespective of any State border as a reason in itself for interference" (per Isaacs, J., in R. v. Smithers Ex Parte Benson ((1912 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n declared invalid, the Commonwealth made the Dried Fruits Act (1928-35). Under that law, no person could send dried fruit from one State to another unless he exported his quota outside Australia. This was challenged by James. When the case reached the Privy Council, three points were Considered by the Privy Council and decided. The first was that. 92 bound also the Commonwealth, the second was that it created a ban against prohibitions or burdens at the frontier, and lastly, that it protected commerce in motion and passing the frontiers of the States. A large number of cases were noticed in which it was decided that trade and commerce was validly burdened in the exercise of power to make laws without impairing movement of trade at the borders. These laws dealt with various subjects like monopolies, price fixation, health regulations, licensing systems, entry of goods or persons and transport. The last group consisted of cases in which restrictions applying to motor vehicles as integers of trade and commerce or their owners were considered. Willard v. Raw-ion ((1933) 48 C.L.R. 31 S.) was concerned with a law which required registration of all motor vehicles on payment of a fee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effectively started by the Government Airlines Commission. The validity of the entire Act was challenged by private operators who stood excluded from field, on the ground of an infringement of s. 92 of the Commonwealth of Australia Act. The establishment of the Airlines Commission was upheld, but the creation of monopoly was held to be invalid. Latham, C.J observed: "I venture to repeat what I said in the former case (Milk Board case) ((1939) 62 C. L. R. 116, 127): 'One proposition which I regard as established is hat simple legislative prohibition (Federal or State), as distinct from regulation, of inter State trade and commerce is invalid. Further a law which is directed against' inter-State trade and commerce is invalid. Such a law does not regulate such trade, it merely prevents it. But a law prescribing rules & is to the manner in which trade (including transport) is to be conducted is not a mere prohibition and may be valid in its application to inter-State, notwithstanding s. 92." One other important case was decided by the High Court of Australia before our draft Constitution was prepared, and to that we next turn. That case is Bank of New South Wales v. The Commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese words "'trade, commerce and intercourse" were wide enough to include intangibles and took the aid of some American decisions which had held that insurance was within the Commerce power. (6) Though the freedom was at the frontiers of the States but any restraint put upon trade, commerce and intercourse even before some tangible property leaves the State of origin was also contemplated. (7) Dixon, J's dictum in O' Gilpin's case((1935) 52 C. L. R. 189) where he observed "It is not, therefore every regulation of commerce or of movement that involves a restriction or burden constituting an impairment of freedom. Traffic regulations affecting the lighting and speed of vehicles, tolls for the use of a bridge, prohibition of fraudulent descriptions upon s goods, and provisions for the safe carriage of dangerous things, supply examples of regulatory provisions not strictly restrictions within s. 92. According to State, J., all Transport cases precept Willard v. Rawson ((1933) 48 C.L.R. 316) were wrongly decided. Willard v. Rawson ((1948) 76 C.L.R. 1, 380, 381), according to the learned judge was a pure case of traffic regulation, but in a other cases the burdens impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Provinces." Several important decisions were rendered by the Privy Council and to some of theme we find it necessary to refer. In Citizens Insurance Co. v. Parssons ((1881) 7 App. Cas. 96.) and. again in Bank of Toronto v. Lamb (3) the Privy Council found it necessary to limit the general words of No. 2 of s. 91 'to afford scope for powers given exclusively to the Provincial Legislatures'. In City of Montreal v. Montreal Street Railway ((1912) A. C. 333, 344), the same was observed again. Lord Halsbury, L. C., in Attorney-General for Onterio v. Attorney General for the Dominion ([1896] A. C. 348) said that the words must be given 'a statutory meaning'. There is, however no definite statement of the limits to be placed but generally the exercise of regulation of trade and commerce within the Provinces is upheld under No. 16 of s. 92, which gives the following power to the Provinces: "Generally all matters of a merely local or private nature in the Province." And this is even where some prohibitions and restrictions affect the importation, exportation, manufacture, keeping sale, purchase and use of commodities and must in some way interfere with business ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse. I describes the commercial intercourse between nations and parts of nations, in all it branches, and is regulated by prescribing rule for carrying on that intercourse." The principle of federation as understood in the United States is that sovereign States have surrendered a part of their power to the United states and barring what has been surrendered and what is prohibited by the constitution of the States, the residue belongs to the United States. This is brought, out in the Tenth Amendment: "The powers not delegated to the United States by the Constitution nor prohibited by it to the States, are reserved to the States respectively, or to the people." Most of the cases in the American Reports are concerned with what rights belong to the States and how far the Congress can regulate commerce. That is not a subject with which we are concerned in the present enquiry. We now come to the Indian scene. In M. P. V. Sundararamier & Co. v. The State of Andhra Pradesh Venkatarama Aiyar, J., rightly pointed out that "Our Constitution was not written on a tabula rasa, that a Federal Constitution bad been established under the Government of India Act, 1935, and though that has und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of the Central Government. After 1858, the Government of the country was carried on in the name of the Queen through her Secretary of State for India. The general pattern was, however, the same, though as time passed, democratic institutions in Government slowly emerged. When the Reforms came in 1919 and introduced a system of local governments, the process was not decentralisation but reconcentration, as is known in France. By stages, the Councils at the Centre and in the Provinces were greatly expanded, a large number of nominated members being added. When elections came, they included the representation of some special interests. Legislation was even then from the Centre in the shape of Regulations or under instructions from the Centre, unless it was of a wholly local character. We shall. pass over the details of the preparatory periods. When Parliament began to modify all this, the aim was to give to the Provinces a separate existence, though under a strong Centre. When the Government of India Act, 1915 was amended, there was a definite break up of the legislative machinery into two. There emerged then the Legislative Assembly and local Legislatures. In the field of local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Government is to have fair play in the Provinces. Our first aim has therefore been to find some means of entirely separating the resources of the Central and Provincial Governments." Under the Government of India Act, the Devolution Rules (Rules 2 and 14) made the separation of the resources. From this, it is not to be gathered that the Provinces had a separate fisc. By R. 16, it was provided that all moneys were to be paid into an account in the custody of the Governor-General and he made rules with the sanction of the Secretary of State and issued orders, both general and special, for payments, withdrawals or disbursements from that account. By far the greater part of the Devolution Rules dealt with these matters and, in addition, there were congeries of rules and instructions. Taxation in the Provinces was under Entry 48 in Part II of the First Schedule of the Devolution Rules, which read: "48. Sources of Provincial Revenue not included under previous heads, whether- (a) taxes included in the Schedule to the Scheduled Tax Rules or (b) taxes, not included in those schedules, which are imposed by or under provincial legislation which has received the general previous sanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave regard to India as a whole and not merely British India. In this, there was the echo of what the Montagu-Chelmsford Report said: "Our conception of the eventual future of India is a sisterhood of States, selfgoverning in all matters of purely local or provincial interest In this picture there is a place for the Native States." The Commission emphasised one fact more than any other. They observed: "Economic forces are such that the States and British India must stand or fall together. The increasing importance of industry brings problems that must be faced by both together The States themselves have their own tariff policies, and there is a serious possibility that, unless provision can be made for the reconciliation of divergent interests, numbers of tariff walls will be perpetuated in an area where fiscal unity is most desirable." The Commission also suggested that- "the now Constitution should provide an open door whereby, when it seems good to them, the Ruling Princes may enter on just and reasonable terms." The Commission, therefore, recommended a federal Constitution composed of British India and the Indian States. They said: "We are inclined ourselves to think that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the Central Legislature as will bind these autonomous units together". They also pointed out that the unity of India on which they had laid so much emphasis was dangerously imperfect so long as the Indian States had no constitutional relationship with British India. The Committee recognised the difficulties of economic ties between the Provinces inter se and also British India as a whole on the one hand, and the Indian States on the other, and observed : "On the one band, with certain exceptions, the States are free themselves to impose internal customs policies, which Cannot but obstruct the flow of trade. Even at the maritime ports situated in the States, the administration of the tariffs is imperfectly coordinated with that of the British Indian ports, while the separate rights of the States in these respects are safeguarded by long standing treaties or usage acknowledged by the Crown. On the other hand, tariff policies, in which every part of India is interested, are laid down by a Government of India and British India Legislature in which no Indian State has a voice, though the States constitute only slightly less than half the area, and one-fourth of the population of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of our recommendation for the statutory prohibition of certain specified forms of discrimination would lay open to challenge in the Courts as being ultra vires any legislative enactment which is inconsistent with these prohibitions, even if the Governor-General or Governor has assented to it." With these suggestions in respect of the freedom of Grade and commerce, a Federal Constitution was recommended. It was also recognised that it would be the Provinces which would carry on the ,national building activities' and the need for more finances 'or the Provinces was acutely recognised. The establishment of self-governing units and self-governing constitutions, the creation of deficit Provinces, the corporation of Burma and the cost of establishment of a Federation, were matters which were gone into by the Federal Finance Committee. The Federal Structure Committee, Sir Walter Leyton, the Davidson Committee and experts like Sir Malcolm Hailey and Sir Otto Niemeyer. The Report of the First Taxation Inquiry Committee (1926) was also available from which guidance was taken, and just as the topics of legislation were demarcated between the Centre and the Provinces, so also the sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctured or produced, discriminates in favour of the former, or, which, in the case of goods manufactured or produced outside the Provinces, 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" By this section, power was denied to the Provincial Legislatures under two Entries in the Provincial List to impair free entry and export of goods in the Provinces. The two Entries were referred to separately and expressly by their content and were "27. Trade and Commerce within the Province" and 29. Production, supply and distribution of goods." The word ,'commodities" was used instead of "goods" in the White Paper, and the change to "goods" appears to have been lost sight of in s. 297(1). However, the definition of "goods" took in commodities, and the words "goods of any class or description" were wide enough to show what was meant. The subject of taxation was not dealt with in cl. (a) but cl. (b), and that provided that taxation in the Provinces was not to have a differential basis. In this connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether to give the commerce power only Parliament or to divide it between Parliament and the State Legislatures ; (b) whether to ensure freedom of trade, commerce and intercourse interState, that is to say, at the borders of the States or to ensure it even intra-States ; (c) whether to make the prohibition against restrictions absolute or qualified, and if so, in what manner ; (d) if qualified by whom was the restriction to be imposed and to what extent; (e) whether the freedom should be to the individual or also to trade and commerce as a whole ; (f) what to do with the existing laws in British India and more so, in the acceding Indian States ; (g) whether any special provisions were needed for emergencies; (h) what should be the special provisions to enable the States to levy taxes on sale of goods, which taxes were to be the main source of income for the States according to the experts. All-these matters have, in fact, been covered in Part XIII, and the pitfalls which were disclosed in the Law Reports of the Countries which had accepted freedom of trade and commerce have been attempted to be avoided by choosing language appropriate for the purpose. In addition to this, the broad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing 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 tax to which similar goods manufactured or produced in that State are subject, so, however as not to discriminate between goods so imported and good 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 clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President. Ins. by the Constitution (Seventh Amendment) Act, 1956, s. 29 and Sch.) 305. Nothing in articles 301 and 303 shall affect the provisions of any existing law except in so far an the President may by order otherwise direct, and nothing in article 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 relating to any such matter as is referred to in sub-cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of List III. Concurrenl List 33. (Trade and Commerce in, and the production, supply and distribution of : (a) the products of any industry where the control of such industry by the Union is declared by Parliamentary law to be expedient in the public interest) and imported goods of the same kind as such products ; (b) food-stuffs, including edible oilseeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unpinned and cotton seed or (e) raw jute. The words in brackets show the entry as it was prior to its amendment by the Constitution (Third Amendment) Act, 1954. The word industries' occurred in place of the word industry' there. By dividing the commerce power and by enacting the provisions of Part XIII, the problems which arose in the United States of America and Canada have been avoided. In Canada, as we have shown already, the question was whether in passing a law the Provinces were encroaching upon the commerce power of the Dominion given by No. 2 of s. 91 and conversely, whetherthe regulation of trade by the Dominion meant an encroachment of the powers of the Provinces. In our Constitution, questions of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the State Legislatures, that controversy can never arise. Parliament which is authorised by Art. 302 can impose restrictions on trade, commerce and intercourse in two aspects. They are : (a) between one State and another; or (b) within any part of the territory of India. By the first is meant trade and commerce in motion across the frontiers of States. It means the inter-State character of trade, commerce and intercourse. By the second, the power is made more general. Parliament may put restriction in " any part' of the territory of India. The territory of India is defined by Art. 1(3), which says : "(3) The territory of India shall comprise(a) the territories of States; (b) the Union territories specified in the First Schedule ; (Before the Constitution (Seventh Amendment) Act, 1956 the clause read the territories specified in Part D of the First Schedule') and (c) such other territories as may be acquired." The words ",within any part of the territory of India" give power to Parliament to legislate for 'any part' not only generally but also locally. This power is subject to two restrictions. The first is that this must be done by law', which means that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclares by law that a restriction is in the public interest and the State Legislature (legislates under the shelter of such a declaration, are also nullified, see Entry 33(a). Entry 35 of the Concurrent List or Entry 57 of List If read with Entry 35 of List 111, to confine the citation to Entries, with which we are primarily concerned here. In the Seventh Schedule to the Constitution in addition to Entries 41 and 42 (List 1), 26 and 27 (List II) and 33 (List III) there are many other Entries regulating special trades. In some of them, the formula by law made by Parliament' is again repeated out of abundant caution. By the words of Art. 303 'by virtue of any entry relating to trade and commerce' is meant not the five Entries last named by us but others also, e.g., Entry 8 of List II, Entries 29, 30, 81 of List 1 Entry 29, 15 of List III (to mention only a few from each List), Thus is achieved one purpose which is paramount viz., that the exercise of the commerce power, however derived, is not to be exercised to create preferences and discrimination between one State and other whether the action proceeds from Parliament or a State Legislature or both acting in union. No q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fixing of quotas of dried fruits or their even distribution in home and outside markets which agitated the Australians can hardly &rise, and similar questions can adequately be dealt with by Parliament under this power. Next comes Art. 304. It beings with the non-obstante clause "Notwithstanding anything in article 301 or article 303." It is contended that one can understand the mention of Art. 301 but not of Art. 303, and the Article is thus said to be inaccurately drafted. We have already shown why in Art. 303 the State Legislatures found a mention, and unless Art. 303 was also put aside in Art. 304, there would arise a question of balancing it against Art. 304. To avoid this, both Arts. 301 and 303 have been excluded from consideration. Article 304 is divided into two parts. It enables the Legislatures of States to pass laws which affect trade, commerce and intercourse. Clause (a) of the Article enables taxation of good from other States pari passu taxation of similar goods in the State but so as not to discriminate between them. The ban of Art. 301 is lifted but uniformity is imposed. Compared with s. 297(1)(b) the Article is narrower in its enabling portion and shorter in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made for the operation of laws by which a State or a corporation owned or controlled by the State carries on any trade, business, industry or service whether as a monopoly or otherwise. Article 305 does not apply to the statute here impugned as it was not an ,existing law'. Article 306 was a transitory provision which enabled certain Part B States to Continue levy of existing taxes or to restrict trade, commerce and intercourse for a period, notwithstanding the provisions of Part XIII. With that, we are not concerned after 1955 due to the repeal of that Article. Article 307 also is immaterial in this case. It provides for the appointment of an authority for carrying out the purposes of Arts. 301-304, and is a counterpart of s. 101 of the Australian Constitution. We shall now notice some cases which were decided by the High Court of Australia and the Privy Council, because it is these cases which have been cited to us in support by the rival parties. After the Constitution of India came into force on January 26 1950, came the decision of the Privy Council in Commonwealth of Australia v. Bank of New South Wales((1950 A.C. 235). In that case, the Privy Council departed from what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State trade, notwithstanding s. 92'.", observing: "With this statement, which both repeats the general proposition and precisely states that simple prohibition is not regulation, their Lordships agree." The Privy Council also made it clear that in some cases "'regulation" may take the form of prohibition, thus endorsing the statement of Harrison Moore that the power of legislation, is not merely a power to regulate; it ranges from creation to destruction, it may establish as well as prohibit: The Commonwealth of Australia, 2nd Edn., p. 280. The Advocates-General of Bombay and the Punjab and Mr. G. S. Pathak relied upon many decisions of the Australian High Court after the Banks' case. (1) Strictly speaking, these decisions could not have influenced the framing of our Constitution, because by the time they were rendered, our Constitution had already been framed. The Banks case, (1) having drawn the distinction between regulation and simple prohibition, the later Australian cases began to allow a play for regulation of trade and commerce. There being no machinery for achieving restrictions, reasonable in them. selves, restrictions to be valid had to be within the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om which the appeal went to the Privy Council. Leave to appeal in McCarter v. Brodie [1950] 8 0C.L.R.432) was refused. Before we examine the decision of the Privy Council, lot us recall and re-state the main events in brief. In James v. South Australia ((1927) 40 C.L.R. 1), what was struck down by the High Court as. a contravention of s. 92 was the executive determination of where and in what quantities dried fruit were to be marketed. In James v. Cowan ((1932) A. C 542), the action of the Minister expropriating the surplus dried fruits was also held to be a contravention. In James v. The Commonwealth ((1936) A. C. 578), it was held that s. 92 bound not only the States but also the Commonwealth. The last case was also generally understood as laying down that by "free" was meant freedom at the frontiers. An extract from the judgment of Evatt, J., in The King v. Vizzard ((1933) 50 C.L.R. 30) was quoted to ,show that freedom did not attach itself to each and every part of transaction, and the other parts were not free from regulation or control. Then came the Bank's case, ((1948) 76 C. L.R. 1, 380, 381) which laid down that regulation of trade, commerce and intercourse among the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that it prohibited, restricted or burdened inter-State commerce. Next, according to him two further points were settled by the Bank's case: ([1948] 76 C.L.R. 1. 380,381). (1) That the object or purpose of an Act, challenged as contrary to s. 92 was to be ascertained from what was enacted and consisted in the necessary legal effect of the law itself and not in its ulterior effect socially or economically and (2) that the doctrine of 'pith and sub stance though of help to find out whether it Wag nothing but a regulation of a class of transactions forming part of a trade and commerce was beside the point when the law amounted to a prohibition or the question of regulation could not fairly arise. According to Dixon, J.,, the Transport cases involved a pragmatical solution. The main reason of the error according to him was that trade and commerce Was treated 'as a sum of activities' and "the interState commercial activities of the individual, and his right to engage in them were ignored", and much importance was attached to absence of discrimination against inter-State trade considered as a whole. Dixon, J., then added to the five points a sixth, viz., "the disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceded that : "the imposition of charges in respect of vehicles used on inter-State journeys would infringe section 92 if the charges (a) discriminated against inter-State road transport or vehicles engaged therein; (b) were imposed at such a rate as to be prohibitive of inter-State road transport, whether alone or in common with all road transport". The Privy Council pointed out that in the Transport cases, ([1938] 57 C.L.R. 327) sufficient weight was not given to James v. Cowan ([1932]A.C. 542), where determinations of executive in its discretion were said to be invalid. It accepted the six propositions of Dixon, J., and followed the unusual practice of quoting in extenso the opinions of Dixon and Fullagar, JJ., in McCarter v. Brodie ([1950] 80 C.L.R. 432) and expressed them as their own. The Board overruled the Transport, cases, and observed : "In their opinion it follows that if the validity of the Transport Act is to be established in the present case, it can only be upon the ground that the restrictions contained therein are regulatory' in the sense in which that word is used in the Bank case." We now come to the last phase. The distinction between laws which merely reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration fees. The majority was prepared to sustain charges if imposed "as a real attempt to fix a reasonable recompense or compensation for the use of the highway and for a contribution to the wear and tear which the vehicle may be expected to make." The minority thought that (except for a fee for a specific service) no charges could be levied. In two cases viz., Nilson v. The State of South Australia ()[1955]93C.L.R 292.) and Pioneer Tourist Coaches Pty. Ltd. v. The State of South Australia ((1955] 93 C.L.R. 307), it was held that a State could not require commercial motor vehicles to register and pay a fee exceeding mere administrative charges. There is yet another line of cases recently decicided in Australia. The taxing of commercial vehicles employed in inter-State or intrastate transport has been justified in some cases on the ground that such taxes are compensatory, and the tax is a recompense for the wear and tear of roads. In Armstrong v. The State of Victoria [No. 2] ([1957] 99 C.L.R. 28), Part II of the Commercial Goods Vehicles Act, 1955 (Victoria) was challenged. That Act required the owner of every commercial vehicle of load capacity exceeding four tons to pay compens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll further. The main question that arose then, as it has arisen here, is : Do taxation laws come within the reach of Art. 301 ? Now, it cannot be laid down as a general proposition that all taxes are hit by that Article. We have shown above that the financial independence of the States was secured by an elaborate division of heads of taxation, which were. well-thought out to provide the States with the means of independent existence and the wherewithal of nation-building activities. There is hardly any tax which the States are authorised to collect which could not be said to fall on traders. Property tax, sales tax, municipal taxes, electricity taxes (to mention only a few) are paid by traders as well as by non-traders. To say that all these taxes are so many restrictions upon the freedom of trade, commerce and. intercourse is to make the entire Constitutional document subordinate to trade and commerce. Since it is axiomatic that all taxes which a tradesman pays must burden him, any tax which touches him must fall within Art. 304, if the word "restriction" is given such a wide meaning. Every such legislation will then be within the pleasure of the President, and this could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that trade, commerce and intercourse should be rendered 'unfree'. Trade and commerce remain free even when general taxes are paid by tradesmen in common with nontradesmen. The Question whether a tax offends Part XIII can only arise when it seeks to tax trade, commerce and intercourse. Support for the contrary proposition is not to be found in James v. The Commonwealth The Privy Council in James v. The Commonwealth did not lay down: "Every step in the series of operations which constitutes 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." (p. 629) The passage represents the view hold in McArthur's case ((1920) 28 C.L.R. 530). That case was disapproved at p. 631. We have already dealt with this view at some length. Thus, taxation laws and taxes must be divided into two kinds. Taxes which are general and for revenue purposes which fall on those engaged in trade, commerce and intercourse in the same way as they fall on others not so engaged cannot normally be within the reach of Part XIII. A motor transport owner cannot claim that be will not pay property tax in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft the ban which has been imposed in favour of action by law made by Parliament and the State Legislatures respectively. Article 304 expressly mentions the power to impose taxes which must include at least excise duties and sales tax, and from this, also, it is quite clear that taxation is within the prohibition contained in Part XII. This argument was also rejected by the majority in Atiabari Tea Company case ((1961) 1. S.C.R. PC(1)), and we respectfully agree. Before, however, a tax can be struck down, the incidence of the tax and the method of its collection must be examined. If the tax falls upon trade, commerce and intercourse as such, irrespective of whether it falls on trade viewed as a whole or upon individual traders, and restricts the freedom guaranteed, a question will immediately arise about the legality of the tax. In this connection, even trade not in motion and more so trade in motion will be protected unless the law, if made by Parliament is in the public interest, and if made by the State Legislature it is reasonably in the public interest and the previous sanction of the President has been obtained. What we have said about taxation and taxes is also true of other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses and go on and so forth are not normally restrictions of trade, commerce and intercourse but are meant for the better and more effective flow of trade, commerce and intercourse. Such laws can not be viewed as restrictions at all, and do not come within the freedom angle, nor do they require the process under which freedom can be curtailed. Just as a tax of a general character payable by all and sundry and not placed upon a trade directly and immediately cannot be considered as a restriction of trade even though it burdens a trader, so also regulations of trade without hampering it or impairing its freedom cannot be described as restrictions. A regulation, when it ceases to be a regulation and becomes a prohibition may require justification as a reasonable restriction. Fullagar, J., in Mc Carter v. Brodie ([1950] 80 C.L.R. 432.) pointed out that a regulation of speed on the high ways does not offend the freedom guaranteed, but a rule that commercial vehicles should travel at one miles per hour ceases to be regulation and becomes a restriction. Here, the question is not one of degree but of the essence of the purpose. The technique of justifying laws as regulatory was evolved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Arts. 301 and 304. It is on this ground that laws prescribing the rule of the road and like provisions already referred to as well as a regulation that the height to which trucks may be loaded must be such as not to endanger the overhead bridges or wires, do not have to go before the President, since they do hot affect the freedom guaranteed. The object of such laws cannot be regarded as a restriction of trade and commerce. Freedom in Art. 301 does not mean anarchy. Similarly, a demand for a tax from traders in common with others is not a restriction of their right to carry on trade and commerce. A system of 'licensing of motor vehicles is a regulation, but does not impair the freedom of trade and commerce unless the licensing is made to depend upon arbitrary discretion of the licensing authority. Similarly, a fee for administrative purposes may also be viewed as a part as regulation. Such licensing and fees fall outside Art. 301, because they cannot be viewed as restrictions, and therefore do not need to be processed under Art. 304. Such regulations are designed to give equal opportunity to everyone, subject to a certain standard. The object being a public object, such re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing respectively with vehicles fitted with pneumatic tyres and vehicles not so fitted. The first part deals with two categories marked respectively "A" and "B". , A" comprises motor vehicles plying for hire for the conveyance of passengers and light personal luggage of passengers, while "B" cornprises goods vehicles plying under Public Carrier's Permit. There are further sub-divisions in each category "A" and "B" according to the seating capacity of the vehicles on the basis of which different rates of tax are imposed, but it is not necessary to go into their details. Schedule III comprises goods vehicles registered outside the State using roads in Rajasthan, and they are required to pay a tax calculated at a specified sum per day. Schedule IV is headed: "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 Permit." These vehicles are again classified according to the kind of tyres with which they are fitted as well as by their load capacity and different amounts of tax are payable by each class. Part II of this Schedule specified the tax payable by dealers in or manufacturers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erate on trade and commerce directly. It is not denied that the carriage of passengers and goods amounts to trade. It was, in fact, so help in the Transport cases in Australia and also by the Privy Council. Under the Act, this trade can only be carried on, if the tax is paid. The Act, therefore, involves a prohibition against a trade, which prohibition is released on payment of tax. The Schedules affect motor vehicles for carriage of passengers and goods on hire in Rajasthan and also similar vehicles coming from outside. In so far as vehicles coming from outside are concerned, their entry into the State is barred unless the tax is paid. The tax is thus not incidental to trade but is directly on it and is on its movement. This is not tax which the trader has to bear in common with others, and the tax is for revenue purposes. This is a case in which if the tax is not paid, the trade is destroyed. The charging provisions do not take into account what distance a particular vehicle travels within the State. A vehicle traveling a hundred miles and another traveling only one mile have to pay an identical sum as tax. How then can it be said that it involves a fair recompense for the wear a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me the Act, was not submitted to the President for his Previous sanction, nor was it assented to subsequently after it passed the Legislature. The question, therefore, whether the restriction imposed by the Act is reasonable or not,, does not arise. We are, therefore, of opinion that s. 4(1) as read with Schs. IT, III and Part 1 of Sch. IV offends Art. 301 of the Constitution, and as resort to the procedure prescribed by Art. 301(b) was not taken, it is ultra vires the Constitution. We wish to make it clear that we pronounce no opinion about the constitutional validity of s. 4(1) as read with Sch. 1 or the second Part of Sch. TV. The first raises a question as to the meaning of the expression "intercourse" in Part XIII and as that matter is not relevant for the appeal before us, and thus no arguments were heard on that point, we refrain from expressing any opinion on it. The second involves many other questions, which are far remote from the controversy with which we are now concerned, and therefore need not be considered here. We would, therefore, allow the appeals, and quash the demand made upon the appellants. By COURT: In accordance with the opinion of the majority, these app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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