Atiabari Tea Co. Ltd.

v. The State of Assam and Ors."

IN THE SUPREME COURT OF INDIA"

Hon'ble Judges/Coram: B.P. Sinha, C.J., J.C. Shah, K.C. Das Gupta, K.N. Wanchoo and
P.B. Gajendragadkar, JJ "
Appellant: Atiabari Tea Co. Ltd."

!
Respondent: State of Assam & Ors."
!
Date of Judgment: 26.09.1960"
!
!
!

Facts:"
In the case of Atiabari, the State of Assam had imposed taxes on roads and inland waterways
transport, under Assam Taxation Act, 1954. In this case it was found that a large part of the tea
manufactured in Assam, had a market in Calcutta and the usual route used was of roads and
inland waterways. This Taxation Act,was passed by the Assamese legislature for the imposition
of tax on use of roads and inland waterways and was approved by the Governor.The appellants
paid the tax under protest and then filed petitions at the Assam High Court, challenging the Act
as well as the validity of the tax demands made by officers of the Respondent.!

Procedural History: The appellants moved the High Court under Art. 226 of the Constitution
challenging the validity of the Act. The High Court by its judgment and order dated June 6, 1955,
dismissed the writ petitions. Thereupon, the appellants under Art.132 obtained the certificates
that the cases involved substantial questions of law as to the interpretation of the Constitution.
The petitions under Art. 32 of the Constitution were moved in this Court for the same purpose of
challenging the vires of the Act. The consolidated appeals arise from the judgement and order of
the High Court of Judicature in Assam dated June 6, 1955 and the Writ Petitions under Article
32 of the Constitution impugning the constitutionality of the Act. !

Issue:"
Whether the tax demands made under the Act would be valid or not.!

!
Analysis:"
!
!

The learned court said that, under article 304(a) of the Constitution, the State is supposed only
tax a particular good,imported into the state to the same extend and in the same manner as it
would do to the same good, produced in the State.!

According to Article 304(b), if a reasonable restriction on trade, is made by the State no bill is
supposed to be passed by the State legislature without the sanction of the President. !

Also according to Section 302, for a legislature to pass any restriction on trade and commerce, it
should be reasonable and be in public interest.!

!
!

Holding: Transport and movement forms an integral part of trade and therefore if a tax is
imposed on the transport and movement of trade then it directly and immediately restricts trade
and therefore is a restriction on freedom of trade and commerce and falls within the purview of
Article 301. !
Taxing laws are not excluded from the operations of Article 301, which means that tax laws can
and do amount to restrictions on the freedom guaranteed to trade under Part XIII of the
Constitution.!
As per Article 304 (b) the State cannot make laws that restrict the freedom of trade guaranteed
under Article 301 without the prior consent of the President. !

Comments: !
The present case is a significant case to understand the scope and gamut of Article 301 and its
relation with other Articles mentioned under Part XIII of the Constitution. The case also lays the
doctrine of direct and immediate effect. And also lays down that taxing law are not excluded
from the operations of Article 301. Following the judgment, the Assam Legislature Amended the
Act in accordance with the requirements of Article 304(b) and it was upheld as valid in Khyerbari
Tea Co. Ltd.!

!
!
Judgement/Conclusion:"
!

It was held in this case that as according to Section 304(b), before passing of an Act, imposing
restrictions on trade and commerce, the assent of the President is required, which was not
taken in this case, as only that of the Governor was taken, thus making this Act void.!

!
!
!
!
!
!