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Freedom Of Trade, Commerce And Intercourse In India

As we all know India is a democratic country and we live in era where every things are being digitalized from north pole to south pole, be it America , Japan and China . This paper will discuss about freedom of trade and commerce within the territory of India . As we all know India is a federal country and world 's 5th largest economy . India is the 7th largest country in the world and it's major economy depends of tertiary sector such as ( labour, agriculture, fisheries , etc).

No federal country has an even economy. Some of its constituent units may be agricultural while others may industrial. Some states may produce raw materials while the processing and manufacturing industries may be located in other States because of several favourable factor like availability of cheap labour or electric energy.

This circumstance creates the possibility that the constituent units which have legislative powers of their own may, to serve their own narrow and parochial interests, seek to create trade barriers by restricting the flow of commodities either from outside or to other units. Creation of such regional trade barriers may prejudicially affect the national interests as it may hamper the economic growth of a country .Through this article we shall analyze the freedom of trade and commerce in I

Position in India
The Constitution-makers desired to promote free flow of trade and commerce in India as they fully realized that economic unity and integration of the country provided the main sustaining force for the stability and progress of the political and cultural unity of the federal polity, and that the country should function as one single economic unit without barriers on internal trade.

Article 301, declares that "subject to other provisions of this part , trade, commerce and intercourse throughout the territory of India shall be free." This constitutional provision imposes a general limitation on the exercise of legislative power, whether of the Centre or of the States, to secure unhampered free flow of trade, commerce and intercourse from one part of the territory to another. The purpose underlying Art. 301 is to promote economic unity of India and that there should not be any regional or territorial economic barriers.

Article 301 declares that "subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free". (emphasis supplied).

Trade means buying and selling of goods for profit-making purposes. Under Article 301, the word trade means an actual, organized & structured activity with a definite motive or purpose. For the motive of Article 301, the word trade is interchangeably used with business.

Commerce means transmission or movement by air, water, telephone, telegraph or any other medium; what is essential for commerce under Article 301 is transportation or transmission and not gain or profit.

It means the movement of goods from one place to another. It includes both commercial and non-commercial movements and dealings. It would include travel and all forms of dealing with others. However, it is argued that the freedom guaranteed in Article 301 does not reach out to intercourse in its broadest meaning. There are two reasons for this. First of all, the word "intercourse" is used in juxtaposition with the words 'trade and commerce' and hence this word here will mean "commercial-intercourse" and not purposeless motion.

The second reason being that though Article 301 imposes a limitation on the power of Legislature and Parliament (provided to them under Article 245 and 246) but the word intercourse is not included as a subject of legislation under the Seventh Schedule (as the words trade and commerce have been) and so the word intercourse cannot be implied to have the widest of the meaning when used here.

Activity Which Is Not Trade
Illegal activities, like lottery and gambling, can be an example. The bar on these illegal activities was upheld by the Supreme Court in the case of State of Bombay v. R.M.D. Chamarbaugwala (1957). In this case, it was held that all activities of criminal nature or those activities which are undesirable would not be given any protection under Article 301. Some examples of such activities can be clicking obscene pictures for money, trafficking of women and children, hiring goondas or terrorists, etc. Though the forms, methods, and procedures of trade may be applied these activities are (not subject to private ownership 19(1)(g)

Note: Article 301 under Part XIII empowers the free flow of the stream of trade throughout the country whereas Article 19(1)(g) under Part III provides the freedom to practice any occupation, trade or business in the interest of the general public. The right under Article 301 is constitutional and can be claimed by anyone. The right under Article 19(1)(g) is fundamental and can be claimed only by citizens. Thus, this aspect of limitation of Article 19 is dealt with under Article 301 which gives the right to both citizens and non-citizens to move the court if their right has been

The Automobile Ltd v state of Rajasthan
The Automobile Transport Ltd. v/s State of Rajasthan, case, State of Rajasthan imposed an annual tax on motor vehicles (Rs 60 on a motor vehicle and Rs 2000 on a goods vehicle).
  • The appellant challenged the validity of the tax levied under Article 301. Now whether the tax levied was constitutionality correct or not had to be checked.
It was held by the court that in the present case the tax imposed is valid as it is only a regulatory measure or a compensatory tax for the facilitation of the smooth running of trade, commerce, and intercourse. The Court commented that the taxes are the sole key for a state, in order to preserve the financial health of the state at large.

The concept of "Compensatory or Regulatory Taxes" has evolved to ensure that the state will levy such taxes that are set as an objective in the form of compensation, that is, for the public interest as well as for regulatory purposes if necessary. They would be used within the state. If the same is challenged in the Court as being an infringement or as being violative of the freedom under Article 301 then that would not be considered as an infringement and such a measure or tax does not even need the validation of the provisions under Article 304

Restrictions to trade and commerce:
  • Parliament's power to regulate trade and commerce in the public interest:
    Article 302 gives power to the Parliament to impose restrictions on the freedom of trade, commerce or intercourse carried on within a state or across states anywhere in the territory of India. These restrictions can solely be imposed taking into due consideration the interests of the public. The power to decide whether something is in the interest of the public or not is solely given to the Parliament.

    It can be seen as in the case of Surajmal Roopchand and Co v/s the State of Rajasthan (1967) were under the Defence of India Rules, in the interest of the general public, restrictions were imposed on the movement of grain.
  • States power to regulate trade and Commerce:
    The power of the Parliament in Article 302 is kept in check by Article 303. Article 303(1) states that the Parliament does not have the power to make any law which will keep one State at a more preferable position than the other State, by virtue of any entry in trade and commerce in any one of the lists in 7th Schedule. However, Clause (2) states that the Parliament can do so if it is proclaimed by law that it is essential to make such provisions or regulations, as there is indeed a scarcity of goods in some parts of the country. The power to decide whether there is a scarcity of goods in some parts of the territory or not is vested in the hands of the Parliament.
Article 304(a) further says that the State should impose taxes on any goods transported/imported from other States if alike goods are taxed in the State too. It is done so that there is no discrimination between goods produced within the State and goods imported from some other states.

In the case of State of Madhya Pradesh v/s Bhailal Bhai,1964) the State of Madhya Pradesh imposed taxes on imported tobacco which was not even subject to tax in the very own State i.e State of Madhya Pradesh . The Court disapproved of the tax statement that it was discriminatory in nature.

clause (2) of Article 304 guides the States to impose certain reasonable restrictions on the freedom of trade, commerce, and intercourse as may suit the public interest. But no Bill or Amendment for such shall be put forward in the State Legislature without the prior approval of the President. A law passed by the State to regulate interstate trade must thus fulfil the following conditions:
  • An approval from the President must be taken beforehand,
  • The restriction must be sensible and rational
  • It must be in the interests of the public.
These conditions make it clear that the Parliament's power to regulate trade and commerce is superior to the State's power.

Atiabari Tea VS State Of Assam
In this case of Atiabari Tea Co.Ltd. v/s the State of Assam, Assam Taxation Act levies a tax on goods transmitted through Inland Waterways and road. The petitioner in the present case carried on the business of transporting tea to Calcutta (now Kolkata) via Assam. Now while passing through Assam for the purpose of transportation to Calcutta, the tea was liable to tax under the said Act.

The rationality of The Assam Taxation Act of 1954 was questioned on the grounds that:
  • whether it is violative of Article 301 or not?
  • whether it could be protected by making it fall under the ambit of Article 304 (b) or not?
The Supreme Court said that the disputed law undeniably levied a tax that directly and immediately infringed the movement of goods and therefore it comes under the purview of Article 301. The Supreme Court further clarified that these taxes can only be levied after fulfilling the conditions of Article 304(b) which states that the sanction by the President is required before any State enacts such a law.

In this case, the requirements of Article 304(b) were also not fulfilled. Freedom assured under Article 301 would become non-existent or imaginary if transmission of goods is obstructed without meeting the criteria set out by Article 302 to Article 304 of the Constitution.

The constitution famers had borrowed this part of constitution from the Australian constitution (sec 92). It's scope is very wide. Sometimes centre overrule on state and vise- versa, subject to certain exception. Article 301 in the Constitution provides the freedom of trade, such freedom cannot be absolute. Thus Article 302 to 305 impose restrictions and ensures that trade is conducted in a lawful manner throughout the states and the country.

It is very clear by now that any direct tax acting as a restraint to freedom so contemplated under the Fabric of the freedom of trade commerce and intercourse is ultra- vires of the Constitution. Whether the tax is prohibitory or compensatory has been left to facts and circumstances of each and very case. With so many judicial decisions regarding freedom of trade commerce and intercourses.

All these provisions together ensure the provision of Constitutional status to the freedom of trade, commerce, and intercourse. Now at least there would be no unreasonable interference with trade and commerce based upon geographical variations or any other such barriers.

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