SARDAR PATEL SUBHARTI INSTITUTE OF LAW
SWAMI VIVEKANAND SUBHARTI UNIVERSITY
SUBJECT: Perspective in Federalism
A PROJECT REPORT ON
Trade Commerce and
SUBMITTED TO: SUBMITTED BY:
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Perspective in Federalism: Trade Commerce and Restrictions in India, Essays (university) of Constitutional Law
The inter-relation between Article 301 and Article 19(1)(g) of the Indian Constitution, which provide freedom of trade and commerce, and the restrictions that can be imposed on them. It also talks about the power of the Parliament and the States to regulate trade and commerce in the public interest, and the conditions that must be fulfilled for such regulations. The document also highlights that the freedom of trade, commerce, and intercourse is not absolute and can be restricted in certain cases. examples of activities that are not covered under Article 301.
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SARDAR PATEL SUBHARTI INSTITUTE OF LAW
SWAMI VIVEKANAND SUBHARTI UNIVERSITY
SUBJECT: Perspective in Federalism
A PROJECT REPORT ON
Trade Commerce and
SUBMITTED TO: SUBMITTED BY:
Acknowledgement
There are people who simply by being what they are influence you to do things you never thought yourself capable of doing. Among these are my LORD and my PARENTS to whom I wish to extend my gratitude on the event of completing this task. I am deeply grateful to my supervisor, …….. for providing her guidance and support to me throughout my work. Her wide knowledge and her logical way of thinking have been of great value for me. Her understanding, encouraging and personal guidance have provided a good basis for the present project. Her kind support and guidance have been of great value in this study. I owe my most sincere gratitude to my friends , who gave me the opportunity to work with them in the project and gave me untiring help during my difficult moments. I warmly thank them for their valuable advice and friendly help. Their extensive discussions around my work and interesting explorations in operations have been very helpful for this study. I owe my loving thanks with the warm heart and mist of gratitude in eyes. I would like to give my indebtedness to my parents , my sister and my friend; for the encouragement in academic exploration. Without their encouragement and understanding it would have been impossible for me to finish this work. During this work I have collaborated with many colleagues for whom I have great regard, and I wish to extend my warmest thanks to all those who have helped me with my work.
Freedom of trade, commerce, and intercourse Article 301 talks about the freedom of trade, commerce, and intercourse throughout the country. It states that subject to other provisions under Part XIII, the freedom to carry on these activities shall be free. Freedom here means the right to freedom of movement of persons, property, things that may be tangible or intangible, unobstructed by barriers within the state (intra-scale) or across the states (inter-scale). The three main words used in this article are: Trade: 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: 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. Intercourse: 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 can not be implied to have the widest of the meaning when used here. The use of the word ‘free’ in Article 301 does not mean freedom from laws and rules governing the country. There is a clear distinction between the laws obstructing freedom and laws containing rules and regulations for the proper conduction of trade activities in a smooth and easy manner.
Activities which are not trade: Article 301 gives the freedom of trade, commerce, and intercourse but there are certain activities which may be covered under the ambit of the trade, commerce or intercourse activities but are not protected by the freedom guaranteed under Article 301 of the Indian Constitution. 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 extra-commercium (not subject to private ownership or acquisition), and thus are not covered under Article 301. Inter-relation between Article 301 and Article 19(1)(g) ● 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 infringed. ● Article 19(1)(g) contains restrictions to the freedom of carrying an occupation or trade while Article 301 is accompanied by Article 302- which lay down the restrictions to the free flow of trade in the country. However, the restrictions specified in Article 302-307 should have indirect results and should not directly reduce the freedom laid down in Article 19(1)(g). Article 301 is thus considered an explanatory provision to Article 19(1)(g) and also has a more limited scope than Article 19(1)(g) because it is only concerned about the flow of goods and services. ● It is also often argued that Article 301 is the right available for trade as a whole whereas Article 19(1)(g) is the right for individuals. However, this is not true. Article 301 is derived from Section 92 of the Australian Constitution and hence this right is available to individuals as well. ● Thus both of them can be said to be interrelated in some aspects. They also can be seen as interrelated concepts at the time of emergency. At the time of emergency, rights under Article 19(1)(g) are suspended. At that time the court looks forward to the rights provided under Article 301 to check whether any violation has occurred or not.
Restrictions on trade, commerce, and
intercourse among States:
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 fulfill 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. Freedom of trade, commerce and intercourse is not absolute: Even though Article 301 provides that trade, commerce and intercourse should be free throughout the territory India, this freedom is not absolute in nature. It means that certain restrictions can be imposed on this freedom and such restrictions will no be violative of the provisions under Article 301. These restrictions have been mentioned in Part XIII of the constitution and even Article 301 provides that this freedom is subjected to the provisions of this part. Parliament has been provided with the power to impose some restrictions on the free flow of goods under Article 302 of the Indian Constitution and such a power is subject to the provisions of Article 303. Under Article 302, the Parliament can restrict the freedom of trade between different states, if it is necessary for the public interest. This restriction can be applied on any State or it may also be placed in any part of the territory of India. In the case of Prag Ice & Oil Mills v. Union of India, it was held by the Supreme Court that even though Article 302 does not speak about reasonable restrictions, but still the restrictions which can be imposed under this Article should have a reasonable nexus with the public interest for which the restriction is placed.
While the Parliament has the power to impose restrictions on the freedom of trade in any State or part of the territory of India, this power is subjected to the provisions of Article 303 of the Indian Constitution which provides that the Parliament cannot impose a restriction on any State in favour of another State. It means that no discriminatory restriction can be made by the Parliament which gives benefit to one State while the other States are excluded from such benefit. But clause 2 of Article 303 provides that in case of scarcity in a State, the Parliament can be allowed to impose such discriminatory restrictions so that the State which is facing the problem of scarcity can overcome it. Article 304 of the Indian Constitution provides some powers to the State Legislatures for imposing some restrictions on the freedom of trade. Under this Article, the legislature of a State can charge tax on the goods which are imported from other States, if such tax is charged on the similar goods which are produced in that State.
Appointment of authority for carrying out the purposes of Articles
301 to 304:
Article 307 under Part XIII permits the Parliament to designate such authority as it deems fit for carrying out the provisions laid down in Articles 301, 302, 303 and 304. The Parliament can also bestow such authorities with functions and powers as it feels are required.
The relation between Article 301 and 19(1)(g):
There is a complex relationship which exists between Article 301 and 19(1)(g). While both provide the right of trade and commerce, there have been arguments which state that the rights under Article 301 are for the trade as a whole whereas, the right under Article 19(1)(g) is provided only to the individual. But this view is wrong and it cannot be maintained because Article 301 is derived from Section 92 of the Australian Constitution which includes the rights of the individual as well. So, the relation between the two cannot be explained, they both are interrelated because, during the proclamation of emergency, the rights under Article 19 are suspended and in such cases the Courts can look towards the provisions of Article 301 for finding out if any violation of freedom of trade has taken place or not. So, it can be said that both these articles are interrelated with each other.
Judgment: 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(b).
The state of Mysore vs Sanjeeviah (1967)
Facts: In the case of the State of Mysore v/s Sanjeeviah , the government under the
Mysore Forest Act, 1900, made a law banning the movement of forest produce between sunrise and sunset.
Issue: Whether it was violative of the freedom guaranteed Article 301 of the
Constitution?
Judgment: The Supreme Court held the law void. It remarked that such a law was
restrictive and not regulatory thus violative of the freedom provided under Article
G.K.Krishna vs State of Tamil Nadu (1975)
Facts: In the case of G.K Krishna v/s State of Tamil Nadu , a govt notification under
Madras Motor Vehicles Act was issued, increasing the motor vehicle tax on omnibuses from Rs 30 to Rs 100. The government’s argument while imposing this tax was that this was done to stop the unhealthy competition between omnibuses and regular stage carriage buses and to reduce the misuse of omnibuses.
Issues: The petitioner in his argument questioned:
● whether the tax was compensatory or regulatory?
● whether it was a barrier to the freedom of trade, commerce, and intercourse or not?
Judgment: The Supreme Court held that the tax on carriage charges was of
compensatory or regulatory nature and was not therefore violative of the freedom guaranteed under Article 301. The Courts while explaining its rationale behind the judgment said that these taxes are not barriers but a medium that facilitates trade. A tax to become a prohibited tax must be first a direct tax. A direct tax is a tax that infringes the transmission of goods or services in a trade or business. The Court, however, presented its view in this regard that no citizen has the right to engage in any service without reimbursing the State for the special service. Here, in this case, safe and efficient roads are required for the smooth running of vehicles. The maintenance of such roads will cost the money of the Government and the use of public motor vehicles stands in direct relation to it. Therefore the imposing of tax should not seem unreasonable i.e. making of a special contribution over and above the contribution generally provided by the taxpayers to the state. The increase in tax was thus held correct and valid in the eyes of law.
Table of Contents:
Acknowledgment
Introduction
● Objective of such provisions
Freedom of Trade, Commerce and Intercourse
● Activities which are not trade
Restrictions to Trade and Commerce
● States power to regulate Trade and Commerce
Restrictions on Trade, Commerce and Intercourse among states
● Freedom of trade and commerce is not absolute ● Appointment of authority for carrying out the purpose of Article 301 to 304 ● Relationship between Article 301 and 19(1)(g)
Landmark Judgements
Conclusion
Bibliography
Bibliography:
● https://indiankanoon.org/doc/121190/ ● https://legislative.assam.gov.in/sites/default/files/swf_utility_folder/department s/legislative_medhassu_in_oid_3/menu/document/The%20Assam%20Taxatio n%20%28on%20goods%20carried%20by%20Roads%20or%20Inland%20Wa terways%29%20%28Amdt.%29%20Act%2C%201954..pdf ● https://blog.ipleaders.in/freedom-trade-commerce-intercourse-articles-301- 7-indian-constitution/ ● https://blog.ipleaders.in/trade-and-commerce/#:~:text=Article%20301%20of% 20the%20Indian,the%20transportation%20of%20these%20goods. ● Books: - ● # Jain, M.P., Indian Constitutional Law, 738, (Nagpur: Wadhwa & Co., 1987, 4th edition, reprint 2002). ● # Pandey, Dr. J.N., The Constitutional Law of India, (Central Law Agency, 48th edition, 2011) ● # Saharay, H.K., The Constitution of India, (Kolkata, Eastern Law House,3rd Edition). ● # Manohar, Sujata V., Constitutional Law of India, (Lucknow, Eastern Book Company, Third Edition, 2010). ● # Basu, D.D., Shorter Constitution of India, (Nagpur, Lexis Nexis Butterworths Wadhwa, 14th Edition reprint, 2010). ● # Kashyap, Subhash C., Constitutional Law of India, (Universal Law Publishing Co., 2008).