Subject to the other provisions of this part, trade, commerce and intercourse throughout the territory of India shall be free.
Article 301 enacts the general rule that trade, commerce and intercourse throughout the territory of India shall be free. The freedom declared by article 301 may be defined as a right to free movement of persons or things, tangible or intangible, commercial or non-commercial, unobstructed by barriers, inter-State or intra-State or any other impediments operating as such barriers. All obstructions or impediments, whatever shape they may take to the free flow or movement of trade or non-commercial intercourse offend article 301 of the Constitution.
Welton v. Miss Quri, (1857) 91 US 272. The word 'commerce' was explained by Field J.-
"Commerce is a term of the largest import. It comprehends intercourse for the purpose of trade in any and all its forms including the transportation, purchase, sale and exchange of commodities between the citizen of our country and citizens of different States."
Atiabari Tea Co. Ltd. v. State of Assam, MANU/SC/0030/1960 : AIR 1961 SC 232: ILR 1961 13 Assam 257: (1961) 1 SCR 809. In this case it is held that tax laws are not outside the purview of article 301. In that case, the applicants carried on the business of growing tea and exporting it to Calcutta via Assam. In the course of its passing through the State of Assam, the tea was liable to tax under the Assam Taxation Act, 1954 which imposed tax an goods carried by road or inland waterways in the State of Assam.
The Supreme Court held that the tax imposed on the goods directly restricted their transport or movement and thus offended article 301. The act was, therefore, held void and the State was restrained from levying the tax.
Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, MANU/SC/0065/1962 : AIR 1962 SC 1406: (1962) 2 SCA 35: (1963) 1 SCR 491. The principles followed in this case are-
(a) Article 301 assures freedom of inter-State as well as intra-State trade, commerce and intercourse.
(b) Trade, commerce and intercourse have the widest connotation and taken in movement of goods and persons.
(c) The freedom is not only from laws enacted in the exercise of the powers conferred by the legislative entries relating to trade and commerce or production, supply and distribution of goods, but also to all laws including tax laws.
(d) Only those laws whose direct and immediate effect to inhibit or restrict freedom of trade or commerce will come with the mischief of article 301.
(e) Laws which are menly regulatory or which impose purely compensatory taxes and hence intended to faciliate freedom of trade, are outside the scope article 301.
State of Bombay v. R. M. D. Chamarbaugwala, MANU/SC/0019/1957 : AIR 1957 SC 699: (1957) 2 Mad LJ (SC) 87: 1957 SCJ 607: 1957 SCA 867. Trade and Commerce which are protected by article 301 are only those activities which are regarded as lawful trading activities and are not against the public policy. In this case Supreme Court held that gambling is not trade but res extra commercium.
B.R. Enterprises v. State of Uttar Pradesh, MANU/SC/0330/1999 : AIR 1999 SC 1867: 1999 AIR SCW 1526: JT 1999 (3) SC 431: MANU/SC/0330/1999 : (1999) 9 SCC 700: 1999 (7) SRJ 95: 1999 (4) Supreme 472. The Supreme Court has held that State-run lotteries are not different from private lotteries as regards their gambling nature. They are, therefore, equally excluded from the category of trade or commerce either under article 301 or article 303.
Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest.
Jalan Trading Co. (P) Ltd. v. D.M. Aney, MANU/SC/0267/1978 : AIR 1979 SC 233: 1978 Lab IC 1772: (1979) 3 SCC 220. Section 10 of the Bonus Act, was challenged for violation of articles 19(1)(g) and 301. The Act compelled an employer to pay a minimum statutory bonus to employees even in years in which management sustains losses. The Supreme Court held that the restriction was reasonable and in public interest under articles 19(6) and 302. Referring to DPSP the court said that what is directed by Gounders of the Constiution cannot be regarded as unreasonable or against public interest.
Atiabari Tea Co. Ltd. v. State of Assam, MANU/SC/0030/1960 : AIR 1961 SC 232: ILR 1961 13 Assam 257: (1961) 1 SCR 809. Where Parliament exercise its power under article 302 and passes a law imposing restriction on the freedom of trade in the public interest. Whether or not the given law is in the public interest may not be justiciable and in that case Parliament is given the sole power to decide what restrictions can be imposed in the public interest as authorised by article 302.
(1) Notwithstanding anything in article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule.
(2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making, or authorising the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.
State of Madras v. N.K. Nataraja Mudaliar, AIR 1969 SC 147: (1968) 3 SCR 829: (1968) 22 STC 376. The validity of Central Sales Tax Act, was challenged for violation of article 303(1). The Act provided for levy of sales tax in case of sales to an unregistered dealer at 7% or the rate applicable to sale of such goods in the State, whichever be higher. The tax was thus, to vary from State-to-State. The Supreme Court upheld the validity of the Act on the ground that any act imposing a tax, which was to be collected and retained by States, could not be said to be giving preference to one State over another or discriminating between them.
Notwithstanding anything in article 301 or article 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 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.
State of Madhya Pradesh v. Bhailal Bhai, MANU/SC/0029/1964 : AIR 1964 SC 1006: 1964 Jab LJ 115: (1964) 15 STC 450: 1964 MPLJ 705: (1964) 1 SCWR 793: (1964) 6 SCR 261. The sales tax imposed by the State of Madhya Bharat on tobacco leaves, manufactured tobacco and tobacco used for bidi manufacturing payable at the point of sale by the importer in Madhya Bharat was held to be violative of article 301 or the ground that similar goods manufactured and produced in the state of Madhya Bharat was not subject to the same tax.
Article 305 provides that nothing in articles 301 and 303 shall affect the provisions of any existing law except insofar as the President may direct otherwise. Thus, even if an existing law gives preference to one state over the other or makes discrimination it shall not be invalid.
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