Automobile Transport (Raj) Ltd. v. State Of Rajasthan, Jaipur

AUTOMOBILE TRANSPORT (RAJ) LTD. V. STATE OF RAJASTHAN

Whether Sections 4 and 11 of the Rajasthan Motor Vehicles Taxation Act, 1951 violate the freedom of trade, commerce, and association guaranteed under Article 301 of the Indian Constitution of 1949?

Freedom of Trade and Commerce: The primary principle at stake is the freedom of trade, commerce, and intercourse throughout India as guaranteed by Article 301 of the Constitution. This provision establishes that trade should be free from restrictions unless justified under specific conditions.
Reasonable Restrictions: The court assessed if the taxation imposed by the Rajasthan Motor Vehicles Taxation Act was a reasonable restriction on the freedom of trade.
Direct vs. Indirect Restrictions: The distinction between direct and indirect restrictions on trade was discussed. The court determined that the tax imposed did not directly obstruct trade but instead had an indirect effect, which was deemed permissible under Article 301.
Public Interest Justification: The court applied the doctrine that laws affecting trade must serve a public interest purpose. In this case, the need for road maintenance and development justified the imposition of taxes on transport vehicles.
Purposive Interpretation: The interpretation of Articles 301 to 304 was significant in this case, particularly regarding how these articles interact with each other concerning state powers to regulate trade and commerce.

The apellants are in the business of operating stagecoaches, and they all have their headquarters in the then state of Ajmer. All three operate on the Nasirabad-Deoli Road, although the Automobile Transport (Raj.) Ltd. also operates between Ajmer and Kishangarh, for which it possessed permission from the erstwhile Ajmer State.
The route from Nasirabad to Deoli was located mostly in the erstwhile state of Ajmer, although for a short distance it also travelled into Rajasthan. Similarly, the route between Ajmer and Kishangarh was partially located in the old state of Ajmer and partially in the state of Rajasthan.
The Regional Transport Officer of Jaipur, who is also the Motor Vehicles Taxation Officer, sought tax from the applicants under the Rajasthan Motor Vehicles Taxation Act (No. XI) of 1951 for the period from April 1, 1951, to March 31, 1954.
The applicants said that they were not obligated to pay this tax, and they filed these writ petitions contesting, among other things, the constitutionality of the Act.
They argued that the taxes violated their freedom of trade and commerce under Article 301.
The High Court dismissed their petitions, holding that the Act did not infringe Article 301.
The matter was appealed to the Supreme Court.

The Supreme Court of India upheld the constitutionality of the challenged Act, concluding that it aligns with the Indian Constitution. The Act was found to be regulatory in nature, as the taxes compensate for services provided, such as road access. The petition was rejected unanimously, with all judges agreeing that the Act is valid.
The Court rejected interpretations suggesting the Act impedes trade, asserting that the taxes are non-discriminatory.
The ruling emphasized that no right is absolute, and freedom of trade can be subject to regulations for public interest. Article 19(1)(d) guarantees the right to free movement, but reasonable restrictions, such as taxes for road use, are permissible.
The Court stated that the taxes levied under the Act are compensatory, intended for road maintenance and construction in Rajasthan. It clarified that Article 301, which ensures the free movement of trade and commerce, does not include freedom from taxes.
The Court distinguished between Articles 302 and 304, noting that restrictions under the former need not be reasonable, while those under the latter must be.
The provisions of the Act regulate motor vehicles’ movement and do not violate the freedom guaranteed by Part XIII of the Constitution.