Trade, Commerce and Intercourse (Articles 301–307)

Part XIII of the Constitution of India — Articles 301 to 307 — is the chapter that holds the Indian economic union together. Article 301 declares that trade, commerce and intercourse throughout the territory of India shall be free; the provisions that follow then carve out the legitimate spaces in which Parliament and the State Legislatures may regulate, restrict or tax that freedom. The architecture is best read as a single instrument: a sweeping declaration of free internal commerce in Article 301, qualified by carefully drawn permissions in Articles 302 to 305, with Articles 306 (now omitted) and 307 dealing with residual and institutional matters.

For the judiciary aspirant, the chapter is doctrinally rich and litigation-heavy. The Atiabari–Automobile Transport–Jindal Stainless trilogy — drawn from the canon of landmark constitutional cases — maps the doctrinal swings on whether a tax can be a "restriction" on trade and, if so, on what footing it can be saved. Layered above that is a smaller cluster on regulatory measures, the prohibition on inter-State discrimination, the Presidential-sanction proviso and the saving of pre-Constitution monopoly laws. This chapter on the Constitution of India walks through the scheme article-by-article, integrates the leading authorities, and isolates the exam-angle distinctions examiners reach for again and again.

Article 301 — the freedom declared

Article 301 reads: Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free. The opening words anchor the entire Part. The freedom is real but conditional — conditional on the permissions worked out in Articles 302 to 305.

Three propositions about the scope of Article 301 are settled. First, the object of the freedom is to ensure that the economic unity of India is not broken up by internal barriers — Atiabari Tea Co. v. State of Assam (1961). Second, the freedom extends not only to inter-State movement but also to intra-State transactions and movements — State of Madras v. Nataraja Mudaliar (AIR 1969). Third, Article 301 imposes a limitation upon the exercise of legislative power, whether by the Union or by a State — Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (AIR 1962).

Although Article 301 is positively worded, in effect it is negative: it is freedom from such laws as restrict or affect the activities of trade, commerce and intercourse — not freedom from all laws. Jindal Stainless Ltd. (2) v. State of Haryana (2006) explained that Article 301 refers to freedom from laws which go beyond regulation, and which burden, restrict or prevent trade movement between States and within a State.

Article 301 and Article 19(1)(g)

There is a prima facie overlap between Article 301 and Article 19(1)(g), because both concern the freedom to trade. The doctrinal differences are two. Article 19(1)(g) confers a fundamental right; Article 301 confers a justiciable right which is not a "fundamental" right (Atiabari Tea Co., 1961). Article 19(1)(g) is confined to citizens; Article 301 extends to all individuals — including non-citizens and corporations. Aspirants studying the broader scheme of Article 19 freedoms should keep this overlap in mind: the same impugned law can attract both heads of challenge with different consequences for standing and remedy.

Before the Automobile Transport case, High Courts had broadly taken the view that Article 19(1)(g) looked at freedom from the individual's standpoint while Article 301 looked at it from the standpoint of geographical barriers — Moti Lal v. Government of Uttar Pradesh (AIR 1951). The majority in Automobile Transport rejected so simple a divide. Article 301, the Court held, is also concerned with the individual's freedom from restrictions, not necessarily geographical, but because regulatory measures are outside its purview, the scope of the two provisions is not identical. The freedom under both Articles is subject to restrictions imposed by the State in the collective interest — restrictions which must be reasonable and not arbitrary or excessive (Bishamber Dayal Chandra Mohan v. State of U.P., AIR 1982). The very fact that Article 301 sits within the larger constitutional scheme of enforceable rights and limitations means it must be read alongside its near-cousin in Part III.

"Subject to the other provisions of this Part"

The opening qualification of Article 301 is the gateway through which restrictions enter. The general rule of free trade declared by Article 301 is subjected to restrictions imposed by law: by Parliament under Articles 302 and 303(2), and by the State Legislature under Article 304, subject to the limits in those Articles (Indian Cement v. State of A.P., AIR 1988; State of Bihar v. Harihar Prasad Debuka, AIR 1989). Restrictions cannot be imposed by mere executive action — only by law made by a competent Legislature. The bar on executive action is consistent with the broader scheme governing the Union executive and its relationship with statute.

What "trade, commerce" includes — and what it does not

The expression "trade or business" was given a broad meaning in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax (1955) — a real, substantial and systematic course of activity with a set purpose. But Article 301 protects only lawful trading activity. In State of Bombay v. R.M.D. Chamarbaugwala (AIR 1957) the Supreme Court held that activities which are res extra commercium — gambling, hiring of goondas, trafficking in women — are not "trade" within the meaning of Article 301 at all, so neither Article 301 nor Article 304 has any application to laws suppressing them.

The same reasoning was applied to liquor in State of Punjab v. Devans Modern Breweries Ltd. (2004): the permissive privilege to deal in liquor is not a "right", the levy charged for parting with that privilege is neither a tax nor a fee, and Articles 301–304 are inapplicable to liquor trade because liquor is a noxious substance injurious to public health, order and morality. Har Shankar v. Deputy Excise Commissioner (AIR 1975) had earlier stated the result bluntly — restrictions on liquor trade are valid even if Article 304(b) is not satisfied.

Examples of measures held to facilitate trade rather than impede it include traffic regulation (G.K. Krishnan v. State of T.N., AIR 1975), licensing of vehicles, marketing and health regulations, price control, economic and social planning, and prescription of minimum wages (Nataraja Mudaliar, AIR 1969). These cannot be challenged under Article 301 unless they are colourable measures designed to restrict free flow. Sales tax as such, or even a higher rate of sales tax in one State than in a neighbouring State, does not by itself violate Article 301 (Sodhi Transport Co. v. State of U.P., AIR 1986; Vrajlal Manilal & Co. v. State of M.P., AIR 1986). The general test, as crystallised in Nataraja Mudaliar, is the "direct and immediate effect" test: once a restriction is found not to be regulatory but to interfere directly with the flow of trade, it offends Article 301 — whether at the State frontier or at any stage prior or subsequent.

Taxation and Article 301 — the great trilogy

The single most exam-relevant doctrinal arc in Part XIII concerns the relationship between taxation and the freedom under Article 301. The judicial position has gone through three large turns.

Atiabari (1961) — the movement test

In Atiabari Tea Co. v. State of Assam (1961) a five-judge Bench, by majority, held that Article 301 has primarily the movement part of trade in mind: when Article 301 says trade shall be free throughout the territory of India, it is the movement and transport of goods that must be free, subject only to the exceptions provided by the other Articles of Part XIII. The Assam Taxation on Goods Carried by Roads or Inland Waterways Act, 1954 was struck down because its purpose was to collect taxes on goods solely on the ground that they were carried by road or inland waterways within the State — a direct restriction on free movement. Even the State's plea that the levy was meant to maintain roads did not save it: that object could be achieved only by complying with Article 304(b), which had not been done.

Automobile Transport (1962) — the regulatory and compensatory carve-out

A seven-judge Bench in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (AIR 1962) reconsidered Atiabari. By a majority of four, the Court upheld the Rajasthan Motor Vehicles Taxation Act, 1951 — the Act levied a tax for the maintenance of roads, and was held to be a compensatory or regulatory tax not hindering trade. The Court accepted the broader Atiabari reading subject to a clarification: regulatory measures, and measures imposing compensatory taxes for the use of trading facilities, do not come within the purview of the restrictions contemplated by Article 301 and need not comply with the proviso to Article 304(b). This refinement gave rise to a long line of cases applying the compensatory-tax theory. Bhagatram Rajeev Kumar v. Commissioner of Sales Tax, M.P. (1995) loosened the test still further, treating the existence of "some connection" between the tax and the facilities extended to dealers as sufficient — even an indirect link, such as the revenue being passed to local bodies for municipal services, was enough. State of Bihar v. Bihar Chamber of Commerce (1996) followed Bhagatram to uphold a Bihar entry tax.

Jindal Stainless (2006) — quantifiable benefit, then rejection

A five-judge Bench in Jindal Stainless Ltd. (2) v. State of Haryana (2006) repudiated the "some connection" test of Bhagatram. The Court held that whenever a law is impugned as violative of Article 301, the impugned enactment must facially indicate quantifiable data on which the compensatory tax is sought to be levied — the benefit must be measurable. Bhagatram and Bihar Chamber of Commerce were overruled. For roughly a decade thereafter, the "quantifiable benefit" test was the exam-line answer for the compensatory-tax question.

Jindal Stainless (2016) — the nine-judge re-set

The decisive shift came when a nine-judge Bench in Jindal Stainless Ltd. v. State of Haryana (2016) reconsidered the entire architecture. Seven of the nine judges held, broadly, as follows. Taxes are not within the contemplation of Part XIII at all — the word "free" in Article 301 does not mean "free from taxation". Only such taxes as are discriminatory in nature are prohibited, and only by Article 304(a). A non-discriminatory tax is therefore not an infraction of Article 301. Clauses (a) and (b) of Article 304 are to be read disjunctively — a levy that violates Article 304(a) cannot be saved even if Article 304(b) or its proviso is satisfied. The compensatory tax theory itself — evolved in Automobile Transport and recast in the 2006 Jindal decision — has no juristic basis and is rejected. Atiabari, Automobile Transport, the 2006 Jindal Stainless decision and all the judgments that followed those pronouncements stand overruled to the extent of the reliance.

Two further propositions of the 2016 Bench have direct exam value. First, a tax on entry of goods into a local area for use, sale or consumption is permissible even if similar goods are not produced within the taxing State — settling a point on which the earlier case-law had vacillated. Second, Article 304(a) frowns upon "discrimination of a hostile nature in the protectionist sense" and not on mere differentiation; incentives and set-offs granted to a specified class of dealers for a limited period of time in a non-hostile fashion, with a view to developing economically backward areas, do not violate Article 304(a). The result, post-2016, is that the analytical pathway has been simplified. For a State tax challenged under Part XIII, the central question is no longer whether the tax is regulatory or compensatory, but whether it is discriminatory in the constitutional sense within the meaning of Article 304(a).

Regulation versus restriction — the working distinction

Even apart from Articles 302 to 305, both the Union and the State Legislatures have power to exercise legitimate regulatory control over trade and commerce, which does not amount to a "restriction" at all. Legitimate regulation does not infringe the freedom under Article 301 — see Manick Chand Paul v. Union of India (AIR 1984) and Malwa Bus Service (Pvt.) Ltd. v. State of Punjab (AIR 1983). The distinction between regulation and restriction is therefore the threshold question: while restrictions obstruct the freedom of inter-State movement, regulations promote it.

Measures held regulatory include police regulations such as lighting and rules of the road, licensing provisions with compensatory fees, and provision of necessary services to enable free movement — all from the Automobile Transport majority. Measures held to be restrictions, on the other hand, include a rule which totally prohibits the movement of certain goods during a specified period, and any rule which directly hinders the free flow of trade between any two parts of India — including the prohibition of any class of commercial transactions such as forward contracts (Koteswar Vittal Kamath v. K. Rangappa Balig & Co., AIR 1969).

A separate doctrinal distinction is between regulation and prohibition. The former is valid; the latter cannot be a "reasonable restriction". A rule which totally prohibits the movement of forest produce between specified hours is bad (State of Mysore v. H. Sanjeeviah, AIR 1967); a rule which permits transport subject to a permit obtained from a specified officer, in pursuance of the directive in Article 51A(g) — one of the fundamental duties in Part IVA — is good (Aramachine & Lakri Vikreta Sangh v. State of Rajasthan, AIR 1992). Where the State imposes a total ban, the burden is on the State to show that despite the ban the measure is in substance a regulation, or alternatively a reasonable restriction within Article 304(b) — held in State of Tamil Nadu v. Sanjeetha Trading Co. (AIR 1993).

Article 302 — Parliament's power to restrict

Article 302 says that 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. The power is wide, but it is bounded by Article 303 — Parliament cannot, in exercise of this power, give preference to one State over another, except in a situation of scarcity of goods in any part of India [Article 303(2)]. Examples of legislation placed under Article 302 include the Defence of India Act, 1962 and the Rules under it (Surajmal Roopchand & Co. v. State of Rajasthan, AIR 1967); Section 8(2)(b) of the Central Sales Tax Act, 1956 (State of T.N. v. Sitalakshmi Mills, AIR 1974); and the Mines and Minerals (Regulation and Development) Act, 1957 (State of T.N. v. Hind Stone, AIR 1981).

"In the public interest" — the ceiling on Article 302

Even where a law imposes a direct burden on the freedom under Article 301, it can be saved by Article 302 if it is required in the public interest — for example, to prevent evasion of tax, or to canalise inter-State trade through registered or licensed dealers (Sitalakshmi Mills, AIR 1974; Chandrakant Saha v. Union of India, AIR 1979). The nexus of the law with the public interest must be reasonable, even though the word "reasonable" is not used in Article 302 — see Prag Ice and Oil Mills v. Union of India (AIR 1978). Aspirants who have already worked through the federal scheme in our chapter on the Centre-State legislative relations will recognise this as one of the few constitutional levers that allow the Union, by ordinary law, to override State-level commerce.

Article 303 — the prohibition on inter-State preference

Article 303(1) is the non-discrimination ceiling: notwithstanding Article 302, neither Parliament nor the State Legislature may make any law giving preference to one State over another, or making 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. Article 303(2) carves out an exception in favour of Parliament alone — in a scarcity situation, Parliament may declare a discriminatory or preferential law necessary.

The mere imposition of a tax by a State Legislature does not amount to preference or discrimination vis-à-vis another State merely because rates of tax differ across States (State of Kerala v. A.B. Abdul Kadir, 1969). Preference or discrimination arises only when goods produced in another State are taxed while similar goods produced in the taxing State are exempted (State of Rajasthan v. Mangilal Ghasi Ram, 1969). On that footing, a notification reducing the rate of tax on inter-State sale of cement effected by local dealers was upheld in Shree Digvijay Cement Co. Ltd. v. State of Rajasthan (2000); but a State law prohibiting the sale of lottery tickets of other States while promoting its own lottery was held discriminatory and violative of Article 303 in B.R. Enterprises v. State of U.P. (1999). Article 304(a) authorises a State to impose non-discriminatory taxes on imported goods — if the tax is in fact discriminatory, the law is hit by Article 303(1) (Weston Electronics v. State of Maharashtra, AIR 1989).

Article 304 — what the State may do

Article 304 opens with a non-obstante clause to both Article 301 and Article 303. The State Legislature may, by law: (a) impose on goods imported from other States or Union Territories any tax to which similar goods manufactured or produced in that State are subject, so however as not to discriminate between the imported and the locally produced goods; 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. The proviso says that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the State Legislature without the previous sanction of the President. The conditions of Article 304 are attracted only after it is first held that the State law in question offends Article 301 or 303 — see Video Electronics Pvt. Ltd. v. State of Punjab (AIR 1990).

Clause (a): non-discriminatory taxation of imports

Clause (a) subordinates the principle of free inter-State trade to the State's power to tax imported goods, provided no discrimination is made in favour of similar locally produced goods (Mehtab Majid & Co. A.T.B. v. State of Madras, AIR 1963). The clause is not confined to imposts at the border; it applies to all taxes on goods, including sales tax (Nataraja Mudaliar, AIR 1969). Under clause (a), "discrimination" means an intentional and purposeful differentiation that creates economic barriers, with an element of unfavourable bias. Action that furthers the economic development of the whole of India by removing economic barriers is not discriminatory (Video Electronics, AIR 1990).

The discrimination test is sensitive to actual effect. A higher rate on imported goods is plainly discriminatory; so is taxing the same rate on differently-priced goods, or taxing ingots manufactured from out-of-State scrap while exempting ingots from locally purchased scrap (Andhra Steel Corporation v. Commissioner of Commercial Taxes in Karnataka, AIR 1990). On the other hand, where the rate of tax takes account of differences in price or processing costs (Mehtab Majid, AIR 1963), or where the formal rate is the same but the burden falls more heavily on imported goods because of differences in local conditions (Associated Tanners v. C.T.O., AIR 1987), there is no discrimination. Concessions for goods manufactured in comparatively under-developed States such as Goa do not violate Article 304(a) because they further the constitutional objective of balanced economic development (Video Electronics, AIR 1990). The 2016 nine-judge Bench in Jindal Stainless confirmed that a tax on entry of goods into a local area for use, sale or consumption is permissible even if similar goods are not produced within the taxing State. The connection between this point and the wider scheme of Centre-State fiscal architecture is worth noting: Article 304(a) is the federal protection from one State weaponising its taxing power against the products of another.

Clause (b): reasonable restrictions and Presidential sanction

Clause (b) confers a power on the State Legislature similar to that of Parliament under Article 302, with three differences. First, while Article 302 is subject to the non-discrimination prohibition in Article 303(1) (unless Parliament uses the scarcity exception), the State's power under Article 304(b) is expressly free from Article 303(1) by virtue of the opening non-obstante clause. Second, while Parliament's power to impose restrictions under Article 302 is not subject to the requirement of reasonableness, the State's power under Article 304(b) is expressly subject to that requirement. Third, exercise of the power under Article 304(b) requires previous Presidential sanction. The Court explained these three differences in Jindal Stainless Ltd. (2) (2006).

The tests of reasonableness under Article 304(b) are the same as those used under Article 19(6) (Tika Ramji v. State of U.P., 1956). Reasonableness is judged in light of the public interest the restriction seeks to serve — typically protection of public health, safety, morals and property within the territory (Kalyani Stores v. State of Orissa, AIR 1966). A restriction that does not impede goods movement but only facilitates passage — a transit pass (Sodhi Transport Co., AIR 1986), a despatch certificate (Hans Raj Bagrecha v. State of Bihar, 1971), or a permit disclosing particulars of the goods (Harihar Prasad Debuka, AIR 1989) — is not unreasonable merely because it causes some inconvenience. A restriction is also not unreasonable merely because it is retrospective in operation, even if the retrospective period is long (Khyerbari Tea Co. Ltd. v. State of Assam, AIR 1964). Equally, where the restriction in fact directly and immediately affects the free movement of trade, no question of reasonableness under Article 304(b) can arise (K.P. Govindan v. State of Kerala, AIR 1978) — the law fails at the threshold. The onus of showing that a restriction is in the public interest and is reasonable lies on the State (A. Hajee Abdul Shukoor & Co. v. State of Madras, AIR 1964).

The proviso to Article 304(b) — Presidential sanction

The proviso to clause (b) requires that no Bill or amendment for the purposes of clause (b) be introduced or moved in the State Legislature without the previous sanction of the President. The defect of want of previous sanction may, however, be cured if the Bill subsequently receives the President's assent under Article 255 (Atiabari Tea Co. v. State of Assam, AIR 1961). Both a Bill and an amendment introducing a restriction within Article 304(b) require sanction; but where the principal Act has been sanctioned, an amendment which merely varies the form of restriction without adding to it does not require fresh sanction (Subodhaya Chits Fund Pvt. Ltd. v. Director of Chits, AIR 1991). Importantly, the proviso applies only to clause (b). A levy that violates clause (a) by imposing a discriminatory tax cannot be saved even if the procedure under clause (b) or its proviso is satisfied — the 2016 nine-judge Bench in Jindal Stainless made this explicit.

Article 305 — saving of existing laws and State monopolies

Article 305, as it stands after the Constitution (Fourth Amendment) Act, 1955, has two limbs. First, nothing in Articles 301 and 303 affects the provisions of any "existing law", except in so far as the President may by order otherwise direct. Second, nothing in Article 301 affects the operation of any law made before the commencement of the Fourth Amendment in so far as it relates to State monopolies, or prevents Parliament or a State Legislature from making any law of the kind referred to in Article 19(6)(ii). The amendment was prompted by Saghir Ahmed v. State of U.P. (1955), which raised but did not decide whether a State monopoly law could conflict with Article 301. The effect, as the Statement of Objects explained, was to make the U.P. Road Transport Act and similar existing State-monopoly laws immune from challenge under Articles 301 and 303 — see Jain Transport and General Trading Co. v. State of U.P. (AIR 1957).

The expression "existing law" is to be read with the definition in Article 366(10), which is confined to an Act passed or subordinate legislation made before the commencement of the Constitution. An Act passed before commencement but brought into force after the Constitution remains an existing law — P.P. Kutti Keya v. State of Madras (AIR 1954). But subordinate legislation must have been issued before 26 January 1950 to qualify as existing law (Sanjeeviah, AIR 1967). Examples of pre-Constitution Acts saved by Article 305 include the City of Bangalore Municipal Act, 1948, the East Punjab Motors Control Act, 1948, the Motor Vehicles Act, 1939, and the Punjab Excise Act, 1914 (recently confirmed in Devans Modern Breweries, 2004). The Court in Punjab Traders v. State of Punjab (AIR 1990) held that a clarificatory amendment of an existing law remains protected by Article 305 and does not require Presidential assent under Article 304(b); but if the amendment contains additional provisions that enlarge the scope of the principal Act so as to constitute fresh impediments to free flow, it is unconstitutional in the absence of previous Presidential sanction.

Article 306 — omitted; Article 307 — the Authority that never was

Article 306, which dealt with the power of certain States in Part B of the First Schedule (the former princely States) to impose restrictions on trade and commerce, has been omitted — a piece of constitutional housekeeping covered more fully in the chapter on amendment procedure under Article 368. Article 307 remains: it authorises Parliament to appoint such authority as it considers appropriate for carrying out the purposes of Articles 301 to 304, and to confer on that authority such powers and duties as it thinks necessary. Parliament has not in fact created any such authority. The question is examined regularly in policy literature on India as a single market — but on the constitutional side, Article 307 sits dormant and is most often examined in the negative form: "Has Parliament created an authority under Article 307?"

Remedies and the consolidated picture

The freedom under Article 301 is not a fundamental right. Its infringement therefore cannot be challenged by a petition under Article 32 — the principal remedy under the chapter on constitutional remedies (Sanjeeviah, AIR 1967). But the individual is not without remedy: legislative or executive action that offends Article 301 can be challenged under Article 226 of the Constitution — typically by way of one of the prerogative constitutional writs issued by the High Court (see Vrajlal Manilal & Co., AIR 1986; G.K. Krishnan, AIR 1975). The doctrine of severability applies where a statutory provision violates Article 301 or Article 304 (Mangilal Ghasi Ram, 1969).

For revision purposes, the limitations on the freedom under Article 301 collect as follows: non-discriminatory restrictions imposed by Parliament under Article 302 — see our chapter on the Union Legislature for the lawmaking architecture; discriminatory or preferential provisions for scarcity under Article 303(2); non-discriminatory State taxes on imported goods under Article 304(a); reasonable restrictions imposed by a State under Article 304(b) subject to previous Presidential sanction; and restrictions imposed by existing law saved by Article 305. None of these powers can be exercised by mere executive order. This entire architecture interlocks with the ordinary federal allocation of powers — best read alongside our chapter on the distribution of legislative powers, where the substantive entries in the Lists supply the legislative competence and Part XIII supplies the trade-and-commerce filter through which any exercise of that competence must pass.

Exam-angle distinctions

Several distinctions repeatedly appear in objective questions and short-answer prompts. Regulation versus restriction: regulation facilitates trade and falls outside Article 301, while a restriction obstructs trade and must be justified under Articles 302 to 305. Restriction versus prohibition: a restriction can be reasonable; a total prohibition is hard to defend as a reasonable restriction unless its character can be proved to be regulatory in substance. Article 19(1)(g) versus Article 301: the former is a fundamental right of citizens, the latter a justiciable but non-fundamental right available to all individuals. Article 302 versus Article 304(b): both are powers to impose restrictions in the public interest, but only Article 304(b) imports an express requirement of reasonableness and a Presidential-sanction proviso. Article 303 versus Article 304(a): 303 prohibits inter-State preference at the level of any law made under a Seventh-Schedule entry on trade and commerce, while 304(a) permits non-discriminatory State taxation of imported goods — a discriminatory State tax is bad both under 303(1) and 304(a). Atiabari versus Jindal 2016: Atiabari's movement test and Automobile Transport's compensatory carve-out have been overruled to the extent indicated; the present test for State taxation under Part XIII is the disjunctive Article 304(a)/(b) test laid down by the nine-judge Bench.

One frequently missed point: the res extra commercium doctrine takes activities like liquor and gambling entirely out of Part XIII; an Article 304(b) defence then never arises because Article 301 is not engaged. Another point: Article 304(b) requires previous sanction of the President, but the defect is curable by subsequent assent under Article 255. Articles 301 to 307 form a self-contained chapter on the constitutional protection of the Indian internal market — best read alongside the chapter on the State executive for a full picture of the federal scheme.

Frequently asked questions

Is the freedom under Article 301 a fundamental right?

No. The Supreme Court in Atiabari Tea Co. v. State of Assam (1961) held that Article 301 confers a justiciable right but it is not a fundamental right. The practical consequence is that a person aggrieved by an infraction of Article 301 cannot invoke Article 32, but may approach the High Court under Article 226. The freedom is also wider in personal scope than Article 19(1)(g) — Article 301 extends to all individuals, including non-citizens and corporations, while Article 19(1)(g) is confined to citizens.

After the 2016 nine-judge ruling in Jindal Stainless, is the compensatory tax doctrine still good law?

No. The nine-judge Bench in Jindal Stainless v. State of Haryana (2016) expressly rejected the compensatory tax theory as having no juristic basis and overruled the relevant portions of Atiabari (1961), Automobile Transport (1962) and the 2006 Jindal Stainless decision. The Court held that taxes are not within the contemplation of Part XIII at all, and that the word free in Article 301 does not mean free from taxation. The current test for State taxation under Part XIII is Article 304(a) — only discriminatory taxes are prohibited.

Does Article 301 protect intra-State trade or only inter-State trade?

Article 301 protects both. The Supreme Court in State of Madras v. Nataraja Mudaliar (1969) held that the freedom under Article 301 extends not only to inter-State but also to intra-State transactions and movements. The economic union of India is the object of the Article. Although the bulk of the case-law has involved inter-State movements, the constitutional reach of Article 301 covers both. Article 304(b) reflects the same principle by speaking of restrictions with or within that State.

What is the difference between regulation and restriction under Part XIII?

Regulation facilitates the movement of trade — police regulations such as lighting and rules of the road, licensing with compensatory fees, and provision of necessary services for free movement — and falls outside Article 301 altogether. A restriction, by contrast, obstructs the freedom of inter-State movement and must be justified under Article 302 (by Parliament, in the public interest) or Article 304(b) (by a State, as a reasonable restriction in the public interest, with previous Presidential sanction). The Automobile Transport (1962) majority drew this line and successive Benches have applied it.

What is the previous-sanction requirement under the proviso to Article 304(b)?

The proviso says that no Bill or amendment for the purposes of Article 304(b) shall be introduced or moved in a State Legislature without the previous sanction of the President. The defect of want of previous sanction is, however, curable: if the Bill subsequently receives the President's assent under Article 255, it is treated as validly enacted. Note two points: the proviso attaches only to clause (b) and not to clause (a); and an amendment which is merely clarificatory or which varies the form of an already-sanctioned restriction without adding to it does not require fresh sanction.

Can a State law that is discriminatory under Article 304(a) be saved by Presidential sanction under Article 304(b)?

No. The 2016 nine-judge Bench in Jindal Stainless held that clauses (a) and (b) of Article 304 are to be read disjunctively. A levy that violates Article 304(a) by imposing a discriminatory tax on goods imported from other States cannot be saved even if the procedure under Article 304(b), or its proviso requiring previous Presidential sanction, has been complied with. The non-discrimination requirement under clause (a) is therefore a hard ceiling for State taxing power, independent of the public-interest and reasonableness analysis under clause (b).

Is the liquor trade protected by Article 301?

No. The Supreme Court in State of Punjab v. Devans Modern Breweries Ltd. (2004) held that Articles 301 to 304 are inapplicable to the liquor trade, because the permissive privilege to deal in liquor is not a right at all and the levy charged for parting with that privilege is neither a tax nor a fee. The reasoning rests on the res extra commercium doctrine first applied to gambling in State of Bombay v. R.M.D. Chamarbaugwala (1957). Liquor is treated as a noxious substance injurious to public health, order and morality, and so falls outside the scope of Article 301 at the threshold.