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Atiabari Tea Company Vs State of Assam

Atiabari Tea Company Vs State of Assam

Reference of Case named Atiabari Tea Company Vs State of Assam is A.I.R. 1961, Supreme Court 232.

Subject – In Atiabari Tea Company Vs State of Assam, it is considered that if an Act contravenes the freedom conferred by the Constitution of India, it is invalid such as the Assam (On the Goods transported through roads or waterways) Tax Act, 1954.


In the case of Atiabari Tea Company Vs State of Assam, Assam Taxation ( On Goods Carried by Road or Inland Waterways ) Act 1954, levies a tax on goods transmitted through Inland Waterways and roads. 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.

Facts of the case named Atiabari Tea Company Vs State of Assam –

The plaintiffs were the owners of Tea-garden in Assam and West Bengal and were doing the trade of Tea in Calcutta. From Calcutta, tea was used to be dispatched for consumption within the country and was also exported to foreign countries and a large quantity of tea was transported through Roads and waterways.

The Legislative Assembly passed the Assam Tax (On the goods transported trough roads and waterways) Act (No. XIII), 1954 with the approval of the governor and enforced it with effect from 01-06-1954. The Act provided for the imposition of tax on the goods transported through roads and waterways. Under Section 7 of the Act, the Tax Commissioner issued certain notifications, requiring the assesses to submit certain statements.


Atiabari Tea Company Vs State of Assam

1. The rationality of The Assam Taxation Ad of 1954 was questioned on the grounds that whether it is violative of Article 301 or not?

2. Whether it could be protected by making it fall under the ambit of Article 304 ( b ) or not?

High Court-

The appellants, on the ground that the Act itself and the notifications issued there were against the Constitution of India, presented a Petition in the High Court under Article 226 of the Constitution, challenging the validity of the Act. It was alleged in the petition that the Act was against the provisions of Article 301 of the Constitution because due to the imposition of tax on the goods transported, the trade-in tea would have been adversely affected.

It was also alleged in the petition that only the Central Government had the right to regulate the production, distribution, and import and export of tea and that this work was out of the jurisdiction of the Assam Legislative Assembly. The Honourable Judges of the High Court observed that under the Constitution the freedom of trade, commerce, and intercourse throughout the whole country is conferred.

They also observed that neither the permission of the President was obtained to introduce the Act in the Legislative Assembly, as required under Article 304(B) of the Constitution, nor was his approval regarding the validity of the Actions taken under Article 225(C). Under these circumstances, the Act contravened the assurance of freedom of Trade and Commerce.

The Honourable Judges, therefore not consider it necessary to think over the other arguments in this case on the basis of the majority of opinions admitted the appeal and the petition with costs. Principles of Law Laid Down- Any Act, obstructing the freedoms conferred under the Constitution of India, is invalid. No Act can be produced in the Legislative Assembly without the permission of the President and can be treated as invalid until it is approved by the President.

JUDGMENT of Atiabari Tea Company Vs State of Assam

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.

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