B.A. LL.B. (Five Years) Sem 4 Constitutional Law II 2025 Jun Question Paper with Solutions

For full marks, cover: the object of Part XIII (one economic unit); the words of article 301 and what "trade", "commerce" and "intercourse" cover; the freedom binds both Parliament and the States; the exceptions in articles 302 to 305; the direct restriction test (Atiabari); regulatory measures (Automobile Transport); the present law on taxes (Jindal Stainless, 2016); article 301 compared with article 19(1)(g); a conclusion.

Object of Part XIII

India is a Union of States. Each State has power to tax and to regulate trade. If every State put up barriers at its borders, the country would break into many small markets. Goods would be stopped and taxed at every boundary.

The framers wanted India to be one economic unit. So Part XIII, articles 301 to 307, guarantees the free flow of trade across the whole country. It is a federal safeguard for the national economy.

2. Article 303(1). Neither Parliament nor a State may, under a trade and commerce entry, give a preference to one State over another or discriminate between States.
3. Article 303(2). Parliament alone may do so where the law declares it necessary to deal with a scarcity of goods in any part of India.
4. Article 304(a). A State may tax goods imported from other States or Union territories. The tax must be one that similar local goods also bear, and must not discriminate between the two.
5. Article 304(b). A State may impose reasonable restrictions on trade with or within the State in the public interest. The proviso requires the President's previous sanction before such a Bill is introduced.
6. Article 305. Existing laws are saved, unless the President directs otherwise. Laws creating State monopolies, of the kind in article 19(6)(ii), are also outside article 301.

What counts as a restriction: Atiabari

In Atiabari Tea Co. Ltd v. The State of Assam, AIR 1961 SC 232, decided on 26 September 1960, Assam taxed tea and jute carried by road or inland waterway through the State. The Act was passed without the President's previous sanction under article 304(b). Tea companies challenged it.

The majority held the Act void. It said trade must flow "smooth and unhampered" by any restriction, whether at a State boundary or at any point inside a State. Only a law that directly and immediately restricts the movement of trade is caught by article 301. An indirect or remote effect is not enough. The direct restriction test remains the law for restrictions that are not taxes.

Regulation is not restriction: Automobile Transport

In The Automobile Transport (Rajasthan) Ltd v. The State of Rajasthan, AIR 1962 SC 1406, Rajasthan taxed motor vehicles used in the State. Bus operators said the tax hampered inter-State trade.

4. The compensatory tax theory has no basis and is rejected. Atiabari and Automobile Transport are overruled to the extent they rested on it.
5. Article 304(a) strikes at hostile, protectionist discrimination, not mere differentiation. Time-limited incentives for backward areas can stand.

So an answer today works in two steps. If the measure is a tax, ask only whether it discriminates against goods from other States. If it is not a tax, apply the Atiabari direct restriction test and look for a saving under article 302 or 304(b).

Article 301 and article 19(1)(g) compared

Article 19(1)(g) gives a citizen the right to carry on any trade or business. It is a fundamental right, enforceable under article 32. Article 301 protects the flow of trade itself, against both governments. A company or a non-citizen can rely on it, and it is enforced by ordinary writ or suit. A law may satisfy article 19(6) and still fail under article 304(b) if the President's sanction was not taken.