The Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan and Others (1962)

Case Summary: The Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan and Others (1962)

Case Stats

Court	Supreme Court of India
Case No.	Appeal (civil) 42 of 1959
Date of Decision	09-04-1962
Bench	Full Bench
Hon'ble Judges	S. K. Das, J; N. Rajagopala Ayyangar, J; M. Hidayatullah, J; K. Subba Rao, J; J. R. Madholkar, J; J. L. Kapur, J; A. K. Sarkar, J
Acts Referred	Constitution of India — Art. 1, Art. 19(1), Art. 132, Art. 248, Art. 265, Art. 276, Art. 285, Art. 287, Art. 288, Art. 301, Art. 302, Art. 303, Art. 304; Rajasthan Motor Vehicles Taxation Act, 1951 — §4, §11; Rajasthan Motor Vehicles Taxation Rules, 1951 — Rule 23; Constitution (Seventh Amendment) Act, 1956 — §29
Citations	AIR 1962 SC 1406; (1963) 1 SCR 491
Advocate	G. C. Kasliwal
Final Decision	Overruled — Rajasthan High Court's view reversed, tax held violative of Art. 301 unless justified under Art. 304(b)

[Judgment Source] https://www.courtkutchehry.com/Judgement/Search/AdvancedV2?docid=280214

Facts of the Case

Three transport operators challenged the validity of the Rajasthan Motor Vehicles Taxation Act, 1951, arguing that the tax on motor vehicles plying partly outside Rajasthan violated the freedom of trade, commerce and intercourse under Article 301 of the Constitution. The Rajasthan High Court upheld the tax as a reasonable and indirect burden, but granted a certificate for appeal due to the constitutional importance of the issue.

Law Points Raised

• Scope and interpretation of Article 301 — whether it prohibits laws imposing taxes that hinder trade, commerce, or intercourse.
• Distinction between direct and indirect restrictions on trade.
• Applicability of Article 304(b) — whether the impugned tax constitutes a permissible regulatory or compensatory levy.
• Relationship between Articles 301, 302, 303, and 304.
• Effect of the Atiabari Tea Co. judgment on interpretation of trade freedom.

Acts / Provisions / Articles Referred

• Constitution of India — Art. 1, 19(1), 132, 248, 265, 276, 285, 287, 288, 301, 302, 303, 304.
• Rajasthan Motor Vehicles Taxation Act, 1951 — §4, §11.
• Rajasthan Motor Vehicles Taxation Rules, 1951 — Rule 23.
• Constitution (Seventh Amendment) Act, 1956 — §29.

Judgments Referred

Atiabari Tea Co. Ltd. vs State of Assam (1961) — defined 'restrictions' under Article 301 and carved out 'compensatory' taxes as permissible.

Obiter Dicta

Taxes genuinely compensatory in nature, aimed at providing facilities such as road maintenance, do not amount to restrictions on the freedom under Article 301.

Ratio Decidendi

A tax directly and immediately impeding trade, commerce, or intercourse violates Article 301 unless justified under Article 304(b) with Presidential sanction. Compensatory taxes facilitating trade are permissible. The Rajasthan motor vehicles tax was compensatory and valid.

Final Ruling

Supreme Court held that while Article 301 forbids restrictions on trade, compensatory taxes for road maintenance are allowed. The Rajasthan Act's levy was compensatory and thus constitutionally valid.

Summary

The Supreme Court clarified the doctrine of 'compensatory taxes' under Article 301. It held that while taxes that directly hinder trade are prohibited, levies intended to maintain and improve trade facilities are permissible without violating trade freedom. The Rajasthan Motor Vehicles Taxation Act was upheld as a valid compensatory tax.