What did the Supreme Court decide?

The Assam goods carriage tax directly and immediately restricted movement of goods, so it infringed Article 301 and was void for not meeting Article 304(b).

Can a State still tax goods in transit?

Yes, but only if conditions of Article 304(b) are met, including prior Presidential sanction and reasonableness in public interest.

What is the key test from this case?

Whether a measure directly and immediately impedes trade and commerce across India. If yes, Article 301 is triggered.

Did the Court allow discrimination in taxation?

No. Taxes that unfairly burden inter-State movement or favour locals can violate Part XIII and be struck down.

Why is Atiabari famous in constitutional law?

It anchors the freedom of trade doctrine under Article 301 and explains how Articles 302–304 control State restrictions.

Law Easy

01 November, 2025

1101

Atiabari Tea Co. Ltd. v. State of Assam (1961) — Article 301 & 304(b), Free Trade & Tax | The Law Easy

Quick Summary
Issues
Rules
Facts
Arguments
Judgment
Ratio
Why It Matters
Key Takeaways
Mnemonic
IRAC
Glossary
FAQs
Related

Home
Cases
Atiabari Tea Co. Ltd. v. State of Assam (1961)

Atiabari Tea Co. Ltd. v. State of Assam (1961)

Supreme Court of India 1961 AIR 1961 SC Trade & Commerce Arts. 301–304 7 min read

```

Author: Gulzar Hashmi
Location: India
Publish Date: 25 Oct 2025
Primary Keywords: Article 301; Article 304(b); freedom of trade; Part XIII; Assam goods tax
Secondary Keywords: discriminatory taxation; ultra vires; Presidential sanction; direct and immediate restriction; tea transport
Slug: atiabari-tea-co-ltd-v-state-of-assam-1961

```

Quick Nav

Quick Summary Issues Rules Facts Arguments Judgment Ratio Why It Matters Key Takeaways Mnemonic IRAC Glossary FAQs Related

```

Quick Summary

CASE_TITLE: Atiabari Tea Co. Ltd. v. State of Assam (AIR 1961 SC)

PUBLISH_DATE: 25 Oct 2025 | AUTHOR_NAME: Gulzar Hashmi | LOCATION: India

The Supreme Court protected the freedom of trade under Article 301. Assam’s tax on goods carried by road/waterways directly and immediately hit movement of tea. Because the State did not satisfy Article 304(b) conditions (including Presidential sanction), the Act was declared void.

Issues

Did the 1954 Assam Act violate Article 301’s freedom of trade, commerce, and intercourse?
Could the Act be saved under Article 304(b) as a reasonable restriction in public interest with Presidential sanction?

Rules

Freedom of Trade (Art. 301): Inter-State movement must be free from direct and immediate barriers.
Saving Clause (Art. 304(b)): States may impose reasonable restrictions in public interest only with prior Presidential sanction.
Ultra Vires: A State law beyond its constitutional limits or conflicting with central control can be struck down.
No Discrimination: Taxation cannot unfairly burden goods moving out/into the State or favour locals.
Public Interest: Revenue aims must not cripple free trade across India.

Facts (Timeline)

View

Timeline of events in Atiabari Tea case (Assam goods carriage tax)

Tea companies based in Calcutta owned gardens in Assam and West Bengal; large tea consignments moved by road and river.

Assam Act XIII of 1954 came into force on June 1, 1954, taxing goods carried by roads and inland waterways.

Tax Commissioner issued notices under Section 7 seeking returns and statements from assessees.

The companies challenged the Act as violating Article 301; the High Court upheld the Act.

Appeal reached the Supreme Court of India.

Arguments

Appellants (Tea Companies)

The levy directly and immediately obstructs movement of tea—hits Article 301.
Assam failed to comply with Article 304(b) safeguards, including Presidential sanction.
The measure is discriminatory and ultra vires; it distorts inter-State trade.

Respondent (State of Assam)

The tax is a regulatory/compensatory levy to serve public purposes.
It does not target inter-State movement; Article 301 is not triggered.
Even if it restricts trade, it is reasonable in public interest.

Judgment (Held)

View

Judgment concept image for Atiabari Tea case

Act void: The levy directly and immediately impeded movement of goods; Article 301 was violated.
304(b) unmet: No compliance with Presidential sanction and reasonableness test; the Act could not be saved.
Principle affirmed: Freedom of trade is real only if direct barriers are removed; revenue measures must not cripple inter-State flow.

Ratio Decidendi

A law that directly and immediately restricts the movement of goods across India offends Article 301. A State can justify such a restriction only by satisfying Article 304(b) (reasonable restriction in public interest with prior Presidential sanction). Absent that, the law is unconstitutional.

Why It Matters

Protects the national market from State-level barriers.
Sets a clear constitutional test for trade-impacting taxes.
Guides legislatures on using Article 304(b) correctly.

Key Takeaways

Direct Impact

If a levy directly slows goods’ movement, Article 301 is hit.

304(b) Shield

States need prior Presidential sanction and reasonableness.

Ultra Vires

Courts strike down laws beyond constitutional limits.

No Favouritism

Discriminatory taxes that favour locals risk invalidation.

Mnemonic + 3-Step Hook

Mnemonic: “MOVE FREE — OR 304(b)!”

MOVE FREE: Article 301 protects movement of goods.
DIRECT HIT? If restriction is direct and immediate, it violates 301.
304(b) SAVE: Only with prior sanction + reasonableness in public interest.

IRAC Outline

Issue	Rule	Application	Conclusion
Does the Assam goods-carriage tax violate Art. 301 and can it be saved by Art. 304(b)?	Freedom of trade (Art. 301); saving via 304(b) needs prior Presidential sanction and reasonableness.	The levy directly and immediately burdens inter-State movement of tea; no 304(b) compliance shown.	Act is void for violating Art. 301; it is not saved by Art. 304(b).

Glossary

Article 301: Guarantees freedom of trade, commerce, and intercourse throughout India.
Article 304(b): Allows States to impose reasonable restrictions in public interest with prior Presidential sanction.
Ultra Vires: Action beyond the power granted by law; unconstitutional or invalid.