What did Article 301 protect in this case?

Article 301 protects free trade, commerce, and intercourse throughout India. It does not create freedom from all taxes; reasonable, compensatory charges are allowed.

Why was the Rajasthan tax upheld?

The tax was compensatory. It paid for road maintenance and facilities used by transport operators, so it regulated rather than restricted trade.

What is the direct vs indirect restriction test?

A direct restriction targets trade itself and is presumptively invalid under Article 301. An indirect, incidental effect—like a road-use fee—can be valid.

How do Articles 302 and 304 fit in?

Article 302 lets Parliament impose restrictions (not necessarily reasonable). Article 304 allows States to impose reasonable restrictions for public interest.

What is the case’s key takeaway for students?

Compensatory taxes for using public infrastructure are regulatory, not barriers to trade. Always ask: Is it a road-use fee for services?

utomobile Transport (Raj) Ltd. v. State of Rajasthan

Automobile Transport (Raj) Ltd. v. State of Rajasthan

Supreme Court of India 1962 (citation) Author: Gulzar Hashmi India Article 301 ~6 min read

A simple explainer of the landmark ruling that treated road-use taxes as compensatory and not a barrier to the freedom of trade and commerce under Article 301.

Slug: automobile-transport-raj-ltd-v-state-of-rajasthan Gulzar Hashmi India Constitutional Law

Quick Summary

The Supreme Court held that the Rajasthan Motor Vehicles Taxation Act, 1951 does not break the freedom of trade and commerce under Article 301. The tax was treated as a compensatory road-use fee, not a barrier to trade. Because it pays for roads and related services, it is a regulation, not a restriction. The petitions were dismissed, and the Act was upheld.

Issues

Do Sections 4 and 11 of the 1951 Act violate Article 301 (free trade, commerce, and intercourse)?
Is the levy a direct restriction on trade, or only an indirect/incidental effect?
Can the levy be justified as a compensatory or regulatory charge serving public interest?

Rules

Article 301: Trade across India should be free from barriers unless justified by the Constitution.
Direct vs Indirect: Direct barriers are suspect; incidental effects may be valid.
Compensatory/Regulatory Charges: Fees to maintain roads and provide facilities are regulatory, not prohibitive.
Articles 302 & 304: Parliament may restrict trade (Art. 302). States may impose reasonable restrictions in the public interest (Art. 304).

Facts — Timeline

Timeline illustration for Automobile Transport case

Operators: Appellants ran stage-carriages from Ajmer; routes touched Rajasthan briefly.

Tax Demand: Jaipur RTO sought motor vehicle tax under the Rajasthan Motor Vehicles Taxation Act, 1951 for 1951–1954.

Challenge: Writ petitions claimed the Act hurt Article 301 freedom of trade and commerce.

High Court: Dismissed the petitions; upheld the Act.

Appeal: Matter reached the Supreme Court of India.

Arguments

Appellants

Tax burdens movement across States; it blocks trade under Article 301.
The law targets inter-State routes; effect is a direct curb on commerce.
No clear link between levy and road services used.

Respondent State

Levy is a road-use fee to maintain and develop highways.
Any effect on trade is incidental, not direct.
Charge is non-discriminatory and serves public interest.

Judgment

The Supreme Court upheld the Act. The levy is compensatory, aimed at funding roads and facilities used by transport operators. It regulates traffic and does not directly block trade.

Article 301 ensures free trade, but not freedom from all taxes.
Non-discriminatory road-use fees are valid regulatory measures.
Petitions were rejected; Act stands constitutional.

Ratio Decidendi

A levy that reimburses the State for providing road infrastructure is a regulation, not a restriction, under Part XIII. The effect on trade is indirect and acceptable. Hence, Article 301 is not violated.

Why It Matters

Sets the compensatory tax principle for road-use and similar fees.
Guides how to read Articles 301–304 together.
Helps States design non-discriminatory levies tied to public services.

Key Takeaways

Article 301 ≠ tax immunity.
Road-use fee = regulatory, if linked to services.
Look for direct vs indirect impact on trade.

Charge must be non-discriminatory.
Public interest and purpose matter.
State powers exist within Part XIII checks.

Mnemonic + 3-Step Hook

Mnemonic: “ROAD = Regulate, Not Obstruct, Article 301 Defended.”

Purpose: Is the fee for roads/services?
Impact: Direct barrier or indirect effect?
Neutrality: Non-discriminatory across users?

IRAC Outline

Issue: Does the 1951 tax break Article 301?

Rule: Article 301 (free trade) + compensatory tax doctrine; Arts. 302–304.

Application: Tax funds roads; effect on trade is incidental; charge is neutral.

Conclusion: Levy is regulatory and valid; Act upheld.

Glossary

Article 301: Guarantees freedom of trade, commerce, and intercourse across India.
Compensatory Tax: A fee to cover the cost of services or facilities provided by the State.
Direct Restriction: A law that targets trade itself, creating a barrier.
Indirect Effect: A side effect on trade from a general regulatory measure.

FAQs

No. If a charge is compensatory and tied to services (like roads), it is regulatory and valid.

Check purpose (service), connection (use), and neutrality (non-discriminatory). If yes, it’s compensatory.

If it prefers local trade or targets outsiders, it risks violating Part XIII and can be struck down.

No. It protects against barriers, not fair payments for facilities used by traders and transporters.

Case Card

CASE_TITLE: Automobile Transport (Raj) Ltd. v. State of Rajasthan
PRIMARY_KEYWORDS: Article 301; freedom of trade and commerce; compensatory tax
SECONDARY_KEYWORDS: Articles 302 & 304; road-use fee; Part XIII; non-discrimination
PUBLISH_DATE: 25 Oct 2025
AUTHOR_NAME: Gulzar Hashmi
LOCATION: India
Slug (auto): automobile-transport-raj-ltd-v-state-of-rajasthan
Canonical: https://thelaweasy.com/automobile-transport-raj-ltd-v-state-of-rajasthan/