The Assam Legislature enacted a law imposing a tax on goods including tea carried by Road or Island waterways over any part of the territory of the State. The Act was challenged on the ground of restricting the freedom of trade and commerce guaranteed under Art. 301 of the Constitution- Examine.
In Atiabari Tea Co. v. State of Assam,AIR 1951 SC 232, the Supreme Court held that the impugned law undoubtedly levied a tax directly and immediately on the movements of goods and therefore came within the purview of Article 301. The Act was, therefore, held void.
The Court said that taxes amount to restrictions if they directly and immediately restrict trade. Imposition of a duty or tax to every would not amount per se to an infringement of Article 301.
Only such taxes or restrictions which directly or immediately impede the free-flow of trade, commerce and intercourse would fall within the purview of Article 301.
A tax may in certain cases, directly or immediately, restrict or hamper the flow of the trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of times and circumstances.