Article 304 of the Costitution of India with Case law
📘 Article 304 of the Constitution of India – Restrictions on trade, commerce and intercourse among States
🔹 Text of Article 304:
Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may:
Clause (a)
Impose taxes on goods imported from other States or Union territories, but no discrimination shall be made between goods imported and goods manufactured within the State.
Clause (b)
Make laws imposing reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest.
Proviso to Clause (b):
No Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.
🧾 Explanation:
Article 301 guarantees freedom of trade and commerce throughout India.
Article 304 is an exception to Article 301 and allows State Legislatures to:
Levy taxes on imported goods, provided they do not discriminate against other states.
Impose restrictions on trade in public interest — e.g., for health, environment, or essential supplies.
⚖️ Important Case Laws on Article 304:
🔹 **1. Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232
Held: A tax that directly and immediately restricts trade violates Article 301.
However, Article 304(b) can justify such restrictions if:
They are reasonable,
In public interest, and
Have President’s assent.
This case introduced the "direct and immediate effect" test for trade restrictions.
🔹 **2. Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, AIR 1962 SC 1406
Clarified Atiabari, stating regulatory taxes (e.g., tolls) do not violate Article 301.
For restrictions under Article 304(b):
Must be in public interest,
Must have President’s approval.
Balanced freedom of trade with need for State legislation.
🔹 **3. State of Kerala v. Abdul Kadir, AIR 1976 SC 182
Concerned a Kerala law banning import of certain goods (beedis).
Held: State law valid under Article 304(b) if the restriction is:
Reasonable,
Imposed in public interest,
Has President's prior approval.
🔹 4. Jindal Stainless Ltd. v. State of Haryana, (2016) 11 SCC 1 (Constitution Bench – 9 Judges)
Landmark case on taxation and trade freedom.
Held: Tax laws can be restrictions under Article 304(a), and must not be discriminatory.
Reaffirmed that States cannot create trade barriers via discriminatory taxes.
Emphasized a harmonious reading of Articles 301–304.
📝 Key Takeaways:
| Clause | Provision | Conditions |
|---|---|---|
| 304(a) | State can tax imported goods | No discrimination vs local goods |
| 304(b) | State can restrict trade | Reasonable, in public interest, President’s assent required |
📊 Summary Table:
| Article | Purpose | Scope |
|---|---|---|
| 301 | Freedom of trade and commerce | Across India |
| 302 | Parliament can restrict trade | In public interest |
| 303 | No discrimination in trade | Unless Parliament enacts law |
| 304 | State's power to restrict trade | With conditions (public interest, no discrimination, President’s approval) |
🔎 Example:
If Punjab bans sale of gutka citing public health — valid under Article 304(b) with Presidential assent.
If Tamil Nadu imposes higher tax on wheat from UP than local wheat — violates Article 304(a).
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